A trusted
partner driving
a cleaner future
Annual Report 2019
New decade, new era
Dean Finch
Group Chief Executive
It is increasingly clear we have entered a new era, with
environmental and social concerns gaining greater salience. It is
an era National Express welcomes. The solutions to the challenges
we face, whether carbon, clean air, congestion or inclusive
growth, require high quality public transport at their core.
The single most important thing we can do is lead modal shift
and get people out of cars and onto buses and coaches. It is
safer and it is better for the environment: safer as we employ
the most highly trained professional drivers, operating under
the closest supervision and driving vehicles with the best safety
technology as standard; better for the environment as each bus
takes 75 cars off the road and each coach, a mile of traffic.
National Express is determined to be the trusted partner relied upon
to consistently deliver high quality mass transit for our customers.
While we are determined to do more, we are not starting from
scratch. Our Vision and Values – launched in 2011 – have
guided how we operate. They are not corporate rhetoric, but real
priorities that have driven service improvement and delivered for
our customers and the communities we serve.
Take safety – our priority – as an example. In 2019, across the
whole of National Express Group we achieved zero responsible
fatalities. This is the first that any of our vastly experienced team
can remember, in any of the companies they have worked in.
Our UK bus business was this year recognised by the British
Safety Council as the safest public transport operator of all the
companies they audited across the world.
There are other examples:
− We are proud to have been the first private transport group to
become a Living Wage Foundation accredited employer
− Our National Express Foundation was again the first of its kind
and provides £500,000 a year to local community groups and
student bursaries for those who would otherwise be unable to
attend further or higher education
− All of our main European businesses have 5-star European
Foundation for Quality Management accreditations
These are significant achievements, but we want to step up
for this new era. Just as demands of customers, investors and
stakeholders have changed in recent years, so have National
Express’ ambitions. The next two pages set out our renewed Vision
and Purpose and refreshed set of Values. They reflect our renewed
ambition and approach to deliver on our belief: as a quality
mass transit operator National Express has a unique opportunity
to provide services that meet the demands of customers and
stakeholders and generate sustainable returns for shareholders.
Our Vision is: to be the world’s
premier mass transit operator with
services offering leading safety,
reliability and environmental
standards that customers trust
and value.
This Vision is rooted in a Belief
that: driving modal shift from
cars to high quality mass transit
is fundamental to a safe, green
and prosperous future.
Our Purpose, therefore: to help
lead this modal shift by making mass
transit an increasingly attractive
option for all our customers, whether
they are individuals, transport
authorities, school boards or
businesses. We seek to do this
by earning our customers’ loyalty
by providing safe, reliable and
great value multi-modal services
on clean and green vehicles.
We will achieve this through an Approach: that seeks
social and environmental leadership to ensure we are
a good employer and partner, while using technology
to make our services increasingly easier to access,
safe and efficient. It is this model of progressive
partnership that: delivers industry-leading services for
our customers and communities; secures rewarding
careers for our people; and, generates sustainable
returns for our shareholders.
We judge Success as: being seen by 2030 as the
world’s premier mass transit transport partner, with
a reputation for industry-leading safety, reliability
and value for money across a portfolio of easily
accessible multi-modal services. At the forefront of
technological innovation, National Express will lead
the transition to zero emission vehicles, maintain its
safety leadership and pioneer new ways to access
transport. Our staff will see us an employer of choice
and customers will rely on us as an operator they can
trust, with services that help meet their needs while
also having a positive impact on their communities.
This will, in turn, drive strong, consistent returns for
our shareholders.
Strategic Report
Our values and stakeholders
2
Highlights
3
Chairman’s statement
4
At a glance
6
Business model
8
9
Section 172(1) statement
10 How we sustain our advantage
12 A changing market
14 Our strategy and priorities
16 Key performance indicators
18 Group Chief Executive’s review
21 Group Finance Director’s review
26 Viability Statement and going concern
27 Divisional review: ALSA
30 Divisional review: North America
33 Divisional review: UK
37 Responsible partner
48 Risk management
50 Principal risks and uncertainties
54 Non-financial Information Statement
Corporate Governance
57 Chairman’s introduction to corporate
governance
59 Corporate governance framework
60 Board of Directors
65 Board activity in 2019
66 Board decision-making
69 Purpose, Values and culture
71 Stakeholder relations
76 Roles and responsibilities
Supplementary information
77
79 Nominations Committee Report
83 Supplementary information
87 Audit Committee Report
90 Supplementary information
94 Safety & Environment Committee Report
99 Annual Statement by the Remuneration
Committee Chair
103 Remuneration at a glance and in context
107 Annual Report on Remuneration
122 Directors’ Report
126 Directors’ Responsibilities
Financial Statements
128 Independent Auditor’s Report
136 Group Income Statement
137 Group Statement of Comprehensive
Income
138 Group Balance Sheet
139 Group Statement of Changes in Equity
140 Group Statement of Cash Flows
141 Notes to the Consolidated Accounts
211 Company Balance Sheet
212 Company Statement of Changes in Equity
213 Notes to the Company Accounts
Additional Information
225 Five Year Summary
226 Shareholder information
228 Financial Calendar 2020
229 Definitions and Supporting Information
230 Alternative performance measures
231 Key contacts and advisers
Cautionary statement
1
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Our values and stakeholders
A business with Values fit for a new era
We believe our existing Values still provide the best priority framework to deliver on our renewed Vision and Purpose. Our Values have been refreshed,
however, to reflect our new ambition to be widely regarded as the world’s leading mass transit partner.
Safety
The safest mass
transit operator in
the communities
we serve
Excellence
The leader in every
market we operate
in, trusted to deliver
service excellence,
consistently
Customers
The most trusted and
valued mass transit
partner
People
The place to work
in mass transit
Community &
Environment
The world’s greenest
mass transit operator;
a trusted partner to the
communities we serve
We have very carefully considered our key stakeholders’ priorities in refreshing our Values. We have concluded, as set out in our renewed Vision,
Purpose and Approach, that our key stakeholders ultimately want a trusted partner. Our refreshed Values therefore capture this.
The table below, therefore, sets out the distinctive values, behaviours and approach our key stakeholders expect from a trusted partner.
Key stakeholder
Expectation of standard operator Priorities of a trusted partner
Commercial passengers
Contracted customers
Local authorities,
national governments
and/or elected
representatives
Regulatory bodies
Suppliers
People
− Safe, clean and reliable
service at a fair price
− Consistent delivery that builds trust
− Accurate information, especially during disruption
− Great value for money
− A good company, giving something back
− Safe, efficient service to
contracted terms
− Consistent delivery that builds trust
− Proactive innovation or prompt response
to changing demands
− Great value for money
− Open, accurate and transparent communication,
including fixing things when they go wrong
− Safely delivering services
local populations expect
− Helping solve policy challenges, such as congestion,
carbon, clean air and inclusive growth, in partnership
− A broader community impact
− Regulatory compliance and
safe service
− Proactive communication on challenges
− Joint working on regulatory standards improvement
− Compliance with agreed
contract terms
− Solve problems and challenges in partnership
− Identify areas for joint innovation and
long-term relationships
− Fair day’s pay for a fair
day’s work
− Good colleagues and
a supportive work
environment
− Living Wage Foundation accreditation, rewards
for excellence and offers good opportunities for
progression
− A workplace that values diversity, champions
inclusion and respects the rights of all employees
− A company whose values I share
Wider stakeholder engagement
Our key stakeholders also include our investors. Further detail on all of our stakeholders and how we engage with them can be found in the
Responsible Partner section page 37 to 47 and in Governance pages 71 to 75.
2
National Express Group PLC Annual Report 2019
Highlights
A consistent growth story
Group revenue
(£m)
2,744
Statutory operating profit
(£m)
Normalised operating
profit (£m)
Carbon emissions per
passenger km*
242.3
295.3
19.06
4
4
7
,
2
1
2
3
,
2
1
5
4
,
2
3
.
2
4
2
4
.
5
1
2
9
.
7
9
1
5
.
1
4
2
7
.
7
5
2
3
.
5
9
2
3
4
.
0
2
6
4
.
9
1
6
0
.
9
1
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
Statutory earnings
per share (p)
27.6
7
.
5
2
6
.
6
2
6
.
7
2
Free cash flow
(£m)
178.7
Dividend per share
(p)
16.35
* Total tonnes of CO2 emissions
per million passenger km
Safety – Fatalities and
Weighted Injuries (FWI)
4.513
6
.
8
9
1
7
.
8
7
1
1
5
.
3
1
5
3
.
6
1
6
8
.
4
1
1
9
2
.
9
4
7
5
.
8
4
.
6
4
1
3
1
5
.
4
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
Revenue
Operating profit
Profit before tax
Profit for the year
Basic earnings per share (pence)
Free cash flow
Net debt
Full year proposed dividend per share (pence)
IFRS basis
Normalised basis
2019
£m
2018
£m
2019
£m
2018
£m
2,744.4
2,450.7
2,744.4
2,450.7
242.3
187.0
148.3
27.6
215.4
177.7
138.7
26.6
295.3
240.0
184.8
34.5
178.7
1,241.5
16.35
257.7
220.0
171.0
32.9
198.6
951.5
14.86
Unless otherwise stated, all operating profit, margin and EPS data refer to normalised results, which can be found on the face of the Group Income Statement in the first column. The
normalised result is defined as being the IFRS result excluding intangible amortisation for acquired businesses, net gain in relation to the disposal of Ecolane subsidiaries, US restructuring
costs and, in the prior year, result from discontinued operations. The Board believes that this gives a more comparable year-on-year indication of the operating performance of the Group and
allows users of the Financial Statements to understand management’s key performance measures. Further details relating to separately disclosed items are provided on page 155 in note 4
to the Financial Statements. In addition, unless otherwise stated, all pre-tax results and margin data refer to the Group’s continuing operations. Constant currency basis compares the current
year’s results with the prior year’s results translated at the current year’s exchange rates. The Board believes that this gives a better comparison of the underlying performance of the Group.
All definitions of alternative performance measures used throughout the Annual Report are included on page 231.
3
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Chairman’s statement
Sir John Armitt CBE
Chairman
Fit for a new era
Dear fellow shareholder
A new era of opportunity
This is a very interesting time for mass
transit. Across the world the debate on
climate change, clean air and how we
power future growth is an increasingly
urgent one.
As Dean Finch, Group Chief Executive,
has already said: it is an agenda National
Express welcomes.
I have written in previous Chairman’s
statements that to maintain National
Express’ leadership position we must be
seen as a trusted partner to our customers
and the communities we serve. Time has
only strengthened this conviction.
Strong foundations
It is pleasing, therefore, that we have
a strong track record to build on. Most
importantly, in safety, National Express
has made very strong progress under
Dean’s leadership.
It is perhaps the biggest achievement
during my seven years at National Express
that across the whole Group there were
not any responsible fatalities in 2019. The
investment in Lytx DriveCam smart safety
cameras and the associated management
systems has undoubtedly made a real
difference. The Driving Out Harm campaign
launched in 2010 has changed the safety
culture across the whole Group.
In this area, and many others, National
Express is delivering significant benefits
to our customers, our staff and the
communities we serve.
But we want to go further. As Dean says,
National Express is determined to meet
the opportunity that the new era and
challenges present.
Leadership in the new era
In our meetings with customers, politicians
and regulators, it is clear that they want
their services delivered by an operator that
prioritises safety, excellence and value.
Cities like Birmingham and Barcelona are
setting out radical new plans that place
high quality, clean and green mass transit
at the heart of their future vision.
In launching the renewed Vision and Values,
Dean is again demonstrating National
Express’ leadership and how we ensure our
ambitions and focus reflect the priorities of
customers and key stakeholders.
National Express’ ambition is therefore to
be seen as the world’s leading mass transit
operator, trusted to consistently deliver
high quality services to customers at prices
they value. This is also the company that
our employees tell the Board they want to
work for.
This is why National Express welcomes the
demands of the new agenda: the response
required to meet them is the leadership
National Express aspires to demonstrate.
It is a demonstration of our commitment
that in our full year results statement we
made significant leadership pledges on
zero emission vehicles – including never
buying another diesel bus – in the UK.
4
National Express Group PLC Annual Report 2019 Board engagement with
our people
During 2019, Sir John Armitt has visited
a number of our locations to meet our
people and gain a deeper insight into how
the business runs. In October, he visited
National Express Accessible Transport in
Birmingham, to meet the team running
our Home to School and Ring and Ride
Services. You can read more about how
our Board engages with our employees
on pages 72 and 73.
This has helped expand markedly the
number of commercial passengers we
carry across the Group. This performance
continues to be based on a foundation of
operational excellence.
The year ahead
The Board expects the Group to build
again on these results to deliver further
growth in 2020. The Group has established
strong leadership positions in a number of
markets and there are many opportunities
for both organic growth and further
strategic acquisition in the years ahead.
While there has been some progress
on Brexit in recent months, there is still
uncertainty over the shape of the future
relationship with negotiations at an
early stage.
Whatever the likely outcome, we still
do not believe we will suffer adverse
direct consequences. We do not run
any scheduled cross-Channel services.
Working closely with suppliers, we believe
we have prepared for any disruption to our
supply chains.
Dividend
It is with this confidence in mind that the
Board has again recommended a 10%
increase in the final dividend, bringing
the full year dividend to 16.35 pence per
share. Subject to shareholder approval,
this will be paid on 12 May to those
shareholders registered on 24 April 2020.
Finally, I would like to thank all the staff
at National Express, under the executive
directors’ leadership, for another strong year.
I look forward to us all working together
as National Express continues to prosper
in this exciting new era.
Sir John Armitt CBE
Chairman
27 February 2020
Across the world the
debate on climate change,
clean air and how we
power future growth is an
increasingly urgent one. It is
an agenda National Express
welcomes”
Our commitments have been augmented
with the inclusion of environmental targets
in executive and senior management long-
term incentive share awards.
We are determined to retain such
leadership in the years ahead.
2019 performance
The financial foundation we build on to
meet this new era remains very strong. It is
very pleasing to again announce a record
set of results.
Revenue and profit are up in every division.
We have retained significant contracts,
started major operations in Morocco,
Germany and Birmingham and welcomed
new colleagues such as WeDriveU in
the USA.
5
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information At a glance
National Express at a glance
National Express is a leading international public transport operator,
diversified internationally and by business area.
Revenue breakdown by territory
1
USA
£1,153m
Student transportation
Transit and paratransit
Charter and other
4
1
5
7
3
2
6
8
2
Spain
£746m
Regional/long haul coach
Urban bus
Charter and other
3
United Kingdom
£600m
Regional/long haul coach
Urban bus
Charter and other
5
Germany
£90m
Rail
4
Canada
£77m
Student transportation
Transit and paratransit
Charter and other
8
Bahrain
Urban bus
*Joint venture business
reported through associates
7
Switzerland
£14m
Charter and other
6
Morocco
£65m
Urban bus
Number of people employed worldwide
Number of kilometres travelled
51,000
1.1bn
Number of passenger journeys
Number of vehicles operated
938.6m
31,700
6
National Express Group PLC Annual Report 2019 We own and lease buses, coaches and trains which we use to deliver local, regional, national and
international transportation services. All vehicles are driven and maintained to our global standards.
In Spain, Morocco, North America and Germany, services are run typically under an exclusive
concession. In the UK, our bus and coach services are unregulated.
We hold the largest market share for long haul coach transport in both Spain and the UK, and are the
second largest school bus provider in North America. We are the largest bus operator in Morocco.
Revenue breakdown by business line
Student transportation
(North America school bus)
Urban bus
(UK bus, North America transit, ALSA)
Regional/long haul coach
(ALSA regional and long haul, UK coach)
£804m29.3%1
£796m29.0%1
£752m27.4%1
Charter and other
(North America, ALSA and UK)
Rail
(German Rail)
£302m11.0%1
£90m3.3%1
1 Percentage of Group revenue
7
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Business model
How we create value…
National Express operates safe, reliable, convenient and good value mass transit
services. We do this in both regulated and unregulated markets, and provide
services to our customers who are private individuals, companies, school boards
or public authorities.
Growing revenue
Converting it to profit
National Express generates revenue from two principal sources. The Group engages
in multi-year contracts with bodies such as school boards in North America or local
authorities in Spain and Morocco and these make up 50% of revenue. Revenue is
generated either on a per mile/kilometre basis, or per route travelled. The Group
generates a further 37% of revenue through ticket sales to the public, such as in the UK
bus and coach businesses, coach and some bus services in Spain and Morocco, and
the German Rail business. In these, National Express is marketing the product and taking
revenue risk. Concession revenue from local authorities in the UK, Spain and Germany
delivers 4% of Group revenue with charter/private hire contributing a further 6%. The
remaining 3% is from other revenue streams such as on-board entertainment, SMS
alerts, booking fees and advertising.
The Group uses technology to support its revenue growth. Our Revenue Management
System (RMS) enables us to segment our customer offer through a better understanding
of customer needs and purchasing behaviour to drive revenue through differential pricing
depending on time of journey, ticket type, buying channel etc. Our websites and apps
support our customers in getting the product they need at a price they can afford.
National Express margins are industry leading. We focus on delivering operational
excellence in all we do. Sophisticated network optimisation is a key factor. We optimise
peak vehicle requirements and loading factors through review and redesign of our
networks, reducing the cost of delivering a high quality service to our customers. We
use scheduling software to allow optimisation of routes and asset usage in our student
transportation and transit markets in North America. Our diversity and scale are an
important factor in managing indirect costs, enabling us to optimise cost and quality
across the Group’s supply base.
Delivering cash flow
National Express has a track record of consistently generating cash flow from its
operations. The Group has delivered over £773 million of free cash flow over the last
five years and is extremely disciplined in its management of working capital and in the
conversion of operating profit into free cash.
To fund returns
and re-investment
Our first priority is to re-invest in the core business. After maintaining our base business,
we invest cash back into the operations to grow, having invested £701 million both
organically and inorganically since the start of 2015. This has strengthened our market-
leading positions in coach in the UK and in Spain; built out key hub positions in North
American student transport; and enabled us to move into adjacencies like urban bus in
Morocco or charter in North America. In addition, we can deliver consistent, competitive
returns to shareholders. Over the last five years the Company has returned £327 million
through dividends, growing dividend per share by 59%.
8
National Express Group PLC Annual Report 2019 Section 172(1) statement
…for all our stakeholders
Our Section 172(1) Statement
In accordance with their duty to do so under Section 172(1) of the Companies Act 2006 (Section 172(1)), the Company’s Directors,
individually and collectively, have acted in a way that they consider, in good faith, is most likely to promote the success of the
Company for the benefit of its members as a whole. Examples of how they have done so, including having regard to the factors
specified in Section 172(1), appear throughout this Annual Report. A guide to these factors and where to find more information about
how the Company, under the direction of its Directors, has had regard to them is set out in this statement.
Further specific examples of how the Board of Directors has had regard, in its principal decisions made during the year, to the various
factors set out in Section 172(1), and the impact that regard has had, are set out on pages 66 to 68 of the Corporate Governance
Report. These are incorporated by reference into this Section 172(1) Statement.
Making long-term decisions
We believe that quality mass transit is
at the heart of society’s response to the
climate change, clean air, congestion and
inclusive growth challenges we face. We
have revised our Vision and Values to
meet the demand of this new era and to
ensure our decision-making meets the
scale of the challenges society faces in the
coming years. For more information about:
− why we consider that mass transit
services are the long-term answer to
today’s mobility challenges, see page
12 and 13 of the Strategic Report; and
− why we consider our business model
to be sustainable, see pages 10 and
11, and our Company to be viable and
a going concern, see page 26 of the
Strategic Report.
Having regard to employees’ interests
Our employees and the members of our
wider workforce are our most valuable
asset as they enable us to provide our
mass transit services and, by doing so
safely and well, grow our business by
improving our passengers’ journeys
and our customers’ experience. More
information about:
− how we invest in and reward our
employees is set out on pages 11
and 39 of the Strategic Report;
− how the Board engages with the
Group’s workforce is set out on pages
71 to 73 of the Corporate Governance
Report; and
− how the Company engages with its
and its Group’s employees is set
out on pages 125 and 126 of the
Directors’ Report.
Fostering business relationships
We put our customers at the heart
of what we do by ensuring that we
provide safe, reliable and great value
mass transit services for them. We
develop relationships with our other
key stakeholders, including our suppliers,
regulators, central and local government
authorities and politicians, to ensure we
understand how we can best work with
them best and achieve mutual goals.
More information about:
− who our key stakeholders are, why
they are key and how we engage
with them is set out on pages 41
to 44 of the Strategic Report; and
− how the Board understands
stakeholders’ views, including by
engaging with stakeholders, is set out
on pages 71 to 75 of the Corporate
Governance Report.
Impact on community
and environment
We play a vital role in the communities
we serve by connecting the people who
live in those communities with their work,
leisure, family and friends. Our increased
focus on providing mass transit services
in a sustainable way is also helping
reduce harm to the environment. For
more information about:
− our services and the different
communities and customers they
serve, see pages 2 and 38 of the
Strategic Report;
− our investment in our communities
through the National Express
Foundation, see page 42 of the
Strategic Report;
− our annual carbon emissions and
intensity metrics, see pages 46
and 47 of the Strategic Report;
− our new environmental KPIs and
performance against them, see
Managing our environmental impacts
on page 46 of the Strategic Report; and
− our new LTIP environmental
performance measure, see page
102 of the Annual Statement by the
Remuneration Committee Chair in the
Corporate Governance Report.
Maintaining high standards
of business conduct
Our reputation is key. It underpins our
ability to earn the loyalty of our customers
and thereby to grow our business through
increased commercial passenger journeys
and winning or renewing concession
contracts. We pride ourselves on being
one of, if not the, safest mass transit
provider in the world and we believe this
differentiates us from our peers. We also
aim to become a leader in the provision
of sustainable mass transit services.
For information about:
− how we carry on business responsibly,
see pages 37 to 47 of the Strategic
Report;
− our safety priorities, policies and
performance, see the Safety &
Environment Committee Report
on pages 94 to 98 of the Corporate
Governance Report; and
− our system of internal control including
our management of risk, see the Audit
Committee Report on pages 87 to 93
of the Corporate Governance Report.
Acting fairly between members
Everything we do well benefits our
shareholders, whether they are large
institutions or private shareholders,
financially through the returns we
generate for them and reputationally
through the way we operate. For more
information about:
− our financial performance and the
returns delivered to our shareholders
in the year under review, see pages 3,
6 to 7, 16, 19 to 20 and 21 to 26 of the
Strategic Report and the Consolidated
Financial Statements on pages 136
to 210; and
− how we engage with our shareholders
is set out on page 74 of the Corporate
Governance Report.
9
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information How we sustain our advantage
How we sustain our advantage:
Our Approach
We strive to be a trusted partner to our customers, an operator they can rely upon, with services
that meet their needs while also having a positive impact in their communities. This will, in turn,
drive strong, consistent returns for our shareholders. Building on our success, we have therefore
set a higher level of ambition in each of our Values. To meet this new level of ambition requires us
to differentiate ourselves in terms of what we offer and how we offer it, as outlined below.
Value
Ambition
Aim (the NX Difference)
Approach (the NX Promise)
Safety
The safest
mass transit
operator in the
world
To deliver our ambition
we target:
− Zero responsible fatalities
− An annual reduction in FWI/
million miles
To be the safest, we will continue to invest in
leading edge technology and management
systems to ensure we have the industry’s:
− Best trained drivers
− Closest monitoring (with continuous updating)
− The leading safety credential
of driver and mechanic standards
in each market
− Most sophisticated safety technology on
our vehicles
We will provide assurance through independent
audit of our safety performance.
We will maintain our industry-leading Driving
Out Harm and Target Zero safety campaigns.
Excellence
The industry
leader, trusted
to deliver
service
excellence,
consistently
To deliver our ambition
we target:
To become the trusted leader for excellent
service, we will target:
− Zero in service failures
− 100% on-time performance
− The highest excellence
credential in each country
− No vacancies in driver or technician positions
in every business
− 100% vehicle availability to perform service
− 100% of vehicles at first timing point on time
Customers
The most
trusted and
valued mass
transit partner
We will constantly review our timetables (our
promise to our customer) to ensure that it
delivers service excellence and efficiency.
We will adopt innovative technologies where
they enhance excellence and efficiency and
make our services easier to access.
To deliver our ambition
we target:
To secure customer trust, we will:
− Industry-leading customer
scores in: net promoter (or
equivalent); value for money;
and reliability
− Growing organic patronage or
customers in every division
− Relentlessly focus on operational excellence
and innovation to consistently deliver easy to
access services that customers value
− Offer multi-modal solutions to the transport
needs of individual customers or challenges
of authorities
− Pursue a stakeholder-led strategy in all of our
− The industry’s best and
markets, seeking trusted partner status
easiest to integrate customer
platforms
− Provide industry-leading information, whether
travel options or service performance data to
customers; and by quickly fixing things when
services go wrong
10
National Express Group PLC Annual Report 2019 We seek social and environmental leadership to ensure we are a good employer and partner,
while using technology to make our services increasingly easier to access, safe and efficient.
It is this model of progressive partnership that: delivers industry-leading services for our
customers and communities; secures rewarding careers for our staff; and generates sustainable
returns for our shareholders.
Value
Ambition
Aim (the NX Difference)
Approach (the NX Promise)
People
The place to
work in mass
transit
To deliver our ambition
we target:
− Industry-leading employee
satisfaction scores
− Investor in People status (or
equivalent) in each division
− A ‘Best Place to Work’
credential
− Recognition as the industry
leader in equality
To be seen as the place to work, we will:
− Maintain our leadership on the real Living
Wage and our Group commitment to pay
10% above national minimum wages
− Continue to invest in and champion our
Master Driver and Master Technician
programmes and NX Network for our high
potential employees
− Form university partnerships in each division,
to help recruit the best talent and identify
new sources of innovation
− Target year-on-year reduction in
regretted losses
− Drive equality policies through a Group
Diversity & Inclusion Council
Community &
Environment
The world’s
greenest
mass transit
operator;
a trusted
partner to the
communities
we serve
To deliver our ambition
we target:
To be the greenest operator and most trusted
partner, we will:
− Industry leadership
on the shift to zero
emission vehicles
− 1% of PBT spent on
community activities
every year
− Stakeholder surveys
demonstrating high
trust scores
− Never buy a diesel bus again in the UK, with
an ambition for UK bus to be zero emissions
by 2030 and coach by 2035
− Review and roll out similar ambitions across
the Group
− Set our environmental targets through the
IPCC’s Sectoral Decarbonisation Approach
− Link 25% of the Group’s LTIP award to
environmental targets
− Maintain the National Express Foundation
and major charity programme (e.g. The
Princes Trust in the UK) in each division
− Ensure work experience and staff
volunteering policies with targets in each
division; a charitable partner at every
major depot
11
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information A changing market
Our belief: driving modal shift from
cars to high quality mass transit is
fundamental to a safe, green and
prosperous future
Urban areas face increasing challenges
from congestion, carbon emissions and
the imperative for clear air. At the same
time, transport authorities recognise
that demand for travel is increasing, and
that integrated, accessible, safe, reliable
transport networks are vital for prosperity.
Market overview
25%
increase in demand for transport
70%
of surface transport emissions
emitted by cars
> 50%
of increased traffic congestion
due to on-demand taxi services
Demand for transport is expected to
increase by 25% by 2030 in wealthy cities,
and by 80% in developing countries. This
demand cannot be satisfied by increased
car use.
Cars already emit over 70% of surface
transport emissions in the EU.
The rise in on-demand taxi services is
significantly worsening congestion. San
Francisco estimated that over 50% of
increased traffic congestion between 2010
and 2016 was due to these services.
Demand for
transport cannot
be met by increased
car use
12
National Express Group PLC Annual Report 2019
In the UK alone, if the number of
people travelling in private vehicles
remains constant, this would result
in an additional 35 billion vehicle
miles on the road by 2030.
Zero emission buses will provide the
backbone of clean, reliable, safe transport
networks. Technology, range and cost are
improving, and we estimate that electric
buses will reach Total Cost of Ownership
(TCO) parity with diesel by 2024/25.
Public transport
is the solution
Autonomous vehicles could make this
worse: repositioning at zero occupancy
could reduce average vehicle occupancy
and drive up total vehicle miles.
Costs of zero emission vehicles remain
higher, and there are technological and
infrastructure challenges to address.
From Birmingham to Barcelona, visionary
cities are already committing to a zero
emission future with decreasing access
for cars in the city centre.
What next?
National Express will be the trusted
partner for cities that share our vision
of a prosperous, clean, green future.
We are making commitments today
that will benefit all of our tomorrows.
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
13
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Our strategy and priorities
Driving our business
forward through our three
strategic priorities
Objective
Performance
Future outlook
Measuring our progress
Mitigating risks
Delivering
operational
excellence
We aim to be the safest, cleanest, most reliable,
convenient and best value transport provider in
the modes we operate.
− Another year of record passenger numbers in UK coach and ALSA,
− Network reviews driving efficiency across UK
with Group passenger journeys growing by 5.1%
and ALSA
We believe securing modal shift on to
cleaner, greener and safer vehicles is
− UK bus named the safest public transport company of all those the British
− Development of on-demand services and multi-modal solutions
both a social good and will drive further
Safety Council audited across the world
− First full year of no at-fault fatalities; we remain committed to
the highest levels of safety, after launching our Target Zero campaign
across all businesses in 2018
− All eligible businesses have EFQM1 five-star ratings; UK bus and coach
re-awarded the British Safety Council Sword of Honour
− UK coach won a number of awards including the British Quality
Foundation UK Excellence Award for commitment to excellence
and continuous improvement
− Increased ancillary revenue drivers in UK and ALSA, as well as
profits in passengers, profit and cash.
Charter and Charter School revenues in North America
− Further advances in partnership working to address common
+ See KPIs pages 16 and 17
challenges and cement position as trusted partner
− Demonstrate environmental leadership
− Pledge to never buy a diesel bus in the UK again
− Lead the transition to zero emission coaches
− Ambition to be zero carbon emissions in UK bus by 2030
and in UK coach by 2035
FWI2
Carbon emissions reduction
− ALSA was accredited with the AENOR Social Responsibility Certificate,
− Mobilisation of third service on the RRX rail contract in Germany
recognising corporate social responsibility, good governance
and continuous improvement
£
Deployment
of technology
We utilise technology to raise customer
and safety standards, drive efficiencies
in our business and facilitate growth.
− New mobile websites and ticketing apps are driving higher online
transactions, higher conversion rates and lowering costs
− Further optimisation and automation of RMS to drive incremental
A rising proportion of sales transacted
demand and higher fleet utilisation
through our digital channels
− Proportion of journeys through digital channels in UK bus increased to
− Increasing use of analytic software to enhance operations, driving
demonstrates that our customers value
around two thirds; and up 7% to 45% in ALSA
safety and efficiency improvements
more convenient and faster ways to
− Our real-time RMS in ALSA and UK coach continue to grow revenue,
− Harnessing ideas from our innovation hubs and universities e.g.
pay. At the same time, the transfer
passengers and yield
− Continued roll-out of Lytx DriveCam technology across ALSA, North
America and UK, delivering a reduction in the number of collisions and
associated costs
− Partnering and investing with local innovation hubs and universities
to access new ideas and emerging technology
− All UK buses procured in 2019 were electric vehicles (EV)
− Autonomous vehicle trial in Spain
using AI and big data to redesign routes to optimise running times
of transactions away from traditional
− Continuing enhancements to websites, apps and ticketless
and driver hours
payment systems
ticket offices and third party sales
agents to digital channels is driving
operational efficiencies, reducing costs
− Completion of the roll-out of Lytx DriveCam; rolling out of a Driver
and increasing the opportunity for new
Fatigue alert system in our coach operations
commercial partnerships and revenue
− Building technology platforms, capabilities and expertise
streams.
to provide integrated transport solutions
− Ongoing development of multi-modal solutions and
on-demand services
+ See KPIs pages 16 and 17
Passenger journeys
Growing our business
through acquisitions
and market
diversification
− We acquired nine businesses in the year, both in existing and
− Further selective acquisitions, principally in North America
We maintain a disciplined approach
complementary markets:
− Five in North America, including the significant acquisition of WeDriveU,
providing entry into the fast-growing corporate shuttle market
− Three in ALSA, including new market entries into Aragon and the
Canary Islands
and Spain
to investing and target project returns
− Extending our offering into new regional markets and cities or
well above our cost of capital, typically
building further scale in existing markets and cities
targeting returns of 15%. Across
− Pioneer new ways to access transport with multi-modal services
the business as a whole, disciplined
within big cities, providing complete mobility solutions, through
allocation of capital is measured through
− An accessible transport operator in the UK, providing entry into
integrated platforms
a focus on ROCE, a key element of
We continue to grow our diversified, international
portfolio of transport businesses through
selective acquisitions and diversification into
complementary markets.
a new market
− Doubling the size of our business in Morocco with entry into
two new large cities, Rabat and Casablanca
− Successful mobilisation of two services for the Rhine-Ruhr Express
(RRX), in German Rail
− Investments in assets that provide platforms for future growth
executive remuneration.
+ See KPIs pages 16 and 17
ROCE
See Risks
pages 50 to 53
6
8
2
7
10
See Risks
pages 50 to 53
5
8
4
6
10
See Risks
pages 50 to 53
2
6
11
1
3
9
12
1 European Foundation for Quality Management – recognises operational excellence and awards ratings to businesses based on a number of criteria, including
quality of leadership and strategic direction together with development and improvement of people, partnerships and processes in order to deliver value-adding
products and services to their customers
2 Fatalities and Weighted Injuries Index
14
National Express Group PLC Annual Report 2019
Objective
Performance
Future outlook
Measuring our progress
Mitigating risks
with Group passenger journeys growing by 5.1%
− UK bus named the safest public transport company of all those the British
Safety Council audited across the world
− First full year of no at-fault fatalities; we remain committed to
across all businesses in 2018
− All eligible businesses have EFQM1 five-star ratings; UK bus and coach
re-awarded the British Safety Council Sword of Honour
− UK coach won a number of awards including the British Quality
Foundation UK Excellence Award for commitment to excellence
and continuous improvement
recognising corporate social responsibility, good governance
and continuous improvement
around two thirds; and up 7% to 45% in ALSA
− Our real-time RMS in ALSA and UK coach continue to grow revenue,
− Continued roll-out of Lytx DriveCam technology across ALSA, North
America and UK, delivering a reduction in the number of collisions and
passengers and yield
associated costs
to access new ideas and emerging technology
− All UK buses procured in 2019 were electric vehicles (EV)
− Autonomous vehicle trial in Spain
− Another year of record passenger numbers in UK coach and ALSA,
− Network reviews driving efficiency across UK
and ALSA
− Development of on-demand services and multi-modal solutions
− Increased ancillary revenue drivers in UK and ALSA, as well as
Charter and Charter School revenues in North America
We believe securing modal shift on to
cleaner, greener and safer vehicles is
both a social good and will drive further
profits in passengers, profit and cash.
See Risks
pages 50 to 53
the highest levels of safety, after launching our Target Zero campaign
− Further advances in partnership working to address common
+ See KPIs pages 16 and 17
challenges and cement position as trusted partner
− Demonstrate environmental leadership
− Pledge to never buy a diesel bus in the UK again
− Lead the transition to zero emission coaches
− Ambition to be zero carbon emissions in UK bus by 2030
and in UK coach by 2035
FWI2
Carbon emissions reduction
− ALSA was accredited with the AENOR Social Responsibility Certificate,
− Mobilisation of third service on the RRX rail contract in Germany
6
8
2
7
10
− New mobile websites and ticketing apps are driving higher online
transactions, higher conversion rates and lowering costs
− Further optimisation and automation of RMS to drive incremental
demand and higher fleet utilisation
− Proportion of journeys through digital channels in UK bus increased to
− Increasing use of analytic software to enhance operations, driving
safety and efficiency improvements
− Harnessing ideas from our innovation hubs and universities e.g.
using AI and big data to redesign routes to optimise running times
and driver hours
− Continuing enhancements to websites, apps and ticketless
payment systems
− Partnering and investing with local innovation hubs and universities
− Completion of the roll-out of Lytx DriveCam; rolling out of a Driver
Fatigue alert system in our coach operations
− Building technology platforms, capabilities and expertise
to provide integrated transport solutions
− Ongoing development of multi-modal solutions and
on-demand services
− We acquired nine businesses in the year, both in existing and
− Further selective acquisitions, principally in North America
complementary markets:
and Spain
− Five in North America, including the significant acquisition of WeDriveU,
− Extending our offering into new regional markets and cities or
building further scale in existing markets and cities
− Pioneer new ways to access transport with multi-modal services
within big cities, providing complete mobility solutions, through
integrated platforms
− Investments in assets that provide platforms for future growth
providing entry into the fast-growing corporate shuttle market
− Three in ALSA, including new market entries into Aragon and the
− An accessible transport operator in the UK, providing entry into
Canary Islands
a new market
− Doubling the size of our business in Morocco with entry into
two new large cities, Rabat and Casablanca
− Successful mobilisation of two services for the Rhine-Ruhr Express
(RRX), in German Rail
A rising proportion of sales transacted
through our digital channels
demonstrates that our customers value
more convenient and faster ways to
pay. At the same time, the transfer
of transactions away from traditional
ticket offices and third party sales
agents to digital channels is driving
operational efficiencies, reducing costs
and increasing the opportunity for new
commercial partnerships and revenue
streams.
+ See KPIs pages 16 and 17
Passenger journeys
See Risks
pages 50 to 53
5
8
4
6
10
We maintain a disciplined approach
to investing and target project returns
well above our cost of capital, typically
targeting returns of 15%. Across
the business as a whole, disciplined
allocation of capital is measured through
a focus on ROCE, a key element of
executive remuneration.
+ See KPIs pages 16 and 17
ROCE
See Risks
pages 50 to 53
2
6
11
1
3
9
12
15
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Key performance indicators
Measuring our progress
Financial
Normalised operating profit (£m)
Free cash flow (£m)
Return on capital employed (%)
£295.3m
2018: 257.7
£178.7m
2018: 198.6
12.4%
2018: 12.4
3
.
5
9
2
5
.
1
4
2
7
.
7
5
2
6
.
8
9
1
7
.
8
7
1
4
.
6
4
1
9
.
1
1
4
.
2
1
4
.
2
1
2017
2018
2019
2017
2018
2019
2017
2018
2019
KPI definition
Group normalised operating profit from
continuing operations.
KPI definition
Free cash flow is the cash flow available after
deducting net interest and tax from operating
cash flow. See reconciliation on page 24.
Relevance to strategy
Key measure of the overall performance
of the business.
Relevance to strategy
Strong cash generation provides the funding
to invest in initiatives to drive our strategy.
We are focused on driving growth in
operating profit in order to generate higher
and sustainable returns for our shareholders
and providing the platform for further
growth for all our stakeholders including our
employees, our customers and our partners.
This focus on strong cash generation ensures
that we are running the business efficiently,
converting profit to cash to enable investment
into the business and returns to shareholders,
and providing the platform for further
growth for all our stakeholders including our
employees, our customers and our partners.
KPI definition
Return on capital employed (ROCE) is
normalised operating profit, divided by
average net assets excluding net debt and
derivative financial instruments, translated at
average exchange rates. See reconciliation
on page 23.
Relevance to strategy
Demonstrates how efficiently the Group is
deploying its capital resources and generating
operating profit.
A focus on ROCE ensures that we maintain
a disciplined approach to capital investment
and continue to invest in those areas in which
we deliver the best returns. This ensures that
we maximise returns to shareholders for the
capital they invest.
Performance
– Record Group normalised operating
profit, up 13.1% in constant currency
and 14.6% on a reported basis
– Growth being delivered both organically
and through acquisitions
Performance
– Normalised operating cash flow
of £249 million
– Generated £179 million of free cash after
investing £211 million in capital
expenditure to maintain fleet
Performance
– ROCE of 12.4% – reflecting the accretive
impact of our high return acquisitions
– Invested £211 million of net maintenance
capital, predominantly in replacing our fleet
in our existing operations
– Generated over £770 million of free cash
– Invested £42 million in growth capital
flow in the last five years
expenditure to support growth in digital and
e-commerce initiatives and mobilisation
costs in Morocco and German Rail
– Strong returns generated by our
acquisitions, with acquisitions delivering
returns of at least 15%
Non-financial
Safety – Fatalities and
Weighted Injuries (FWI)
4.513
2018: 9.291
Passenger journeys
938.6m
2018: 898.2 million
Reduction in GHG emissions*
19.06
2018: 19.46
KPI definition
KPI definition
KPI definition
The Fatalities and Weighted Injuries (FWI)
Passenger numbers as measured by the
Total Scope 1 & 2 greenhouse gas emissions
Index weights injuries by severity to give an
aggregate of passenger journeys across each
divided by the total number of passenger
overall standard based score.
of our operating divisions.
kilometres travelled across each of our
Our numbers for North America are estimated
as our school bus services are non-ticketed.
operating divisions.
* Measured as tCO2e / million passenger km
Relevance to strategy
Safety is of paramount importance to a
public transport operator and is a core
Relevance to strategy
Growth in passenger journeys is a leading
indicator for growing our business and
Relevance to strategy
Reducing the environmental impact
of transport is core to our purpose.
measure of our strategic priority: Delivering
hence driving modal shift from cars to buses
Per passenger, bus and coach travel is vastly
operational excellence.
and coaches.
Safety is at the heart of our Values and is
National Express is targeting increased
our priority for both our customers and
passenger ridership as a longer-term driver of
our employees.
High safety standards also help to drive
sustainable growth through customer loyalty
and new business wins.
sustainable value for both the business and
the environment, with public transport a key
solution to lowering carbon emissions and
easing travel congestion.
less polluting than cars and, as such, modal
shift is the single most important thing we
can do. But we are also committed to making
public transport greener. We have adopted
targets through to 2025 that are ‘science
based’ and aligned with limiting global
warming in line with the Paris Agreement.
Performance
Performance
Performance
– In 2019, we saw a 51% improvement
– A record number of passengers carried
Fourth consecutive year of emissions
in the FWI score compared with the
previous year, and a 54% improvement
when adjusting for increased mileage
in 2019, with 939 million passengers
travelling on our services, up 5.1% in
the year
reductions: 2.0% fall in tCO2e / million km to
19.04, our lowest figure since reporting started
in 2014. This has been achieved through:
– First year of no at fault fatalities
– Record number of passengers in UK
– Our businesses in North America and
coach, ALSA and German Rail
Morocco both recorded their lowest ever
– Particularly strong growth in Morocco,
scores, improving by 28.6% and 68.7%
up 20.3%, and now carrying more
respectively on the prior year
passengers than in Spain
– 88% improvement in safety performance
since the introduction of Driving Out
Harm in 2010 (when adjusting for
increased mileage)
– consistent fleet renewal;
– adapting existing fleet ahead of renewal; and
– operational excellence initiatives such as
a decrease in vehicle idling and network
optimisation programmes.
Going forward, we have committed never to
buy another diesel bus in the UK and to be
zero emission in bus by 2030 and coach by
2035. We have started in the UK but will drive
a similar level of ambition across the Group.
Remuneration linkage
Group normalised profit before tax is one of
three bonus inputs to the Executive Directors’
and senior managers’ annual bonus structure.
Remuneration linkage
Free cash flow is one of three bonus inputs
to the Executive Directors’ and senior
managers’ annual bonus structure.
Remuneration linkage
ROCE is one of the performance conditions
for the Long-Term Incentive Plan of Executive
Directors’ and senior managers.
Remuneration linkage
Remuneration linkage
Remuneration linkage
FWI is an input into the Executive Directors’
The Executive Directors’ and senior
25% of the Executive Directors’ and senior
and senior managers’ annual bonus structure.
managers’ annual bonus structure typically
managers’ Long-Term Incentive Plan is linked
include a component of personal objectives
to reducing GHG emissions.
relating to business development metrics.
16
National Express Group PLC Annual Report 2019 Financial
Normalised operating profit (£m)
Free cash flow (£m)
Return on capital employed (%)
£295.3m
2018: 257.7
£178.7m
2018: 198.6
12.4%
2018: 12.4
Non-financial
Safety – Fatalities and
Weighted Injuries (FWI)
4.513
2018: 9.291
1
9
2
.
9
4
7
5
.
8
3
1
5
.
4
Passenger journeys
938.6m
2018: 898.2 million
1
.
2
8
8
2
.
8
9
8
6
.
8
3
9
Reduction in GHG emissions*
19.06
2018: 19.46
3
4
.
0
2
6
4
.
9
1
6
0
.
9
1
2017
2018
2019
2017
2018
2019
2017
2018
2019
Group normalised operating profit from
Free cash flow is the cash flow available after
Return on capital employed (ROCE) is
KPI definition
KPI definition
KPI definition
continuing operations.
deducting net interest and tax from operating
normalised operating profit, divided by
cash flow. See reconciliation on page 24.
average net assets excluding net debt and
KPI definition
The Fatalities and Weighted Injuries (FWI)
Index weights injuries by severity to give an
overall standard based score.
KPI definition
Passenger numbers as measured by the
aggregate of passenger journeys across each
of our operating divisions.
derivative financial instruments, translated at
average exchange rates. See reconciliation
on page 23.
Relevance to strategy
Relevance to strategy
Relevance to strategy
Key measure of the overall performance
Strong cash generation provides the funding
Demonstrates how efficiently the Group is
of the business.
to invest in initiatives to drive our strategy.
deploying its capital resources and generating
We are focused on driving growth in
This focus on strong cash generation ensures
operating profit in order to generate higher
that we are running the business efficiently,
A focus on ROCE ensures that we maintain
and sustainable returns for our shareholders
converting profit to cash to enable investment
a disciplined approach to capital investment
and providing the platform for further
into the business and returns to shareholders,
and continue to invest in those areas in which
growth for all our stakeholders including our
and providing the platform for further
we deliver the best returns. This ensures that
employees, our customers and our partners.
growth for all our stakeholders including our
we maximise returns to shareholders for the
operating profit.
employees, our customers and our partners.
capital they invest.
Performance
Performance
Performance
– Record Group normalised operating
– Normalised operating cash flow
– ROCE of 12.4% – reflecting the accretive
profit, up 13.1% in constant currency
of £249 million
impact of our high return acquisitions
and 14.6% on a reported basis
– Generated £179 million of free cash after
– Invested £211 million of net maintenance
– Growth being delivered both organically
and through acquisitions
investing £211 million in capital
expenditure to maintain fleet
capital, predominantly in replacing our fleet
in our existing operations
– Generated over £770 million of free cash
– Invested £42 million in growth capital
flow in the last five years
expenditure to support growth in digital and
e-commerce initiatives and mobilisation
costs in Morocco and German Rail
– Strong returns generated by our
acquisitions, with acquisitions delivering
returns of at least 15%
Our numbers for North America are estimated
as our school bus services are non-ticketed.
Relevance to strategy
Growth in passenger journeys is a leading
indicator for growing our business and
hence driving modal shift from cars to buses
and coaches.
National Express is targeting increased
passenger ridership as a longer-term driver of
sustainable value for both the business and
the environment, with public transport a key
solution to lowering carbon emissions and
easing travel congestion.
Performance
– A record number of passengers carried
in 2019, with 939 million passengers
travelling on our services, up 5.1% in
the year
– Record number of passengers in UK
coach, ALSA and German Rail
– Particularly strong growth in Morocco,
up 20.3%, and now carrying more
passengers than in Spain
Relevance to strategy
Safety is of paramount importance to a
public transport operator and is a core
measure of our strategic priority: Delivering
operational excellence.
Safety is at the heart of our Values and is
our priority for both our customers and
our employees.
High safety standards also help to drive
sustainable growth through customer loyalty
and new business wins.
Performance
– In 2019, we saw a 51% improvement
in the FWI score compared with the
previous year, and a 54% improvement
when adjusting for increased mileage
– First year of no at fault fatalities
– Our businesses in North America and
Morocco both recorded their lowest ever
scores, improving by 28.6% and 68.7%
respectively on the prior year
– 88% improvement in safety performance
since the introduction of Driving Out
Harm in 2010 (when adjusting for
increased mileage)
Remuneration linkage
Remuneration linkage
Remuneration linkage
Group normalised profit before tax is one of
Free cash flow is one of three bonus inputs
ROCE is one of the performance conditions
three bonus inputs to the Executive Directors’
to the Executive Directors’ and senior
for the Long-Term Incentive Plan of Executive
and senior managers’ annual bonus structure.
managers’ annual bonus structure.
Directors’ and senior managers.
Remuneration linkage
FWI is an input into the Executive Directors’
and senior managers’ annual bonus structure.
Remuneration linkage
The Executive Directors’ and senior
managers’ annual bonus structure typically
include a component of personal objectives
relating to business development metrics.
KPI definition
Total Scope 1 & 2 greenhouse gas emissions
divided by the total number of passenger
kilometres travelled across each of our
operating divisions.
* Measured as tCO2e / million passenger km
Relevance to strategy
Reducing the environmental impact
of transport is core to our purpose.
Per passenger, bus and coach travel is vastly
less polluting than cars and, as such, modal
shift is the single most important thing we
can do. But we are also committed to making
public transport greener. We have adopted
targets through to 2025 that are ‘science
based’ and aligned with limiting global
warming in line with the Paris Agreement.
Performance
Fourth consecutive year of emissions
reductions: 2.0% fall in tCO2e / million km to
19.04, our lowest figure since reporting started
in 2014. This has been achieved through:
– consistent fleet renewal;
– adapting existing fleet ahead of renewal; and
– operational excellence initiatives such as
a decrease in vehicle idling and network
optimisation programmes.
Going forward, we have committed never to
buy another diesel bus in the UK and to be
zero emission in bus by 2030 and coach by
2035. We have started in the UK but will drive
a similar level of ambition across the Group.
Remuneration linkage
25% of the Executive Directors’ and senior
managers’ Long-Term Incentive Plan is linked
to reducing GHG emissions.
17
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Group Chief Executive’s review
Records achieved;
new ambitions set
score and first responsible fatality-free
year on record – demonstrate that our
investment, enhanced management
systems and culture are delivering crucial
improvements. These improvements, most
importantly, protect lives, but also reduce
insurance costs.
We have continued to expand into new
complementary markets, helping to drive
future growth. Our experience in Morocco
has been a stand-out achievement. ALSA
is now the country’s largest operator of
urban buses; indeed, we now operate more
buses in Morocco than we do in the UK.
The successful mobilisation of two major
contracts in Rabat and Casablanca has
cemented our reputation as the operator to
trust. This is a reputation I hope will secure
further growth in Morocco.
Our significant acquisition of WeDriveU
(WDU) – Silicon Valley’s premier employee
shuttle operator – has integrated very well
and is outperforming its ambitious revenue
targets, with growth of over 30% in 2019.
The team is pursuing growth opportunities
beyond its traditional geographical and
sectoral focuses, by leveraging the
National Express brand and network. As
part of our growing North America transit
operations, we are targeting $1 billion of
annual revenue, up from today’s $550
million annualised figure. The divisional
reviews contain more detail on our other
acquisitions made during the year and we
continue to maintain a strong pipeline of
acquisition and new contract opportunities.
Overview
I am pleased to report another record set
of results. All of our key financial metrics
are strong and our growth prospects
positive. I will provide further detail on
them in the following sections. I wanted
to firstly outline how our strategy has
delivered this success and then set out
how our ambition is being raised as we
seek to meet the challenges of a new era
dominated by broader concerns, such as
carbon, clean air and inclusive growth. This
is an agenda I welcome as both timely and
one that I believe National Express is very
well placed to prosper in.
Our consistent, sustained, growth over
recent years has been delivered through a
relentless focus on operational excellence.
This requires each business to rigorously
identify what existing and potential
customers want and relentlessly ensure we
meet these demands in the best and most
efficient manner. Where we get that right,
we have our best opportunity to secure
both happy customers and our strongest
returns. It is pleasing, therefore, that both
ALSA and North America have had record
years, alongside a strong UK performance.
Significant passenger growth (up 5.1%
across the Group year-on-year) and
important contract retention (in, for
example, Boston, Chicago and Bilbao),
coupled with a strong Group operating
margin, are testament to the success
of this approach. Most importantly,
the continued improvement in safety
performance – with our best ever
Fatalities and Weighted Injuries Index
National Express has
transformed itself in the last
10 years, turning around
a business in deep crisis
to one that is consistently
delivering record-breaking
results and strong returns”
Dean Finch
Group Chief Executive
18
National Express Group PLC Annual Report 2019 German Rail: RRX
During 2019, our German Rail team
successfully mobilised operations on two of
the Rhine-Ruhr Express (RRX) lines in North
Rhine-Westphalia. The mobilisation saw the
recruitment of 80 new drivers to operate a
fleet of 30 new trains. RRX delivers a new
standard in regional German Rail.
“The mobilisation of the RRX franchise
was an impressive milestone for the
most important rail project in North
Rhine-Westphalia. National Express
played a major role in the successful
start of operations on the RE 5 and RE
6 lines. Many commuters are benefitting
from the comfort and reliability of the
new vehicles. Their positive feedback
illustrates the importance of a continuous
commitment to greater quality in
regional transport, demonstrated
by National Express.”
Ronald R.F. Lünser, Executive Board
Spokesman VRR AöR public
transport authority
Raising our ambition for a new era
National Express has transformed itself
in the last 10 years, turning around a
business in deep crisis to one that is
consistently delivering record-breaking
results and strong returns. Building on
these firm foundations, the next decade
presents a different set of challenges and,
I firmly believe, opportunities.
We are at an inflection point. As the
political priorities and policies of cities from
Birmingham to Barcelona show, there is a
demand for bold leadership. This is why
National Express is building on its existing
leadership as the first UK transport group
to sign up to the United Nations’ Sectoral
Decarbonisation Approach, to pledge that
we will:
Customers, government and investors are
demanding – rightly – that companies meet
the growing challenges around climate
change, clean air, congestion and inclusive
growth. This is an agenda we embrace.
We believe that high quality mass transit
is a solution to these challenges. To meet
them, National Express has raised its
ambition: to be the world’s leading mass
transit operator.
− never buy another diesel bus in the UK;
− lead the transition to zero emission
coaches, with a target for our first
electric coaches in service next year;
− set ambitions for our UK bus and UK
coach businesses to be zero emission
by 2030 and 2035 respectively; and
− include environmental targets as 25%
of the long-term incentive plan for all
senior executives.
We are determined to grasp this
opportunity and be seen as the trusted
partner consistently delivering excellent
mass transit to build cleaner, greener and
more liveable cities. To deliver this will
require a continued focus on operational
excellence. It will also be enabled by
investment in technology – and the
associated management systems –
that drives excellence, efficiency and
innovation. We firmly believe that it will
also open up new sources of growth to
complement the strong pipeline we have
in place and a continued determination
to drive organic growth.
This is perhaps the most exciting time to
be in mass transit in at least a generation.
These targets will be subject to annual
review, including broadening them to
include similarly ambitious pledges in
our other divisions.
To achieve this ambition we will build
on the progress we have already made.
Our ambition is to build on our safety
improvements to become the world’s
safest operator. Having pioneered new
ways of partnership working – for example,
the multiple award-winning West Midlands
Bus Alliance – we want to be seen as
the trusted partner for customers and
governments, consistently delivering
excellent services.
We are determined to
grasp this opportunity and be
seen as the trusted partner
consistently delivering
excellent mass transit
to build cleaner, greener
and more liveable cities.”
19
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Group Chief Executive’s review continued
Financial performance highlights
National Express had a very strong year across all key financial metrics. Group revenue
increased by 10.2% on a constant currency basis (12.0% on a reported basis). Revenue
growth has been delivered across each division with performance particularly strong in our
overseas businesses – both North America and ALSA enjoyed record growth of 11.1% and
11.7% respectively, on a constant currency basis.
Outlook
I remain confident in our growth prospects.
Across the Group our focus on operational
excellence combined with strategic
acquisitions will continue to drive growth
and shareholder returns.
Revenue in constant currency
ALSA (€m)
North America (US$m)
German Rail (€m)
Revenue in £m
ALSA
North America
UK
German Rail
Group
2019
940.6
1,570.6
102.5
824.7
1,230.1
599.7
89.9
2018
842.3
1,413.6
76.6
745.1
1,060.8
577.0
67.8
2,744.4
2,450.7
Group normalised operating profit increased by 13.1% to a new record of £295.3 million
on a constant currency basis, up 14.6% on a reported basis (2018: £257.7m). Both North
America and ALSA again set new records, with North America achieving the highest rate
of profit growth at 21.4% in constant currency.
These results benefitted from £3 million of currency translation, driven by the weakening of
Sterling against the US Dollar. Normalised profit before tax increased by 7.8% on a constant
currency basis, and 9.1% on a reported basis, to a new record of £240.0 million (2018:
£220.0m). Group statutory profit before tax also increased by 5.2% to another new record
of £187.0 million (2018: £177.7m). Group normalised operating margin is up 30 basis points
year-on-year to 10.8% (2018: 10.5%). Excluding the impact of IFRS 16, Group margin is flat
as North America’s increase has been offset by higher Moroccan fuel costs alongside the
mobilisation of the Rabat and Casablanca contracts.
We have sustained our consistent record in recent years of strong and growing shareholder
returns. Our free cash flow has beaten expectations at £178.7 million (2018: £198.6m),
despite increased investment in the year. Normalised earnings per share (EPS) again grew,
up 4.9% to 34.5 pence (2018: 32.9p). EPS growth is lower than profit growth as the 40%
of WDU that the Group does not own is attributable to the minority owner. This impact will
unwind as the Group takes up its options.
This performance again allows us to propose a 10% increase in the full year dividend to
16.35 pence (2018: 14.86p).
Normalised operating profit in constant currency
ALSA (€m)
North America (US$m)
German Rail (€m)
Normalised operating profit £m
ALSA
North America
UK
German Rail
Central functions
Normalised operating profit
Interest and associates
Normalised profit before tax
2019
124.9
157.0
5.7
109.5
123.0
85.0
5.0
(27.2)
295.3
(55.3)
240.0
2018
119.1
129.3
3.4
105.3
96.9
79.9
3.0
(27.4)
257.7
(37.7)
220.0
We maintain a good momentum into 2020.
We will benefit from a full year of earnings
from our significant contract retentions –
on improved terms – in Boston, Chicago
and Bilbao, alongside the contribution
from major new operations in Rabat
and Casablanca. Our 2019 acquisitions,
especially WDU, will add further growth
and we retain a strong pipeline of further
opportunities in all divisions. We will remain
focused on securing organic growth across
the Group and combine this with close
cost control – through examples such as
the Master Schedule programme in North
America – to drive cash generation and
maintain strong margins.
As our refreshed Vision and Values
demonstrate, we will continue to adopt
a partnership approach. In an era of
increased focus on climate change, clean
air and congestion, recent announcements
of pro-mass transit policies by national
and local governments demonstrate the
opportunity of being seen as a trusted,
high quality operator. We therefore
continue to invest in our industry-leading
safety and excellence programmes to
ensure we are seen as a partner to solve
these challenges. Our zero emission
commitments are a clear example of this.
From our foundation of consistently strong
financial performance we continue to
focus on operational excellence, combined
with strategic acquisitions, to drive future
expansion and secure sustainable and
growing shareholder returns.
Dean Finch
Group Chief Executive
27 February 2020
20
National Express Group PLC Annual Report 2019 Group Finance Director’s review
Record revenue and growth
Chris Davies
Group Finance Director
Presentation of results
To supplement IFRS reporting, we also
present our results on a normalised basis
which shows the performance of the
business before intangible amortisation for
acquired businesses. In years when there
are discontinued operations, significant
disposals or restructuring costs these are
also removed from normalised results.
The Board believes that this gives a
more comparable year-on-year indication
of the operating performance of the
Group and allows the users of financial
statements to understand management’s
key performance measures. Unless
otherwise noted, all references to profit
measures throughout this review are for
continuing operations for both the current
and prior reporting period. In addition to
performance measures directly observable
in the Group financial statements (IFRS
measures), alternative financial measures
are presented that are used internally by
management as key measures to assess
performance. Further explanation in
relation to these measures, together with
cross-references to reconciliations to
statutory equivalents where relevant, can
be found on page 24.
Statutory profit
The Group again delivered a record
profit for the year of £148.3 million
(2018: £138.7m), an increase of 6.9%,
driving basic earnings per share of 27.6
pence (2018: 26.6p). The 3.8% increase
in earnings per share is lower than the
increase in profit for the year as profit
attributable to non-controlling interests
increased to £7.2 million (2018: £3.0
million), principally driven by the 40% of
WeDriveU not yet acquired by the Group.
Reconciliation of normalised profit
before tax to statutory profit for the year
Normalised profit
before tax
Separately disclosed
items
Profit before tax
Tax charge
Profit for the year
2019
£m
240.0
(53.0)
187.0
(38.7)
148.3
2018
£m
220.0
(42.3)
177.7
(39.0)
138.7
The highly successful
refinancing of the Group this
year creates a solid platform
for future growth”
The increase in separately disclosed
items is driven by the amortisation of
intangibles acquired in the current or prior
year, primarily in relation to WeDriveU.
Also included within separately disclosed
items are the gain on the sale of Ecolane,
which has been presented net of all costs
including contingent bonus payments
(further detail on page 40), and charges
related to the restructuring of our North
America division. These latter two items
fully offset each other hence having no
effect on the year-on-year movement. The
statutory tax charge was £38.7 million
(2018: £39.0m), an effective tax rate of
20.7% (2018: 21.9%). The reduction in
effective tax rate reflects an underlying
increase offset by the benefit from the tax-
free gain on disposal of Ecolane.
Revenue
Revenue bridge
2018 revenue
Currency translation
2018 revenue at constant
currency
Growth in the continuing
business
2019 acquisitions
2019 revenue
£m
2,451
39
2,490
109
145
2,744
Group revenue for the period was £2,744.4
million (2018: £2,450.7m), an increase
of 10.2% on a constant currency basis
(up 12.0% on a reported basis with the
benefit of £39 million of foreign currency
gains on translation). Revenue growth of
£109 million from our existing businesses,
representing growth of 4.4%, was boosted
by a further £145 million from acquisitions,
principally in North America and Spain.
21
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Group Finance Director’s review continued
Our business in North America delivered
revenue growth of 11.1% on a constant
currency basis. A key component of this
growth was the acquisition of WeDriveU,
our largest acquisition for eight years and
one of five completed in North America in
2019. WeDriveU is performing well in its
first year of operation within the Group with
revenue growth of over 30% and profit
growth of around 25%. Performance in
the continuing business was robust, with
the school bus business benefitting from
the 2019/20 bidding season in which we
achieved an average price increase of 3.9%
across the entire portfolio and 5.9% on those
contracts up for bid and renewal. In transit,
we extended our two biggest contracts on
improved terms, contributing to a total transit
and shuttle business now generating an
annualised $0.5 billion in revenue.
ALSA delivered a record level of revenue,
growing by 11.7% in constant currency,
with strong organic growth of 10.8%
boosted by three acquisitions made in
the year. Record passenger numbers in
both Spain and Morocco, up 5.8% and
20.3% (up 3.0% excluding the impact of
Rabat and Casablanca) respectively, have
driven revenue growth and Switzerland
has also delivered strong revenue growth,
up 13.7%. Pleasingly, we have seen high
levels of growth across each of our long
haul, regional and urban services, with
our increasingly sophisticated Revenue
Management System (RMS) helping to
drive a 2.9% increase in occupancy to
51.9%. Underlying growth in Morocco
has been boosted by the successful
mobilisation of two new large contracts
to run urban bus services in Rabat and
Casablanca which, whilst having minimal
profit impact in 2019, significantly increase
the size of the business moving forward.
Our UK business delivered a good
performance with revenue growth of 3.9%
for the year driven by robust growth in
both our coach and bus businesses.
In coach, core network revenue rose by
3.6%, benefitting from RMS, helping
to drive record revenue and passenger
numbers, together with a 2.4% increase
in occupancy to 60.9%. Total UK bus
revenue grew by 3.7%, with commercial
revenue per mile growing by 3.2%.
This has been driven by the continued
expansion of low fare zones and products
together with strong growth in digital sales,
with two thirds of passengers now using
digital tickets. Growth has been further
augmented with the acquisition of ATG
(rebranded to National Express Accessible
Transport, or NEAT), providing entry into
the accessible transport market.
In German Rail, reported revenue is up
33.8% to €102.5 million, reflecting the start-
up of two services for Rhine-Ruhr Express.
Normalised profit
Group normalised operating profit
increased by 13.1% to £295.3 million
on a constant currency basis, up 14.6%
on a reported basis (2018: £257.7m). £7.6
million of this increase was driven by the
adoption of IFRS 16 which is offset by an
equal and opposite impact on interest to
give a net zero impact on normalised profit
before tax (see page 25 for more detail).
Profit bridge
2018 normalised profit before tax
(as reported)
Currency
Normalised profit before tax at
constant currency
Growth in continuing business
2019 acquisitions
Driver wages
Fuel
Weather
Interest
£m
220
3
223
46
19
(28)
(6)
(6)
(8)
2019 normalised profit before tax
240
Group normalised profit before tax
increased by 7.8% to £240.0 million on
a constant currency basis, up 9.1% on a
reported basis (2018: £220.0m), after the
benefit of £3 million of currency translation
driven by the weakening of Sterling against
the US Dollar.
The continuing business contributed a
strong £46 million of profit, with growth
across all divisions. This figure is the
flow through of revenue growth and all
costs other than those broken out for
transparency above (namely the increase
in driver wages; the year-on-year impact of
weather; and the year-on-year difference in
hedged fuel prices). Netting these together
represents organic growth in normalised
profit before tax of around 3%.
This was augmented by the nine
acquisitions made during the year which
delivered a £19 million contribution, net of
deal fees. This was partially offset by driver
wage increases, predominantly in North
America and ALSA, and higher hedged
fuel prices together with a greater level of
disruption from adverse weather conditions
year-on-year. The additional interest charge
of £8 million, as shown in the table above,
reflects a higher level of debt over the year
together with a higher proportion of debt
denominated in Sterling.
Segmental profit performance
Normalised
operating
profit
ALSA
North America
German Rail
Normalised
operating
profit
ALSA
North America
UK
German Rail
2019
Local
currency
m
2018
Local
currency
m
124.9
157.0
5.7
2019
£m
109.5
123.0
85.0
5.0
119.1
129.3
3.4
2018
£m
105.3
96.9
79.9
3.0
Central functions
(27.2)
(27.4)
Group normalised
operating profit
295.3
257.7
In our North America business, normalised
operating profit increased by 21.4%
to $157.0 million, driven by a strong
contribution from the acquisition of
WeDriveU. Solid underlying performance
reflected the flow through of the revenue
growth noted above where price increases
more than covered driver wage increases,
albeit at the expense of the loss of some
less profitable contracts. This was partially
offset by a greater level of weather
disruption in the period versus the prior
year. The adoption of IFRS 16 had a
favourable impact of $5 million. Operating
margin improved by 90 basis points to
10.0%, with 50 basis points improvement
on an underlying basis (excluding the
impact of IFRS 16).
Our UK businesses delivered an increase
of 6.5% in operating profit to £85.0
million, reflecting the record revenue
in our core coach business, together
with cost efficiencies, new routes, and
network reviews in both the bus and coach
businesses, partially offset by higher driver
wages. During the year, we recorded a
gain on the sale of a depot, slightly below
the level of gains achieved last year at
around 1% of the UK cost base as we
continue to execute our multi-year property
rationalisation strategy. Underlying
operating margin remains strong and
is broadly flat year-on-year. Reported
operating margin improved by 40 basis
points to 14.2% driven by the adoption
of IFRS 16.
22
National Express Group PLC Annual Report 2019 ALSA also delivered a record level of
profit of €124.9 million, with a normalised
operating profit increase of 4.9% on a
constant currency basis predominantly
driven by strong organic revenue growth
in Spain and Morocco. The impact of
higher hedged fuel prices in Morocco
coupled with lower profitability during
the mobilisation phases of the Rabat
and Casablanca contracts drove an 80
basis point decline in 2019 profit margin
to 13.3%.
Profit in our German Rail operations
increased to €5.7 million (2018: €3.4m)
as we continue to drive improvements
to contract lifetime profitability. There
are a number of drivers of improved
performance in German Rail including
higher than expected growth in passenger
revenues (including settlements for prior
periods) and agreements with the local
transport authorities on penalty exemptions
for particular construction works. We are
very pleased with the smooth mobilisation
of our new RRX franchise.
Group normalised operating profit
margin grew by 30 basis points at
10.8% (2018: 10.5%).
Summary income statement
2019
£m
2018
£m
Revenue
2,744.4
2,450.7
Operating costs
(2,449.1)
(2,193.0)
Normalised
operating profit
Share of results
from associates
Net finance costs
Normalised profit
before tax
Tax
Normalised profit
after tax
295.3
257.7
0.4
(55.7)
240.0
(55.2)
0.9
(38.6)
220.0
(49.0)
The normalised tax charge was £55.2 million
(2018: £49.0m), a normalised effective tax
rate of 23.0%, (2018: 22.3%), in line with
previous guidance. The mix of profits in
different tax jurisdictions drives a slight
increase in the normalised effective tax rate.
Normalised profit attributable to non-
controlling interests increased to £8.6
million (2018: £3.0m) primarily driven
by the acquisition of WeDriveU.
Normalised basic earnings per share
were 34.5 pence (2018: 32.9p).
Return on capital employed
(ROCE)
ROCE is a key performance measure for
the Group, guiding how we deploy capital
resources and as such is a key component
of executive incentives. Like-for-like ROCE
(excluding the impact of IFRS 16) is up by 80
basis points, demonstrating our disciplined
approach to capital allocation and Balance
Sheet management and the accretive impact
of our high return acquisitions. Reported
ROCE was flat year-on-year at 12.4%,
reflecting the adoption of IFRS 16.
Reconciliation of ROCE
Group statutory operating profit
Separately disclosed items
Return – Normalised Group
operating profit
Average net assets*
Remove: Average net debt*
Remove: Average derivatives,
excluding amounts within net debt
Foreign exchange adjustment
Average capital employed
2019
£m
242.3
53.0
295.3
1,148.6
1,203.4
(12.0)
35.8
2,375.8
Return on capital employed
12.4%
184.8
171.0
* Prior year restated for IFRS 16
Net finance costs were £17.1 million
higher at £55.7 million (2018: £38.6m)
with around half of the difference driven
by the adoption of IFRS 16 and the
remainder the results of a higher level
of debt and a greater proportion of
borrowings denominated in Sterling.
Normalised profit before tax of £240.0
million represents growth of 7.8% on
a constant currency basis, up 9.1%
on a reported basis (2018: £220.0m).
Capital allocation
The cash-generative nature of the Group
creates a solid platform for investing
for growth and paying dividends.
After investing in maintenance capital
expenditure and working capital, and
paying interest and tax, the Group’s
priorities for the allocation of the resulting
free cash flow are to:
− invest in the business (growth capital
and acquisitions) to deliver 15% return;
− manage gearing within the range of 2.0
to 2.5 times; and
− return to shareholders – at least
2.0x covered.
Cash management
The Group delivered £178.7 million of free
cash flow in the period (2018: £198.6m).
Free cash flow
Continuing normalised
operating profit
Depreciation and other
non-cash items
EBITDA
Net maintenance capital
expenditure
Working capital
movement
Pension contributions
above normal charge
Operating cash flow
Net interest paid
Tax paid
Free cash flow
2019
£m
2018
£m
295.3
257.7
214.8
510.1
144.4
402.1
(211.4)
(123.9)
(42.0)
(17.5)
(7.6)
249.1
(45.4)
(25.0)
178.7
(7.4)
253.3
(33.6)
(21.1)
198.6
The Group delivered £510.1 million of
EBITDA in the period (2018: £402.1m).
This is an increase of £108.0 million, of
which £54.7 million was driven by the
adoption of IFRS 16 at the start of
the period.
Net maintenance capital expenditure
payments increased by £87.5 million to
£211.4 million, reflecting a return to a
normalised level of expenditure of 1.0
times depreciation. Additions of property,
plant and equipment were £311.5
million (2018: £210.1m); the increase of
£101.4 million reflected a step up in fleet
requirements reflecting both the cycle of
fleet replacement across the Group and
new contracts, particularly in Morocco and
North America. Consistent with previous
years, the Group’s standard payment terms
for fleet purchases are up to 12 months
and, accordingly, it is typical for a large
proportion of fleet additions in the year
to be outstanding at the year end. At the
period end there was £263.3 million (2018:
£160.3m) owing to vehicle suppliers driven
by the increase in additions noted above.
The working capital outflow of £42.0
million in 2019 reflects significant growth
in new contracts, notably in Morocco
and German Rail. The Group makes use
of non-recourse factoring arrangements
on receivables and advance payments.
The total draw down at the period end
was £107.1 million (2018: £88.7m) with
the increase on the prior year driven by
advanced factoring of subsidies in the two
new rail franchises in Germany.
23
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Group Finance Director’s review continued
Net interest paid increased by £11.8 million
to £45.4 million, of which £7.6 million was
attributable to the adoption of IFRS 16
(a proportion of lease payments are now
presented in interest) and the balance
reflected increased payments as a result
of higher net debt and a change in mix of
borrowing currency. Tax paid increased by
£3.9 million to £25.0 million, driven both
by increased profit and an increase in the
effective tax rate.
Statutory cash generated from operations
for the year was £356.2 million (2018:
£306.8m) as shown in the Group Statement
of Cash Flows and expanded further
in note 39 to the Financial Statements.
Operating cash flow of £249.1 million
presented in the table above is different,
predominantly due to the inclusion of
net maintenance capital expenditure of
£211.4 million.
Reconciliation of free cash flow
to net cash flow from operating
activities
Free cash flow
Add: Operating cash flows from
discontinued operations (note 11)
Add: Exceptional cash expenditure
Remove: Net maintenance
capital expenditure
Remove: Other non-cash
movements (note 39)
Profit on disposal of fixed assets
Net cash flow from operating
activities
2019
£m
178.7
(1.2)
(7.2)
211.4
(11.6)
(13.9)
356.2
Cash outflow from exceptional items of
£7.2 million relates to the restructuring
costs in North America.
Net funds flow
Free cash flow
Net growth capital
expenditure
Net inflow from
discontinued operations
Acquisitions
(net of cash acquired)
Disposal of subsidiaries
(net of cash disposed)
Dividends
Other, including
foreign exchange
Net funds flow
2019
£m
178.7
2018
£m
198.6
(42.2)
(5.8)
(1.2)
0.4
(166.4)
(154.5)
21.7
(78.3)
11.4
(76.3)
0.0
(70.8)
(31.5)
(63.6)
Net debt
(1,241.5)
(951.5)
Growth capital expenditure during the
period of £42.2 million included vehicles
for new contracts in WeDriveU in North
America and for the Rabat contract
in Morocco, investment in digital and
e-commerce initiatives in the UK, and
costs associated with the mobilisation
of our RRX rail contract in Germany.
Continuing our successful compounding
growth strategy, we completed nine
acquisitions in the year: five in our North
America division, three in ALSA and one
in the UK. Total consideration for these
acquisitions was £162.2 million of which
£10.6 million is deferred into future years.
The most significant investment in the year
was the purchase of 60% of the share
capital of WeDriveU on 11 April 2019. At
the same time, the Group and the vendor
entered into a put/call agreement whereby
the Group and the vendor have the right to
sell/buy the remaining 40% shareholding
to the other party in three tranches over
the next three years. The call options
have no value for accounting purposes.
However, the put options are required to
be valued and booked on the balance
sheet. Accordingly a liability of £96.8
million has been recognised at the period
end, recorded at the present value of the
estimated redemption value, using forecast
earnings of WeDriveU.
£14.8 million of deferred consideration
relating to acquisitions completed in prior
years was settled in 2019, resulting in a
total net funds outflow in the period of
£166.4 million.
The cash inflow of £21.7 million from
disposals reflects the net proceeds from
the sale of Ecolane in July 2019.
Other items include £11.4 million relating
to the retranslation of foreign currency debt
balances and the maturity of some foreign
exchange contracts.
Net funds flow for the period was an
outflow of £76.3 million (2018: outflow of
£63.6m), resulting in year end net debt
of £1,241.5 million (2018: £951.5m).
Opening net debt increased from £951.5
million, as previously reported, after applying
the transitional adjustment of £213.7 million
in respect of the adoption of IFRS 16.
Gearing at the end of the period was 2.4
times EBITDA, within the Group’s target
range of 2-2.5 times. The adoption of IFRS
16 in 2019 impacted gearing by 0.2 times.
Dividend
National Express’ dividend policy is to
cover the dividend at least two times by
normalised earnings. In considering the
level of the dividend to declare, the Board
has carefully considered three principal
factors, in addition to level of cover:
1. available distributable reserves;
2. in-year free cash flow generation; and
3. gearing and indebtedness.
In line with the interim dividend, the Board
has proposed a 10% increase in the final
dividend to 11.19 pence, to give a full year
dividend of 16.35 pence at 2.1 times cover.
Treasury management
The Group maintains a prudent approach
to its financing and is committed to
an investment grade credit rating. The
Board’s policy is to target a level of debt
that allows for disciplined investment
and ample headroom on its covenants,
with net debt to EBITDA of 2.0-2.5 times
over the medium term. Moody’s credit
rating agency re-affirmed its upgraded
investment grade rating to Baa2/stable
earlier in the year while Fitch credit rating
agency upgraded its investment grade
credit rating to BBB/stable.
The Group’s key accounting debt ratios
at 31 December 2019 were as follows:
− Our bank covenant for gearing is not to
exceed 3.5 times net debt to EBITDA –
in 2019 the gearing ratio was 2.4 times
EBITDA (31 Dec 2018: 2.3x)
− Our bank covenant for the interest cover
ratio is EBITDA not to be less than 3.5
times interest – in 2019 the interest
cover ratio was 9.6 times interest
(31 Dec 2018: 10.5x).
The Group’s covenants are set on a
‘frozen GAAP’ basis, removing the impact
of IFRS 16, thus providing greater levels
of headroom.
The highly successful refinancing of the
Group this year creates a solid platform for
future growth. Through 2019, the Group
has put in place a number of new facilities,
further diversifying the sources of funding
and providing additional liquidity until
2032, in a low interest rate environment. In
October 2019, the Group issued a series
of private placements totalling £414 million
denominated in US Dollars, Sterling and
Euros with maturities ranging from 2027
to 2032 and an average coupon of 1.92%,
representing the Group’s debut issuance
in the US private placement syndicated
market. These facilities were taken on a
delay-draw basis and will remain undrawn
until May 2020 when existing facilities
mature. In November 2019, the Group
issued a £250 million Sterling bond
maturing in 2028 with a coupon of 2.375%.
At 31 December 2019, the Group had
£2.7 billion of debt capital and committed
facilities, comprising £875 million of
Sterling bonds, a £211 million floating
rate note, £175 million of bank loans, a
£557 million revolving credit facility (RCF),
private placements of £480 million and
£407 million of leases. At 31 December
24
National Express Group PLC Annual Report 2019 2019, the Group’s RCF was undrawn
with £1.0 billion in cash and undrawn
committed facilities available, this
elevated level of cash driven by the early
refinancing, and partial double-carry, of
the Sterling bond noted above.
In October 2018, the Group Pension
Scheme, through its trustee company,
completed an insurance buy-in transaction
with Rothesay Life to cover 100% of future
benefits payable to members and the
detailed transfer process is ongoing.
The IAS 19 valuations for the principal
schemes at 31 December 2019 were
as follows:
− WM Bus: £99.1 million deficit (2018:
£127.3m deficit)
− UK Group scheme: £14.2 million surplus
(2018: £14.9m surplus)
Fuel costs
The Group consumes approximately 255
million litres of fuel per year for which it
bears pricing risk (i.e. there is no direct fuel
escalator in the contract or concession
price). Fuel costs represented a total
cost to the Group in 2019 of £188 million
(approximately 7% of related revenue),
at an average fuel component cost (i.e.
excluding delivery and taxes) of 37.3 pence
per litre. The Group pursues a forward fuel
buying policy in order to secure a high
degree of certainty in its planning. This
policy is to hedge fully a minimum of 15
months’ addressable consumption against
movements in price of the underlying
commodity, together with at least 50% of
the next nine months’ consumption in the
contract businesses. Currently, the Group
is 100% fixed for 2020 at an average price
of 37.2 pence per litre, 73% fixed for 2021
at an average price of 36.5 pence and 13%
fixed for 2022 at 33.9 pence.
Impact of new accounting
standards
The new accounting standard,
IFRS 16 ‘Leases’, came into effect
on 1 January 2019.
The standard primarily affects the
accounting for the Group’s operating
leases and results in an increase in the
number of leases being recognised on the
Balance Sheet as the distinction between
operating and finance leases has been
removed. As a result we have recognised
right-of-use assets of £201.1 million and
lease liabilities of £213.7 million as at
1 January 2019.
To ensure sufficient availability of liquidity,
the Board requires the Group to maintain
a minimum of £300 million in cash and
undrawn committed facilities at all times.
This does not include factoring facilities
which allow the without-recourse sale
of receivables. These arrangements
provide the Group with more economic
alternatives to early payment discounts for
the management of working capital, and
as such are not included in (or required for)
our rolling liquidity forecasts.
At 31 December 2019, the Group had
foreign currency debt and swaps held
as net investment hedges. These help
mitigate volatility in the foreign currency
translation of our overseas net assets.
The Group also hedges its exposure to
interest rate movements to maintain an
appropriate balance between fixed and
floating interest rates on borrowings. It has
therefore entered into a series of swaps
that have the effect of converting fixed rate
debt to floating rate debt or vice versa.
The net effect of these transactions was
that, at 31 December 2019, the proportion
of Group debt at floating rates was 24%
(2018: 37%).
Group tax policy
We pursue a prudent approach to our
tax affairs which are aligned to business
transactions and economic activity. We
have a constructive and good working
relationship with the tax authorities in the
countries in which we operate and there
are no outstanding tax audits in any of
our main three markets of the UK, Spain
and the USA. The Group’s tax strategy
is published on the Group website in
accordance with UK tax law.
Pensions
The Group’s principal defined benefit
pension schemes are all in the UK.
The combined deficit under IAS 19 at
31 December 2019 was £90.0 million
(Dec 2018: £116.8m).
The two principal plans are the UK Group
scheme, which closed to new accrual in
2011, and the West Midlands Bus plan (WM
Bus), which remains open to accrual for
existing active members only. The overall
level of deficit contributions will be around
£8 million in total per annum until 2020.
The impact is summarised as follows:
− An increase in EBITDA of £54.7 million
reflecting the reduction in operating
lease costs which are now recognised
on the Balance Sheet
− An increase in operating profit of £7.6
million as the operating lease costs are
removed and replaced with depreciation
(included in operating profit) and interest
costs (excluded from operating profit)
− Zero impact on profit before tax as the
increase in operating profit and finance
costs fully offset
− A decrease in ROCE by 80 basis
points, reflecting the increased level of
average capital employed following the
recognition of right-of-use assets on the
Balance Sheet
− An increase in net debt of £213.7 million
reflecting the recognition of operating
leases on the Balance Sheet
− An increase in gearing of around 0.2
times net debt to EBITDA
Brexit
Given the diversified nature of our business
model and the limited exposure to cross-
border trade, we do not believe that Brexit
poses a material threat to the Group.
We no longer run scheduled operations
between the UK and the Continent,
therefore the main Brexit risk specific to
the Group is that inbound and outbound
airport travel in our UK coach business
may be impacted should air travel be
materially reduced due to restrictions or
currency fluctuation. We purchase some
vehicles from European manufacturers
for UK operations although we have good
working relationships with both these
and alternative UK suppliers to mitigate
any long-term impact should further
Sterling depreciation materially increase
purchase cost. For the purposes of viability
testing, we have modelled a hard Brexit in
conjunction with other principal risks and
remain confident that we have suitable
mitigation plans in place however Brexit
eventually unfolds.
Summary
The strong financial performance delivered
in 2019, coupled with the additional
financing facilities and continued prudent
Balance Sheet management, further
augment the Group’s robust financial
position. We remain confident about
the prospects for the year ahead.
Chris Davies
Group Finance Director
27 February 2020
25
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Viability Statement and going concern
Assessment of prospects
The Board continues to believe that the
Group’s prospects are positive in the
medium to long term.
We are diversified:
The Board concluded that three years
would continue to be an appropriate
timeframe over which to assess the
Group’s ongoing viability, as within
that timeline a number of risks’ impact/
likelihood was expected to reduce:
− No one contract contributes more
− Regulatory: the outcome of the majority
than 2% to revenue;
− The Group receives only 4% of
its revenue in the form of grants
and subsidies
We are positioned to benefit from the future
trends in transportation:
− Transport demand continues to grow
whilst private car ownership is beginning
to decline; the gap will be filled by
public transport
− Public transport is fundamental to
addressing urban challenges of
congestion and poor air quality; our
ambition to be the world’s greenest
transport company places us at the
forefront of this opportunity
We invest in the business to secure
its future:
− Over the last five years, 90% of free
cash flow has been re-invested into
the business
− We invest in technology to allow
customers to access our products at
competitive prices and to deliver our
services safely and efficiently
The Group’s strong financial position
is characterised by operating cash
conversion of 84% and free cash
generation of £178.7m underpinned
by 10% revenue growth. The Group’s
credit rating is investment grade with
committed facilities of £2.7 billion at
31 December 2019.
Principal risks and assessment
period
The Board reviewed the Group’s principal
risks (pages 48-53), looking at each risk’s
impact, likelihood and the timeframe over
which the risk was likely to reduce Group
cash flows. On this basis, the highest
impact and highest likelihood risks were
considered in modelling a severe but
plausible downside to assess the Group’s
future viability.
of the major Spanish concessions
renewals is expected to have become
more certain
− Brexit: the immediate impact of Brexit
will be felt
Assessment of viability
The Group’s viability assessment is an
output of the annual strategic planning
process. To assess viability, multiple,
material risks are selected by the Board
and are assumed to crystallise in parallel
during the assessment period, putting the
financial and operational performance of
the business under plausible, but unlikely,
stresses as outlined below.
Risk stress tests
Brexit: no-trade-deal Brexit assumed, with
material Europe-wide economic downturn
and reduction in travel between the EU
and the UK.
Economic environment: driver wage
inflation continues in North America;
and high speed rail aggressively
undermines profitability in Spanish long
haul coach travel.
Regulatory landscape: material margin
loss in ALSA following resolution of long
haul franchise renewal process.
Terrorism: terrorism event hits
both UK and Spanish consumer
confidence, resulting in lower levels of
discretionary travel.
Cyber: IT system failure and data loss
following cyber attack in UK and Spain
causes significant revenue loss and
financial penalties.
Credit/financing risk: material increase
in the cost of borrowing and reduction in
liquidity following period of reduced cash
generation and profitability, combined with
a loss of factoring facilities.
Climate change: increase in the economic
disruption from extreme weather.
In the unlikely event of this concurrence
of events, the Board would mitigate
through reduced operating costs and
capital expenditure. During assessment,
the Group’s continued cash generation;
access to liquidity and funding; and
mitigation actions demonstrated that
it could tolerate the impact of the risk
scenarios without breach of covenants
or threat to business viability. To further
boost this position, the Group operates a
policy of retaining a minimum £300 million
cash or undrawn committed facilities at
any time.
Viability statement
Based on the results of the analysis, the
Board has a reasonable expectation that
the Group will continue in operation and be
able to meet its liabilities as they fall due
over the three-year period of assessment.
Going concern
The financial position of the Group, its
cash flows, liquidity position and borrowing
facilities are set out in the Group Finance
Director’s review on pages 21 to 25,
and the Group’s business activities,
together with the factors likely to affect
its future development performance
and position, are set out in the Strategic
Report (pages 27 to 36). Note 30 to the
Financial Statements includes the Group’s
objectives, policies and processes for
managing its capital; its financial risk
management objectives; details of
its financial instruments and hedging
activities; and its exposure to credit
risk and liquidity risk.
The Board has reviewed assumptions
about current trading performance,
and has taken account of reasonably
possible adverse changes to performance
impacting availability of resources to June
2021. The Board confirms that it has a
reasonable expectation that the Group
has adequate resources to continue in
operation for the period reviewed, and
accordingly the Board continues to adopt
the going concern basis of accounting in
preparing the financial statements for the
year ended 31 December 2019.
26
National Express Group PLC Annual Report 2019 Divisional review: ALSA
ALSA
Francisco Iglesias
Chief Executive, ALSA
Revenue
£824.7m
2018: £745.1m
Normalised operating profit
£109.5m
2018: £105.3m
ALSA is the leading company in the Spanish road passenger
transport sector, and was acquired by National Express
in 2005.
With over 100 years’ experience, it operates long-distance,
regional and urban bus and coach services across Spain and
in Morocco and Switzerland. Apart from its bus and coach
services, the business also operates service areas and other
transport-related businesses, such as fuel distribution.
Market overview
ALSA holds the market-leading position
in the regulated and highly segmented
bus and intercity coach market in Spain
and is the leading urban transport
operator in Morocco, operating in six
cities in the country. Three levels of
government regulation apply in Spain:
national (long-distance coach), regional
(regional coach) and city (urban bus).
Each concession is exclusive to the
operator, based on compliance with
the public service obligation. Intercity
competition comes from state backed
rail and low cost airlines. Bus and
coach concessions are awarded
through competitive public tender,
typically every 10 years.
Growth drivers
− 174 concessions: 119 intercity coach
concessions (21 long haul and 98
regional), 38 urban bus contracts,
17 others
− Concessional renewal process
restarting
− New contract wins in Spain
and Morocco
− Revenue management generating
passenger and revenue growth
in Spain
− Continuing urbanisation of the
Moroccan economy with rapid
migration to the major cities
− Building scale and services
in Switzerland
− Further bolt-on acquisition
opportunities
Market size
€4.2bn
2018: €4.0bn
Passengers
368m2018: 326m
27
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Divisional review: ALSA continued
Year ended 31 December
Revenue
Normalised operating profit
Revenue
Normalised operating profit
Operating margin
Overview
ALSA had another very strong year. It
again delivered record revenue (up 11.7%),
profit (of €124.9 million) and patronage
(up 12.8%) figures. Every business area
– Spanish long haul, regional and urban
services, plus Morocco and Switzerland
– delivered organic growth. Morocco
added two major contracts in the year
and is growing particularly strongly, with
revenue up 31.9% in the year. The impact
of higher fuel prices, coupled with reduced
profitability during the mobilisation phase,
lowered the ALSA operating margin by 80
basis points to 13.3% (2018: 14.1%). We
expect ALSA to grow strongly in 2020 and
surpass €1 billion of revenue in the year.
The long haul concession renewal process
has restarted, with two small contracts
currently being retendered, albeit subject
to legal challenge. In line with previous
guidance, we do not expect any impact
this year and a modest impact in 2021.
Bilbao contract renewal
In August, ALSA gained a 10-year renewal of its contract to manage urban transport in
the city of Bilbao – the second largest network operated by a private company in Spain.
The network is delivered with a fleet of 143 buses, operating on 35 lines.
“Over the last few years Bilbao has started on a journey to deliver a sustainable, healthy
urban mobility plan, placing its citizens’ welfare at the core of urban development in the
city. On this journey we were lucky enough to find a key partner in ALSA. Their support is
a determining factor, for instance, to providing ‘zero emission’ alternatives in the Bilbobus
fleet, allowing us to start the year with more than 28% of the fleet being replaced by
efficient buses, with the objective that by 2030 it will be rolled out to 100% of the fleet.”
Alfonso Gil, Deputy Mayor and Councillor for Mobility and Sustainability
2019
£m
£824.7
£109.5
€940.6
€124.9
13.3%
2018 normalised operating profit
Growth in the continuing business
2019 acquisitions
Driver wages
Fuel
IFRS 16
2019 normalised operating profit
2018
£m
£745.1
£105.3
€842.3
€119.1
14.1%
€m
119
19
2
(11)
(5)
1
125
Operational excellence: the
foundation of sustained growth
ALSA has firmly established itself as
the leader in the markets it serves. It is
a leadership that is recognised by the
awards – such as the leading BCX-IZO
customer satisfaction recognition and
another, improved, European Foundation
for Quality Management (EFQM) five-star
excellence score – and apparent in the
significant customer growth highlighted
above. Further investment and innovation
in our Revenue Management System
(RMS), including a greater use of machine
learning and AI tools, has helped drive
both passenger growth and an increase
in average occupancy, to 51.9%
(2018: 50.5%).
Morocco again enjoyed another record
year, with its fastest ever rate of expansion.
In 2019, Morocco carried over 190 million
passengers, up 20.3% on 2018. Two major
contracts in Rabat and Casablanca – for
up to 22 and 15 years respectively – were
successfully launched towards the end of
the year. With the full year benefit of these
contracts and the potential for further
expansion, we expect Morocco to double its
contribution in 2020 compared with 2019.
Our Geneva hub also continues to grow,
with the first cross-border (into France)
service starting in December. We believe
there are further opportunities to add other
contracts to complement our existing
range of shuttle, bus, coach and school
bus services. Our range of ski transfer
services also continued to grow strongly,
up 6% in 2019, and on one Saturday
in January 2020 broke the previous
passenger record by over 10%. We
continue to develop common information
and booking systems across our different
alpine brands to provide customers
with a greater choice of services, more
sophisticated pricing and also generate
operational efficiencies. Geneva remains
an interesting growth hub.
During the year ALSA also renewed
a number of contracts, demonstrating
its continued reputation for excellence.
Our largest Spanish urban bus contract,
Bilbao, was renewed for 10 years. ALSA’s
consistent delivery of services that met the
required operational and environmental
targets in our over 1,000 vehicles Madrid
Consortium regional contract led to an
automatic renewal for another five years.
This contract alone is worth over €500
million in revenue across its life. We
renewed our only long haul concession
that has so far completed its retendering
process: our Madrid-Guadalajara services
were secured until 2028. Two other
important contracts also received lengthy
extensions: Asturias regional services
until 2024; and Almeria urban services
until 2023.
Technology investment
to underpin excellence,
efficiency and innovation
The roll-out of the DriveCam smart safety
cameras continued, with nearly 1,400
installed by the year end (up 43% on
2018). Speed monitoring is now installed
in nearly 3,000 vehicles. Allied to a rigorous
management oversight and coaching
programme, standards and assurance
continue to improve, with the lowest
rates of speeding on record.
28
National Express Group PLC Annual Report 2019 ALSA will continue
to focus on delivering
operational excellence,
securing organic growth
across its existing
businesses and diversifying
in a targeted manner”
Francisco Iglesias
Chief Executive, ALSA
Beyond driving standards, our investment
in maintenance is also helping to improve
performance and efficiency. A move
to a predictive maintenance regime is
generating further improvements to
already strong performance metrics, such
as breakdowns: they have been reduced
by a quarter in the year, improving both
service standards and cost efficiency.
ALSA has been pioneering our World Class
Maintenance programme and the lessons
are being applied across the Group.
Investment in improving ALSA’s digital and
web presence continued, with impressive
results. The introduction of features such
as bus location tracking, new methods
of payment and enhanced marketing to
customers helped drive digital revenue up
to 44.6% of ALSA’s total (up 7.2% year-on-
year). The increasing proportion of sales
through digital channels is also enabling
enhanced ancillary sales. The introduction
of luggage and seat reservation has helped
this segment grow by 13.9% year-on-year.
An autonomous bus pilot, in partnership
with the Autonomous University of
Madrid, launched earlier in February 2020.
This fully electric vehicle operates a 3.8
kilometre route on the university campus.
It provides valuable experience and
a credential in a growing market.
There are further opportunities to pursue.
During this year, a particularly interesting
project will enhance customer services
databases to make marketing even more
personalised and sophisticated. Learning
from UK coach’s innovation in this area,
ALSA will tailor pre-trip emails to customers
with information about activities at their
destination, providing the opportunity for
further ancillary sales.
Targeted growth through
strategic acquisition
and market diversification
Three acquisitions were made in
2019. ALSA bought a majority stake
in a company that operates regional
concession services in Aragon. This
investment allows us to enter a regional
market where we do not have any
presence and provides the opportunity for
growth when other local contracts come
up for renewal. It is the same approach
we successfully followed with Cal Pita,
a 2018 acquisition that provided entry into
the Galician market. From this initial entry,
we have secured new contracts, are now
the third largest operator and see further
growth opportunities ahead.
ALSA also acquired a bus company in the
Canary Islands. The company operates
school bus, coach and discretionary travel
services. This provides an entry into a very
interesting market where we believe there
is a strong opportunity for further growth.
ALSA also bought a small chauffeur
business. We retain a strong pipeline of
acquisition opportunities, which we will
continue to pursue in a disciplined manner.
Two contracts were won in Extremadura,
strengthening our position in this
autonomous region.
Alongside the growth in Morocco,
Switzerland and segments such as
ancillary income, set out above, our 2019
acquisitions and contract wins help ALSA
further diversify its earnings. Since 2015, the
proportion of ALSA’s total revenue secured
from long haul services has declined by a
quarter. We expect RMS to continue to drive
organic growth and improving occupancy
rates. Ancillaries will continue to be a source
of strong growth and January 2020 has
already seen a 10.8% increase year-on-
year in earnings from this segment. Airport
services and our minicab businesses also
provide positive sources of organic growth.
It is because of this combination of
diversification, growth across all business
segments and the strength of our pipeline
that we remain confident we will manage
any impact from long haul concession
renewal and continue to grow. There still,
however, remains no certainty that the
renewal process will proceed to plan.
In the meantime ALSA will continue to
focus on delivering operational excellence,
securing organic growth across its
existing businesses and diversifying
in a targeted manner.
29
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Divisional review: North America
North America
Our business in North America has three areas of activity:
student transportation, transit and shuttle services.
We operate in 34 US States and three Canadian provinces.
The student transportation business operates through
medium-term contracts awarded by local school boards to
provide safe and reliable transport for students, and is the
second largest private operator in North America.
Our transit business operates a growing number of transit
and paratransit services across the USA.
Our shuttle business, operating predominantly through
WeDriveU, offers corporate employee shuttle services and
is also growing in the universities and hospital shuttle market.
Market overview
National Express is the second largest
player in the North American school
bus market with a 13% share of the
outsourced market. Just over a third of
the market is outsourced with increases
in outsource conversion being driven by
pressure on public funding. This trend
is likely to continue as school district
budgets remain constrained. Typically
customers are local school boards,
where local relationships are key and
service delivery is very important.
National Express also operates in the
North American public transit market and
is the fourth largest player with around
5% market share. One third of the transit
market is outsourced and there is an
increasing demand for accessible public
transportation services, for fixed route,
paratransit and employee shuttle services.
Growth drivers
− Bolt-on acquisition opportunities
in school bus, transit and shuttle
− New business growth from winning
contracts in school bus bidding
season and through new transit
and shuttle contracts
School bus
Vehicles
20,600
2018: 21,500
Market size
$24bn
2018: $24bn
Transit
Vehicles
4,000
2018: 3,200
Market size
$25bn
2018: $25bn
Gary Waits
Chief Executive,
Student Transportation,
North America
Judith Crawford
Chief Executive,
Transit and Shuttle,
North America
Revenue
£1,230.1m
2018: £1,060.8m
Normalised operating profit
£123.0m
2018: £96.9m
30
30
National Express Group PLC Annual Report 2019
National Express Group PLC Annual Report 2019 WeDriveU
WeDriveU works with many leading brands to provide transport solutions. Our customer
athenahealth offers a multi-modal transportation system using WeDriveU commuter and
last-mile shuttles and onsite transportation demand management services, plus a host of
other amenities including onsite car sharing and bike sharing.
“You aren’t hiring a bus company. You are hiring an expert multi-modal transportation
consultant. Their data driven approach means I have the knowledge I need to make
financial, operational and strategic decisions and share that knowledge across my
organisation. They have saved me money – using the right equipment, low staff turnover
and a focus on experience. They want to deliver results too and I trust their team to work
with other parts of our business without supervision and micromanagement.”
Bridger McGaw, Director of Global Security & Services, athenahealth
Year ended 31 December
Revenue
Normalised operating profit
Revenue
Normalised operating profit
Operating margin
2019
£m
2018
£m
£1,230.1
£1,060.8
£123.0
£96.9
US$1,570.6
US$1,416.3*
US$157.0
US$129.3*
10.0%
9.1%
* Revenue and normalised operating profit at constant currency, adjusting for Canadian Dollar to US
Dollar foreign exchange rate movement in the year
Overview
North America has again delivered
a record performance, with revenues
up by 11.1% and a profit increase of
21.4% to $157.0 million.
This performance has been secured
through a combination of disciplined
bidding, a consistent focus on operational
excellence and efficiency, strategic
acquisitions such as WeDriveU (WDU)
and the disciplined disposal of Ecolane.
We have also invested in the leadership
team and now have, we believe, the
most experienced senior managers in
the industry. This approach has helped
drive margin improvement in year, up 90
basis points to 10.0% (or up 50 bps on
an underlying basis, excluding IFRS 16).
This is despite the growth in lower margin
transit work. With important contract
renewals secured in 2019 – the full benefit
of which we will see this year – important
excellence and efficiency programmes and
a strong pipeline of opportunities in place,
we are confident of continued progress
in 2020.
The North America division continues to
diversify away from its traditional school
bus focus. In 2010, our North American
operations were exclusively school bus.
In 2018, the revenue split between school
bus and transit was 80%:20%; by 2019
it had moved to 69%:31%. This shift will
continue as we deliver on our target of
transit with WDU becoming a $1 billion
of annual revenue business.
2018 normalised operating profit
Exchange movement (CAD to USD)
Operating profit at constant currency
Growth from continuing business
2019 acquisitions
Driver wages
Weather
IFRS 16
2019 normalised operating profit
$m
129
–
129
25
25
(20)
(7)
5
157
Operational excellence: the
foundation of sustained growth
Securing and sustaining a reputation for
operational excellence is crucial to our
ability to continue growing our North
America business. We believe we have the
best trained drivers, subject to the strictest
monitoring system, driving vehicles
equipped with the most advanced safety
technology in the industry. Customers
appear to be recognising this. Particularly
pleasingly, our programme to increase
the number of school bus customers
rating our services as five-star has grown
consistently. From a base of 32% when the
programme started in 2017, the proportion
increased to 48.2% in 2018 and reached
55.4% last year. As well as a crucial part
of the drive to be seen as a trusted partner
consistently delivering excellent services,
five-star customers are more willing to pay
a premium for the quality operations they
are receiving. This programme will remain
a priority.
The benefit of this focus on excellence
and customer service was also seen in the
retention and expansion of our two largest
transit contracts. In Boston, our second
largest transit contract was renewed
for 7.5 years, with total revenue nearly
doubling to $420 million. In Chicago, our
largest single contract in North America
was renewed for at least 7 years, securing
at least $400 million in revenue over its
life. The full annual benefit of these new
contracts will be felt in 2020, providing
positive momentum. Equally, as significant
contracts they are important credentials
with strong customer recommendations
to aid further growth.
Our WDU acquisition has successfully
integrated and exceeded its revenue target
for the year. Its revenue increased by over
30% in the year with growth in all of its
key markets as well as expansion into new
segments, such as its first university and
non-emergency medical shuttle contracts.
We will continue to combine its industry-
leading reputation with National Express’
breadth of operations to help enter new
shuttle segments and markets. While
already a business with nearly $550 million
in annualised revenue, we expect transit
with WDU to grow to a $1 billion annual
income operation.
The school bus bidding season has not
yet concluded, but the early signs are
encouraging. We have continued with a
disciplined bidding approach, prioritising
returns. The current retention rate is 92%
and we have won important new contracts,
such as our first in Alaska. This is our first
10-year school bus contract and provides
a base for further growth in the state.
Last year’s bid season concluded with an
average price increase on bids or renewals
of 5.9%, or 3.9% across the whole
portfolio. This compares with an average
wage increase of 3.4% in 2019.
31
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Divisional review: North America continued
With the ongoing industry-wide challenge
to driver recruitment, we are reviewing
and revising our driver training and
certification processes to find efficiencies
while maintaining our industry-leading
training standards. By way of example,
working with the relevant authorities in
Ontario, Canada we have been granted
the right to bring the accreditation of driver
certification – a key delay in the process
– in-house. Rather than waiting on a third
party to provide the accreditation, we
are able to grant it through designated
internal authorities.
This new approach is already suggesting
important efficiencies to come. This
process does not threaten the quality
of training: we will still have the industry’s
best trained drivers and the number
of training hours remains the same.
However, the external accreditation
bottleneck often meant it took up to
60 days for a group of 50 drivers to finally
receive their licence; this new process
can now complete it in 12. We will look
for similar efficiencies across North
America, aiding driver recruitment and
making us more agile in responding
to organic growth opportunities.
Technology investment
to underpin excellence,
efficiency and innovation
Our investment in technology to enable ever-
improving service excellence, cost control
and efficiency is delivering clear results.
A Master Schedule programme – which
through enhanced central controls
forensically analyses the running time
for every route and then assures that
the associated driver time allocated is
accurate – has delivered both real-time
savings and service improvement in 2019.
This programme started in the second
half of the year and has already identified
significant annualised savings. It has
also seen ‘on-time performance’ of our
school buses improve by 2.6 percentage
points year-on-year. This programme
remains a key strategic priority, with further
efficiencies and improvements to be
secured in 2020.
DriveCam is now installed in nearly 21,000
vehicles. Speed monitoring equipment is
now so comprehensive that 99.08% of
drivers were covered last year. Alongside
strict management and driver coach
programmes, these investments are
delivering clear results. Both the DriveCam
risk score and the incidence of speeding
declined significantly in the year. While this
is the correct thing to do in its own right,
the benefit is also seen in a significant
reduction in legal and claims risk: by the
end of 2019 we had 20% fewer open injury
claims in the USA. Further, benchmarking
data from our US claims handlers shows
that our average cost per claim, for those
settled in 2019, was almost half that of a
pool of 13 other peer organisations in their
portfolio of passenger transport clients.
During 2020, we will invest to further
enhance our systems and processes to
drive operational efficiency and innovation.
We have taken a stake in a company,
ByteCurve, a pioneering technology that
will combine – amongst other things –
our dispatch, operations and scheduling
software. Combining the data will help
identify new areas for service improvement
and cost efficiency, as well as enable
greater central management oversight.
Targeted growth through
strategic acquisition and
market diversification
North America remains a very attractive
market for further acquisitions. We made
five acquisitions during the year, with the
majority again outside of school bus.
As well as the major WeDriveU investment,
we made four other small acquisitions:
two small transit operations; a small
charter, shuttle and coach company
in the Boston area; and a small school
bus business in Baltimore. All of the
acquisitions are either ‘tuck ins’, that can
be operated or managed from an existing
National Express location; or provide entry
into a new strategic segment. For example,
a UK coach manager has moved to the
USA to grow this segment, building on
our recent acquisitions and expanding
our operations organically.
Similarly, we continue to expand our
Charter School operations and now
operate over 650 buses in this segment.
We are also piloting a new approach to
the charter market, with a Charter Contact
Centre established in Los Angeles. This
centre provides a dedicated resource
to grow our presence as well as direct
the response to customer requests. It is
already seeing a good stream of new work,
including operating shuttles for event staff
at the recent Super Bowl.
Transit also added 11 contract wins in the
year, all in the Connecticut and New York
areas, building out from existing hubs. Our
Trinity acquisition (made in 2016) is another
interesting example, as it makes good
progress in ambitious expansion plans in
Detroit, to grow in the school bus, coach,
shuttle and paratransit segments. This
model of multi-modal services operating
from a hub location in a major conurbation
is one that we continue to pursue and grow.
We take a disciplined approach to
acquisitions. We continue to target 15%
returns and our acquisitions have proved
strong assets to the business. Equally,
however, this approach requires us to
assess whether stronger returns can be
secured through disposal. This is precisely
the reason we sold our Ecolane technology
business during the year for $42 million in
cash, plus a $10 million equity stake in the
acquirer’s rapidly growing technology fund.
The sale consideration was a significant
multiple of the original purchase price, only
three years earlier.
With our rapid growth in transit, especially
with the WDU acquisition, our expansion
in segments such as Charter School and
coach, plus a renewed focus on charter
work, we continue to diversify our North
America business away from what was
almost solely a school bus operation less
than 10 years ago. We retain a strong
pipeline of both acquisition and new contract
opportunities, with WDU opening particularly
exciting avenues. When combined with our
continued focus on operational excellence
and efficiency, we look forward to another
successful, record, year in 2020.
32
National Express Group PLC Annual Report 2019 Divisional review: UK
UK
Tom Stables
Managing Director,
UK and Germany
Revenue
£599.7m
2018: £577.0m
Normalised operating profit
£85.0m
2018: £79.9m
National Express operates both bus and coach services in
the UK. In UK bus, National Express is the market leader in
the West Midlands – the largest urban bus market outside
of London. In 2019 we also entered the accessible transport
market. In UK coach, we are the largest operator of scheduled
coach services in the UK, operating high frequency services
across the country. The Kings Ferry group of companies is a
long established provider of private hire, B2B and commuter
coach services. In 2020, we will be introducing the first of our
electric vehicles into the fleet, and it is our ambition to be zero
carbon emissions in our bus business by 2030 and in our
coach business by 2035.
Bus
Market overview
The largest five operators represent
around 70% of the UK deregulated bus
market, with the remainder of the market
made up of a large number of private
operators. Active competition comes
from national and local bus operators,
as well as private car and rail. Economic
regeneration and environmentally
driven public transport present growth
opportunities over the car, with mass
public transport providing solutions for
cleaner air and congested cities.
Growth driver
− Increase passenger volumes through
investment in vehicles, technology
and people through delivering high
quality services
Coach
Market overview
Our coach business has the only
nationwide network of services, with
other competitors tending to focus
on specific regions or corridors.
Selective competition comes from rail,
particularly on discounted fares, and
from large bus operators and localised
services. Drivers for demand include
the level of fare discount to rail, cost
of private motoring, access to airports,
direct routes not addressed by rail and
environmental friendliness. Customer
satisfaction is also an important driver
for longer-term loyalty.
Growth driver
− Revenue growth through competitive
pricing, better distribution channels
and greater understanding of
customers and their needs
Bus market size
Market size
Passengers
$24bn
£4.8bn
253.6m
Coach market size
£500m
Passengers
24.5m
33
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Divisional review: UK continued
NEAT
In September, National Express Accessible Transport (NEAT) took over the
Birmingham City Council contract to run Home to School transport for students
with special educational needs. Every day NEAT ensures that 2,000 students get
to school or college safely.
“It is really positive to have National Express on board delivering these vital services
for children and young people in Birmingham. The Council looks forward to starting
the journey with all our providers to setting the UK benchmark for Home to School
provision and we are confident that National Express will be a key partner in helping
us to achieve this goal.”
Nichola Jones, Assistant Director Inclusion and SEND, Birmingham City Council
Year ended 31 December
Revenue
Normalised operating profit
Operating margin
Overview
Our UK businesses had a good year.
Both the bus and coach businesses
delivered revenue, profit and commercial
passenger growth. They also combined
this with expansion into new markets.
Our coach business again set new records
for revenue and passengers and, with
its success at Dublin Airport, secured its
first operational contract outside of the
UK. Our bus business continues to buck
industry trends, with commercial growth
in the West Midlands adding nearly one
million extra passengers and new routes
launched. This is alongside the expansion
into the accessible transport market with
our acquisition of the 400 vehicle ATG
businesses (now re-branded National
Express Accessible Transport (NEAT)).
These successes are reflected in the
financial results. Overall, UK revenue
increased by 3.9% to £599.7 million (2018:
£577.0m). Normalised operating profit
grew by 6.5% to £85.0 million (2018:
£79.9m). This profit figure includes a similar
level of property sale receipts as last year.
Operating margin has increased by 40
basis points to 14.2% (2018: 13.8%). This
increase is attributable to IFRS 16, with
cost inflation offset by a continued focus
on operational excellence and efficiency.
As the recent government announcement
of a £5 billion fund to increase support
for bus priority schemes and new zero
emission vehicles demonstrates, public
transport is seen as an increasingly
important part of the response to public
policy challenges. Indeed, within the West
Midlands both the Mayor and Birmingham
City Council have recently set out very
pro-public transport policies. We continue
to value our strong partnership working as
2019
£m
599.7
85.0
14.2%
2018
£m
577.0
79.9
13.8%
this is helping to secure passenger growth
and significant investment in local services.
As our electric vehicle plans demonstrate,
it gives us confidence to make important
investment commitments as we believe, by
working in partnership the West Midlands,
we will continue to lead the industry in
service improvement and growth.
2018 normalised operating profit
Growth in the continuing business
Driver wages
IFRS 16
2019 normalised operating profit
£m
80
6
(3)
2
85
Operational excellence: the
foundation of sustained growth
Both of our UK businesses have focused
on delivering excellent services to
customers in an efficient way, at prices
they value. The success of this is evident
in the record number of core coach
passengers of 21.5 million, including the
largest single day ever on Boxing Day.
Surveys show that nearly 300,000 more
people are considering using National
Express coach services than in the year
before. Our bus services helped the West
Midlands have the fastest passenger
growth of any major city region in the
country. In its most recent Transport
Focus independent customer survey our
West Midlands bus business secured its
best ever scores for drivers and value for
money. As well as attracting more, happier,
customers, we are operating ever-more
efficient services, with commercial revenue
per mile up 4.8% in core coach and 3.2%
in West Midlands bus.
Our focus on excellence also entails, as
a priority, safety. Both businesses now
have DriveCam and speed monitoring
programmes fully installed (with the recent
NEAT acquisition to have them in place
this year). The year-on-year reductions
in speeding and the zero fatalities in
the UK (and, indeed, across the Group)
are testament to the benefits of the
investment. Both businesses have secured
the British Safety Council’s (BSC) highest
accolade: the Sword of Honour. For coach
this is the fifth consecutive time; for bus
it is the fourth. Indeed, UK bus was also
judged to be the safest public transport
company of all those the BSC audited
across the world in 2019.
As further evidence of our commitment,
both UK businesses have five-star EFQM
ratings, with coach winning the British
Quality Foundation’s 2019 UK Excellence
Award for a large company.
Technology investment
to underpin excellence,
efficiency and innovation
We continue to invest in the technology
and management systems to deliver
the excellence and efficiency driving the
performance above, as well as innovations
that will help power future growth. Both
businesses have benefitted from industry-
leading pricing technology, whether RMS
in coach or the installation of the largest
contactless payment network outside
of London in West Midlands bus. The
benefit for coach is seen with both core
passengers (4.0%) and revenue (3.6%)
growing, with particularly successful
performances at peak periods: a record
Christmas and a strong summer. Further
evidence is seen in the occupancy rate
growing again in 2019, up 2.4% to 60.9%.
This figure has grown from 54% in 2016,
demonstrating the consistent focus on
improvement and efficiency that underpins
the business’ growth.
34
National Express Group PLC Annual Report 2019
National Express Group PLC Annual Report 2019 Being recognised as a
quality mass transit operator
that local authorities can
trust to help solve their
policy challenges will help
us drive further growth and
shareholder returns”
Tom Stables
Managing Director,
UK and Germany
Bus now has two thirds of passenger
journeys on digital tickets, which is
allowing more sophisticated price targeting
with products for specific competitive
corridors or groups deployed quickly. The
technology also generates significant data
that is used to track product effectiveness
(including the quick withdrawal or revision)
and helps plan services to better meet
changing demand and revise our network.
Coach now has 71% of its revenue
secured through digital channels,
demonstrating the importance of our
continued investment in our web and app
presence. During 2019 coach issued 100
upgrades to its website and app, helping
the app alone to grow revenue by 16% as
the shift to mobile devices continues. The
technology investment is also allowing
coach to secure a growing number of
carefully selected commercial partnerships
– now up to 139, including with 24
universities – that help sell our tickets to
individuals or groups we might otherwise
find hard to reach. In addition, ancillary
sales in the digital booking process
continue to prove a good source of
growth, with revenue up 9% in 2019.
During the year, we further expanded
our data analytics and AI capabilities
to drive operational improvements and
secure efficiency savings. This has been
pursued through both internal excellence
programmes and our National Express
Innovation and Science (NXIS) initiative
where we set challenges for – often small,
start-up – companies to identify solutions
to business problems. In bus, for example,
a NXIS challenge has seen the very
successful pilot of a company using AI
and big data analysis to optimise running
times and driver hours. As this pilot is
rolled out more widely, we believe there
is scope for further significant savings.
We are also determined to lead the switch
to zero emission vehicles. This is both the
right thing to do – given the climate change
and clean air challenge – and increasingly
what our key stakeholders want. Indeed,
both our coach and bus businesses are
at the forefront of the adoption of Euro 6
vehicles, with their fleets fully compliant
by this year and April 2021 respectively.
We will shortly take receipt of 29 electric
double decker buses in the West Midlands
and ran a pilot of an electric coach on an
airport service in January 2020. As our
new environmental commitments set out
in the Group Chief Executive’s review
demonstrate, we are determined to cement
our position as an industry leader, deliver
significant benefits to the communities
we serve and align our ambitions with
the aspirations of our key stakeholders.
Targeted growth through
strategic acquisition and
market diversification
We expect both of our UK businesses to
sustain their organic growth in the year.
Bus added 19 new routes in 2019,
through a combination of local tendered
contract wins and starting new services
to towns in the shire counties surrounding
the West Midlands metropolitan area.
Another new route – to Nuneaton – has
already been launched in 2020, and in
its early weeks is performing ahead of
expectations. As we continue to grow our
commercial passengers, we will look at
further new route opportunities, alongside
further growth in corporate sales. Added
investment in this team is delivering, with
now over 480 corporate clients.
Coach will continue to refine its RMS
and digital revenue to secure organic
growth through sophisticated pricing and
marketing. Nine new routes were launched
in 2019 as the business looks to efficiently
drive further growth. The new services
at Dublin Airport – an up to three-year
contract, operated in partnership with
Ireland’s largest domestic operator – will
provide the opportunity for growth in this
adjacent market. The innovative neon
on-demand product has had some notable
successes in the year, as it fills a gap in
high demand festivals and events that the
scheduled network is less able to efficiently
meet on its own. We are confident this will
continue its growth in 2020.
35
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Our NEAT acquisition has drawn on a
combination of strong local management
and expertise developed in our North
American paratransit business to recently
enjoy the best operational performance
in three years. This has already secured
further local contracts and we will look
to grow NEAT further, including outside
of the West Midlands.
It is because of this success – and the
opportunity presented by the ambitions
set out in Birmingham’s Draft Transport
Plan and the increasingly pro-mass transit
trend in local transport policy – that we are
determined to be seen as a trusted partner.
In an era of increased concerns around
climate change, clean air, congestion and
inclusive growth, being recognised as a
quality mass transit operator that local
authorities can trust to help solve their
policy challenges will help us drive further
growth and shareholder returns.
Germany
Reported revenue is up 33.8%
to €102.5 million, reflecting the
mobilisation of two of the three
Rhine-Ruhr Express (RRX) services.
Profit increased to €5.7 million
(2018: €3.4m).
There are a number of drivers of
improved performance in German
Rail, including higher than expected
growth in passenger revenues
(including settlements for prior
periods); agreements with the local
authority on penalty exemptions for
particular construction works; and a
good start to our new RRX franchise.
Indeed, we are pleased that the strong
start to our RRX services has been
publicly welcomed by local officials.
Divisional review: UK continued
Our UK businesses have also been
combining to deliver services in a
more efficient manner. At Glastonbury,
for example, our bus business ran
shuttles to the festival site from Bristol,
complementing and integrating with our
traditional coach service. This both helped
drive a 7% increase in revenue compared
with 2017 and secured a higher profit,
thereby setting new records for both.
Our coach businesses have also recently
combined their private hire services under
one brand and are already seeing an
increase in bookings. We are confident this
is a market segment that will continue to
grow and offers good opportunities in
the future.
Demonstrable successes from our Bus
Alliance – such as passenger growth on
another new bus lane (Harborne) where
we have invested in Platinum vehicles –
have helped the region secure £30 million
for bus prioritisation in the 2019 Spending
Round, the only city region to do so.
We are already working closely with the
relevant local authorities ahead of the
planned Clean Air Zone’s introduction
in Birmingham later this year, to ensure
we are part of the solution, encouraging
car drivers to shift to environmentally
friendly buses.
36
National Express Group PLC Annual Report 2019 Responsible partner
Environmental, Social and Governance
As Dean Finch, our Group Chief Executive, sets out in his opening statement
to the Annual Report, environmental, social and governance (ESG) issues are
not an ‘add on’ to how we operate, but at the heart of our future success.
Our Vision is to be the world’s premier mass
transit operator with services offering leading
safety, reliability and environmental standards
that customers trust and value. This is Vision
rooted in our Belief that driving modal shift
to high quality mass transit is fundamental
to a clean, green and prosperous future.
Put another way, if National Express is to
continue its success, we need to deliver on
the aims of the ESG agenda. We set out
overleaf how we focussed on the elements
where we have the greatest impact.
Together, we believe our Purpose is to help
lead modal shift by making mass transit
an increasingly attractive option for all our
customers, whether they are individuals,
transport authorities, school boards or
businesses. We seek to do this by earning
our customers’ loyalty by providing safe,
reliable and great value multi-modal services
on clean and green vehicles.
In so doing, National Express becomes part
of the solution to the growing challenges of
climate change, clean air, congestion and
inclusive growth. Customers, local authorities
and investors say this is increasingly
important to them. Good quality mass transit
has clear advantages over the car in delivering
on them. We have long held this view, which
is why we have – for example – invested so
heavily in Euro 6 buses and coaches already.
Euro 6 buses and coaches are cleaner – on
an absolute basis – than a Euro 6 diesel car
for particulate emissions. This commitment
is also why we have already moved to fully
renewable electricity in the UK and Spain.
So with a transition to electric vehicles, we
will be both clean and green.
This is why we have set out a renewed
leadership position through our Vision and
Values. As we say on pages 10 and 11,
In 2015, the United Nations set a 2030 Agenda for Sustainable Development.
Seventeen Sustainable Development Goals (SDGs) were adopted by Member States
to provide a framework to tackle the most pressing challenges the world faces. In
refreshing our Vision, Purpose and Values, we have assessed how we align to the
SDGs, identifying five targets across three goals. The table below lists them and the
associated Group metric.
SDG Goal
Selected target
3.6. By 2020, halve the number of global deaths and
injuries from road traffic accidents
8.5: By 2030, achieve full and productive employment
and decent work for all women and men, including for
young people and persons with disabilities, and equal
pay for work of equal value
8.8: Protect labour rights and promote safe and secure
working environments for all workers, including migrant
workers, in particular women migrants, and those in
precarious employment
11.2 By 2030, provide access to safe, affordable,
accessible and sustainable transport systems for all,
improving road safety, notably by expanding public
transport, with special attention to the needs of those
in vulnerable situations, women, children, persons with
disabilities and older persons
Group metric
FWI / million miles
Commitment to real
Living Wage or 10%
above national minimum
wage where Living Wage
does not exist
Workplace Rights
Policy and FWI / million
miles target
Passenger growth
11.6 By 2030, reduce the adverse per capita
environmental impact of cities, including by paying
special attention to air quality and municipal and other
waste management
CO2 / million
passenger kms
this is how we believe we will sustain our
advantage in the coming years.
We build on strong foundations. As Dean’s
report sets out on pages 18 to 20, our strong
track record of growth is underpinning our
ability to invest for the future. Equally, our
focus on this issue in recent years – from
launching our first Vision and Values in 2011,
through to our leadership in becoming the
first UK transport group to be accredited
as a Living Wage employer – is recognised
by external rating agencies such as
Sustainalytics, which rated us ‘low risk’ for
ESG overall and in every sub-category. It
noted that “the company is at low risk of
experiencing material financial impacts from
ESG factors, due to its strong management
of material ESG issues”. Sustainalytics
places the Group in the top percentile
of the 320 transport companies and the
4th percentile of the more than 12,000
companies, it rates globally.
37
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Responsible partner continued
Focusing on what matters
ESG and transport
We have used the Sustainability Accounting Standards Board’s (SASB’s) Materiality Map®, to help our focus on the aspects most critical
to us. This map identifies the sustainability issues that are likely to affect – both as challenges and opportunities – the financial condition
or operating performance of companies within specific industries. Below we have listed the key SASB dimensions relevant to our industry,
mapped our Values against them and set out our approach to addressing them:
Further information
We are focused on reducing the environmental impact of
transport across all of the markets in which we operate. Per
passenger, bus and coach travel is less polluting than trains
and vastly better than petrol and diesel cars. As such, modal
shift (getting people out of cars and onto buses or coaches)
is the single most important thing we can do.
We are committed to making public transport cleaner and
greener. Having reduced CO2 emissions per passenger
kilometre by 13.4% between 2014 and 2018, for 2019 to 2025
we have adopted the Intergovernmental Panel on Climate
Change’s (IPCC’s) Sectoral Decarbonisation Approach, which
requires us to adopt targets that are ‘science based’ in line
with limiting global warming to the Paris Agreement. Much of
our fleet globally is already at Euro 6 and we have committed
never to buy another diesel bus in the UK. We have also set
ambitions to be zero emissions in UK bus by 2030 and UK
coach by 2035. That is only a start.
For more information, see our environmental report
on pages 46 and 47
Improving the accessibility and affordability of mass transit
is what we do. Fundamentally, we want to run more services
with more passengers using them. By securing modal shift
out of cars and on to high quality, safe, clean and green mass
transit we will also improve the liveability of urban areas and
their economic prospects.
11.2/11.6
3.6
More specifically, in both North America and the UK, we are
rapidly growing our paratransit operations, enabling people of
all abilities full access to the amenities in the cities in which
we operate.
But above all, we do all of this safely as outlined on page 17.
We will continue to make the case that well run mass transit
is the safest option. For example, the American School Bus
Council states that students are about 70 times more likely to
arrive at school safely on a school bus compared to a car.
More information is provided throughout the Strategic Report.
Dimension
Issue
category
Environment GHG
emissions
Air quality
SDG
Goal
11.6
3.9/11.6
Summary definition
Direct (Scope 1)
greenhouse gas
(GHG) emissions that
a company generates
through its operations
Air quality impacts
resulting from
pollutants such as
oxides of nitrogen
(NOx), oxides of
sulphur (SOx) and
particulate matter
Social
capital
Access and
affordability
Quality
and safety
Ensure broad access
to products and
services, specifically
in the context of
underserved markets
and/or population
groups
Offer products and/
or services that
meet customer
expectations with
respect to their
health and safety
characteristics
38
National Express Group PLC Annual Report 2019 Dimension
Human
capital
Issue
category
Labour
practices
Employee
health
and safety
SDG
Goal
8.5
8.8/3.6
Summary definition
Minimum wage
policies and provision
of benefits which
influence how
employees are
attracted, retained
and motivated
Create and
maintain a safe and
healthy workplace
environment that
is free of injuries,
fatalities and illness
Governance Critical
incident risk
management
8.8/3.6
Identify, understand,
and prevent or
minimise the
occurrence of low
probability, high
impact accidents
and emergencies
Further information
As an employer of 51,000 people, we take our duties to them
very seriously and we measure our progress frequently through
employee engagement surveys in every division.
We believe that our employees should be well rewarded for
the job they do and we were the first UK transport group to
become a Living Wage accredited employer. We extended this
commitment to always pay 10% above the national minimum
wage in every country we operate in.
We encourage and provide opportunities for our people to
develop through initiatives such as our award-winning Master
Driver programme and the NX Network for graduates. Across
the Group we have 945 Master Drivers, recognising consistently
exceptional performance and rewarding these drivers with –
amongst other things – membership to IAM RoadSmart (since
2016), which can lower their personal insurance costs.
Our Workplace Rights Policy is that we respect the rights
of all employees. Wherever our employees choose to
be represented by unions, we actively seek to maintain
relationships based on mutual respect and transparency.
We acknowledge that we have more to do to increase
diversity in our business and formed the Diversity & Inclusion
Council last year charged with ensuring that we have a
workforce which is truly reflective of the customers we serve
and the communities we operate in; attracting and retaining
the best possible talent from a diverse pool; and creating a
collaborative, supportive and respectful environment that
increases the participation and contribution of all employees.
The Council has already started its work and we will provide
more information on this in next year’s report.
For more information, see pages 71 to 73
We have a strong system of control to manage and mitigate all
types of risk, including the Board’s review of Group-wide risk;
the Audit Committee’s reviews of divisional risk; and the Safety
& Environment Committee’s oversight of the activities on pages
94 to 98.
To ensure that these controls are effective, we must have the
best people governing our organisation at every level, taking
the important decisions that affect our shareholders, our
passengers, our workforce and our other stakeholders. Every
major decision is analysed through the lens of whether it helps
us achieve our strategy, whether it promotes our values and
whether it exposes us to unacceptable risk.
Each division has a critical incident plan in place. We have
recently up-weighted our response to the management of cyber
risk, introducing a new IT security resource across the Group
and formalising standards, policies and ongoing simulations
and preventative actions.
For further information, see our risk management
approach on pages 48 and 49
39
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Responsible partner continued
We will now set out further how we are delivering against key aspects of this agenda,
with a focus on safety, being a trusted partner and the environment.
Spotlight on safety
Safety is our Group priority. As our
revised Value states: our ambition is
to be the safest mass transit operator
in the communities we serve.
We strive to achieve this ambition
through a combination of clear process
and policies, investment in sophisticated
technology and management systems
and a culture that prioritises safety.
Process and policies
Overall Group responsibility for safety sits
with Dean Finch, Group Chief Executive,
and our Divisional Managing Directors
who set annual plans and priorities for
improved performance.
All businesses within the Group are required
to adhere to 12 Global Safety Standards
which set the clear behaviours and minimum
standards expected of all operations and staff.
These standards are complemented by
five Global Safety Policies, covering:
speed management; driving evaluation;
competency of driving evaluators; driver
monitoring; and driver performance
management. All divisions have developed
plans in these areas. We believe these
standards mean that we now have
the industry’s:
− best trained drivers;
− closest monitoring (with continuous
updating) of driver and mechanic
standards; and,
− the most sophisticated safety
technology on our vehicles.
Performance and implementation are
reviewed in a quarterly meeting of Managing
Directors, chaired by Dean Finch.
Dean reports to the PLC Board on safety
performance every month and our Group
Safety Director (Alison Forster) updates the
Safety & Environment Committee regularly.
The Committee’s chair, Chris Muntwyler,
meets Alison regularly to review performance
and conducts his own safety tours to provide
further assurance.
Investment and culture
As well as these strong processes we
continue to invest heavily in industry-
leading safety technology. We now have
24,750 Lytx DriveCam smart safety
cameras installed as well as speed
monitoring technology on the majority
of our vehicles. This hardware has been
40
Safety case study
National Express West Midlands was judged the safest public transport company of all those
audited across the world by the British Safety Council (BSC) The business scored 99.17%
in the BSC’s Five Star Occupational Health and Safety Audit, placing it fifth of all logistics
companies audited by the BSC. Organisations from over 77 countries across the world put
themselves forward for audit by external assessors.
The British Safety Council’s Five Star Occupational Health
and Safety Audit is the most comprehensive solution in the
market today. It allows companies to go beyond compliance
and prove the value of their hard work with a highly recognised
stamp of excellence in health and safety standards”
James Lewis,
Head of Audit and Consultancy at the British Safety Council
complemented by investment in new
management systems to ensure the
technology is used to its full potential
and drivers receive tailored coaching
and support.
Our systems, policies and investment
are reinforced through a campaign to embed
a business culture that prioritises safety. This
started with Driving Out Harm (launched in
2010) and has recently been reinforced with
a Target Zero campaign.
Results
To measure our performance we adopted
and adapted the railway industry’s Fatalities
and Weighted Injuries (FWI) index. We did
this as it is widely regarded as the most
effective measure of safety performance.
Our performance in 2019 demonstrates
the benefit of our systems, policies
and investment:
− We delivered a significant improvement
in our FWI score to 4.513 (2018: 9.286)
− On a per million miles basis the
improvement was even more significant
0.006 (2018: 0.013)
− It was the first year on record that the
Group did not have a responsible fatality
in any of its operations
Our West Midlands bus business was
also named the safest public transport
company of all those the British Safety
Council (BSC) audited across the world
in 2019. This stand-out achievement
complemented its fourth consecutive award
of the BSC’s highest safety award (the
Sword of Honour). UK coach received a fifth
consecutive Sword. Alongside ALSA, both
businesses have also secured an ISO 45001
accreditation for their occupational health
and safety management systems.
National Express Group PLC Annual Report 2019
How we seek to become a trusted partner
As we have made clear throughout the
Annual Report, we believe that our future
success is dependent upon us being
regarded as a trusted partner delivering
industry-leading safety and service that
customers value and help local communities
address the challenges they face.
ALSA asked stakeholders to rate its
performance (with scores out of 10) in
the following areas: ‘ethics and good
governance’ (7.62), ‘environment’ (7.46)
and ‘social’ (7.45). When asked whether
ALSA puts its Safety Value into action,
stakeholders gave a score of 8.67
To do this requires us to understand what
key stakeholders want. We do this in a
number of ways:
− Through independent surveys of our
customers. In UK bus, for example,
Transport Focus has conducted our
customer survey since 2011. It reported
in the most recent survey that amongst
many records broken, our West
Midlands operation secured its highest
ever score for Value for Money
− Through regular meetings with
contracted customers. In North America,
for example, each school bus customer
is offered a weekly meeting with the
local depot manager and a monthly
or quarterly meeting with the regional
manager. The benefit of this approach
is seen in the proportion of school bus
customers rating our services as five
(out of five) steadily increasingly in
recent years: 2017: 32%; 2018: 48.2%;
and 2019: 55.4%
− Through annual stakeholder surveys.
We ask stakeholders to rate our
performance and approach to assess
whether it aligns with their priorities
and to check whether we are seen to
be a good company. In 2019’s survey,
Approach to stakeholder relations
Across the Group our approach is to
be seen as a proactive and trusted
partner with key stakeholders. We seek
to both understand their priorities and
form alliances with them, as investing
in long-term relationship building helps
us deliver business objectives more
effectively and mitigates potential barriers
to doing so.
We do this by identifying and prioritising
stakeholders across our businesses
and maintaining a different engagement
strategy depending on their importance
to our business. As an illustration, we set
out our UK stakeholder approach below
as a case study.
The Group engages with its stakeholders in
a variety of ways. Our preferred approach
is to be proactive, seeking face-to-face
meetings to understand their priorities, share
our strategy and develop joint approaches
where possible. We also issue stakeholder
newsletters and updates at least quarterly,
to our stakeholder database.
We particularly value structured
engagement with key stakeholders,
where we can work together to identify
opportunities and develop plans to
address shared challenges. To do this,
for example:
− We established strategic quarterly
meetings attended by a Managing
Director or Executive Director for key
operational stakeholders such as
all airports, Highways England and
Transport for London
− We led the establishment of the West
Midlands Bus Alliance Board alongside
the Combined Authority, the police,
Transport Focus and other operators to
work together to drive improvement for
bus customers
− We are represented on relevant external
boards including Highways England’s
Bus and Coach Operations Board
− We engage in regular meaningful
dialogue with Members of Parliament,
government departments and relevant
local and regional decision-makers
to help shape thinking in advance of
the formal policy developments. We
proactively respond to relevant local and
national government consultations and
communicate this through the media
where appropriate
− We inform and engage elected members
when we make large-scale changes to
bus networks in an area through our
public consultation process
− We carry out an annual stakeholder
survey using the same questions in the
bus and coach divisions. We benchmark
survey results and share good practice
The results are used for EFQM purposes.
UK approach to
stakeholder relations
Our stakeholder objective in the UK is
to be seen as a proactive and trusted
partner. To achieve this we identify
our key stakeholders and assign
the most relevant employee to lead
the relationship. This is our ‘tiered
approach’. Relations with our most
significant stakeholders are assigned
to our most senior management, the
next tier is maintained by our next
level of management, and so on.
This is overseen and coordinated by
stakeholder managers. This approach
ensures that senior people are focused
on a few key relationships within a
framework that ensures we identify
and liaise with a broader range of key
stakeholders in a coordinated manner.
TfWM, Elected Mayor for the West Midlands,
Airports, TfL government departments
Strategic relationships led at MD/Executive Director level
with support from Public Affairs/Stakeholder Heads
Elected members (MPs/Councils)
Communication/engagement takes place at divisional MD
level. Managed by Public Affairs/Stakeholder Heads
Local authorities (Officers)
Relationships maintained at strategic level by Public Affairs/
Stakeholder Heads with support from relevant Directors.
Heads and Managers
Local authorities (Officers) and regulators
e.g. Traffic Commissioner
Day-to-day interaction takes place at operational level
between depot/station managers and planners
41
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Responsible partner continued
A trusted partner in the community
Our ambition to be seen as a trusted
partner extends to our activity in the
communities we serve.
Beyond this charitable activity, we
recognise that working in partnership
improves services. This is why we invest
so much time and effort in relationships
with key stakeholders such as the Mayor
of the West Midlands and other West
Midlands local authorities. A clear recent
example is a new bus lane installed on the
busy Harborne corridor in Birmingham.
We invested in high specification Platinum
buses to run on this improved route,
leading to a 4% increase in passengers.
We recognise that to deliver the excellence
our customers and communities
demand we must work closely with local
stakeholders.
Community and Environment
The National Express Foundation has continued to fund community groups, helping
young people to achieve positive outcomes in life. During 2019, grants from the
foundation impacted the lives of nearly 4,300 young people. One of the recipients,
Longford Short Football in Coventry, applied for funds to buy two portable stadiums
to increase the number of football sessions it can run. As a result, it can engage with
250 more young people and help them aspire to succeed in life.
Sport has to be one of the great equalisers
we can share. There can surely be no better way of
understanding that ‘Picking up a football and not a knife’
is the way forward. Many thanks to the National Express
Foundation for their commitment to making this possible
and huge respect to all who devote much of their time
to our young bright people.”
Ann Lucas,
Deputy Mayor, Coventry City Council
This does include a significant amount of
charitable activity, both by staff fundraising
and through Company donations. During
2019, in the UK, we provided significant
donations to homeless charities and
foodbanks, for example. We have also
established partnerships with CHICKS
(which provides respite breaks for
disadvantaged children) and The Prince’s
Trust, where we include employment
workshops and offer apprentices.
The Group also provides £500,000 of
funding to the National Express Foundation
each year. This was the first foundation
launched by a UK transport group.
Since its launch in May 2012, the
foundation has supported over
23,000 young people. In 2019 alone,
the foundation helped nearly 4,300
young people.
The foundation is focused on supporting:
− students with challenging personal and
financial circumstances to enable them
to advance their further and higher
education; and
− charitable and community groups
for projects which support children
and young people and to promote
their own development or improved
inter-community relations.
The principal geographical focus is
the West Midlands and the areas of
Kent served by our Kings Ferry and
Clarkes of London commuter services
(specifically, the Medway, Gravesend
and Longfield areas).
ALSA and our North America business are
also active in the communities they serve.
During 2020, North America is relaunching
its activity, establishing ‘Partners Beyond
the Bus’ where each depot will be required
to support a local community cause.
42
National Express Group PLC Annual Report 2019
Customers
We are proud of our record in retaining transit customers. In
October, Massachusetts Bay Transportation Authority (MBTA)
selected National Express transit to provide paratransit services
as the Ride in the MBTA’s South Service Area. The five-year base
contract, with a two-year option, has a total value of more than
$422 million over seven years. Whilst the Ride’s work is split
between three providers, the new contract awarded transit with
more business than either of the other two operators, operating
50% of the entire Ride programme.
Our operation has recently
gone through multiple, significant
transformations and National Express
has been an essential partner through it
all. They have helped us through these
challenges and are always willing to lend
an extra hand. The local and corporate
teams have felt like a seamless extension
of our department.”
Ben Schutzman,
Chief of Paratransit, MBTA
Excellence
Every year, the start-up of operations after the summer vacation
is always a crucial period for our school bus teams. Good
working relationships with our school board clients are key
to a smooth start-up, and they value our focus on safety and
operational excellence.
Petermann has been a valued
partner for 20 years. During the course
of those years they have delivered
outstanding service with a clear focus on
student safety. Once again, this school
year we got off to another great start with
Petermann providing on-time delivery of
our students so that they can begin their
day learning. They are responsive to our
requests or concerns in an immediate
manner and all actions taken are with an
emphasis on student safety. We value
their efforts to begin and end every day
with the safe delivery of our students to
and from school in a cost effective way.”
Darrell Edwards,
Superintendent, Goshen Local Schools
43
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Responsible partner continued
People
Together with the rest of our UK businesses, Xplore Dundee is a Living Wage Foundation
accredited employer. It is a member of a local action group working to increase the
number of accredited employers in Dundee.
If we’re genuinely going to make Dundee a Living
Wage City, we need leadership from three kinds of
employers: employers with significant numbers of staff,
companies with a high local profile and (this is the hardest
one) with a personal connection to the people of Dundee.
Fortunately for us, Xplore Dundee has all this and more.
When you add the energy and ideas they bring to our Living
Wage City Action Group and the personal commitment
of their senior managers, it’s easy to see why they have
become vital members of our partnership to create a city
where everyone receives a fair wage.”
Peter Allen,
Chair, Dundee Living Wage Action Group
Gender diversity at end
of 2019
Director
25%
12
75%
Female
Male
3
9
Senior managers
99
71%
Female
Male
29
70
All employees
29%
39%
51,191
61%
Female
Male
20,000
31,191
44
National Express Group PLC Annual Report 2019
Task Force on Climate-related Financial Disclosures
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB), was set up to define how
reporting could take account of climate-related issues. In 2017, the TCFD set out four core elements of climate-related financial disclosures,
and in July 2019 the UK Government announced, in its Green Finance Strategy, the expectation that listed companies should disclose in line
with the TCFD recommendations by 2022. We intend to adopt these recommendations by 2022 at the latest and are currently evaluating how
to evolve our reporting to meet the new standards. The table below gives an overview of where we stand today:
Governance
The Board’s oversight
of climate-related risks
and opportunities;
and management’s
role in assessing
and managing these
Strategy
The climate-related risks
and opportunities identified
over the short, medium,
and long term; and the
impact of these
Progress in 2019
Focus for 2020
− Climate-related issues driven by the Safety &
Environment sub-committee of the Board
− Creation of an executive ESG committee to
coordinate and review Group-wide activities
− Align internal reporting with TCFD
recommendations
− Prepare for full adoption of TCFD
reporting standard
− Remuneration Committee aligned
25% of future LTIP awards to carbon
reduction targets
− Increased political and social focus on
− Commitment to only buy zero emission
climate change highlighted as a significant
opportunity for the Group as modal shift to
public transport is an imperative
buses in UK in future
− Ambition to be zero emissions in UK bus
by 2030 and UK coach by 2035
− Significant investment into corporate shuttle
market in North America to continue to drive
commuters out of cars
− Review targets for North America and ALSA
− Increase focus on corporate shuttle
opportunities in the UK to reduce car usage
− All UK buses ordered in 2019 were
− Continue to lobby for increased road
Risk management
The processes for identifying,
assessing and managing
climate-related risks; and
how these are integrated into
the overall risk management
framework
Metrics
The metrics used to assess
climate-related risks and
opportunities; and the targets
associated with these
zero emission
− Innovation labs across Group developing
efficiency boosting innovations
− UK power supply switched to fully
sustainable sources
− Prioritised climate risk and opportunity
assessment within the existing ‘emerging
risk’ processes
− Engaged with Sustainalytics to understand
how stakeholders perceive the Group’s
exposure to climate-related risk
prioritisation for public transport to aid
modal shift
− Procurement challenge to coach manufacturers
to develop long-range zero emission vehicles
− Group business travel to be carbon offset
− Develop specific climate change scenarios for
input into existing risk and viability models
− First year of measuring and reporting
targets set in line with IPCC’s Sectoral
Decarbonisation Approach
− Seven-year targets set in line with IPCC
sectoral goals to contain global warming
to no more than 2°C
− Three-year milestones agreed as an
LTIP input
− Align all UK fleet replacement plans with
commitment to buy only zero emission
buses going forward and ambition to be fully
zero emissions by 2030 (UK bus) and 2035
(UK coach)
− Annual review to ensure that the Group’s
metrics remain aligned with the latest
science-based targets
45
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Responsible partner continued
Managing our environmental impacts
As we report on page 38 we have made strong progress in recent years. But we want to go further. Our new targets are set through the
Intergovernmental Panel on Climate Change’s Sectoral Decarbonisation Approach.
We have backed these targets up with action. We recently made significant new commitments, to:
− never buy another diesel bus in the UK;
− launch a procurement challenge to design an electric coach for our airport shuttle services;
− set ambitions for our UK bus and UK coach businesses to be zero emissions by 2030 and 2035, respectively; and
− include environmental targets as 25% of the Long-Term Incentive Plan for all senior executives.
In 2019, we introduced a new approach to tracking our environmental progress, using the Sectoral Decarbonisation Approach (SDA)
methodology. The SDA methodology is the only approach with transport sector-specific metrics, using Climate science to set targets relevant to
the industry concerned.
We have set an initial seven-year reporting period, from a 2018 baseline, with three new targets which meet the 2018 IPCC goal of controlling
the increase in global warming to below 2°C (2DC), and three additional targets.
This science-driven approach creates an absolute target for the KPI period, and places more importance on achieving the end target than
year-on-year movement.
The intention is for the Group SDA targets to be reviewed regularly as climate science, technology and forecasting methods improve. We are
already considering our level of ambition and will be reviewing a move to 1.5DC in advance of the existing 2025 target year.
Group KPI performance
Although the pathway to the absolute targets is not linear we will continue to report our data on a year-on-year basis, to track progress.
Reduction target information (metric)
Traction energy use (vehicle fuel and electricity)
per m pass km (MWh / m pass km)
Scope 1 & 2 traction carbon emissions (tCO2e / m pass km)
Total Scope 1 & 2 emissions intensity (tCO2e / m pass km)
Scope 1 & 2 building emissions only (tCO2e)
Waste to landfill (tonnes)
Water consumption (m3)
Base year
(2018)
66.92
17.67
19.26
41,656
7,711
Absolute
target
(2025)
Required %
reduction
from
base year
58.72
15.45
16.45
38,199
5,783
-12.25%
-12.53%
-14.59%
-8.30%
-25.00%
2019
64.86
16.67
18.86
40,722
7,616
478,956
439,208
-8.30%
487,470
Required
reduction to
target from
current year
9.46%
7.31%
12.78%
6.20%
24.07%
9.90%
During 2019, the three SDA ‘intensity’ metrics (i.e. emissions per million passenger kilometres) made good progress towards reaching the 2025 goal. Traction
energy use, traction carbon emissions and total Scope 1 & 2 emissions all reduced against the 2018 baseline year driven by our ongoing fleet improvements.
Scope 1 & 2 buildings emissions show a 2.24% reduction between 2018 and 2019 partly driven by projects such as switching electricity contracts to fully
renewable sources in the UK.
The reduction in waste to landfill demonstrates the efficiency of our recycling programmes. The increased water consumption figure is largely down to
continued improvement in accuracy of information, with the amount of estimated data progressively decreasing year on year.
46
National Express Group PLC Annual Report 2019 Environmental compliance
We have continued to maintain full environmental legislative compliance, retaining in 2019 a Carbon Disclosure Project ‘B’ rating and
a water disclosure ‘C’ rating. These ratings represent a significant achievement for our sector and we are proud to have continued our
record of no reported violations, enforcement actions or compliance notices.
Greenhouse gas (GHG) emissions by division
Our total Group emissions increased marginally year-on-year from 865,517 in 2018 tCO2e to 881,741 tCO2e in 2019. The increase of 1.87%,
should be considered against the overall 4% year-on-year increase in passenger kilometres and more than 5% increase in passenger
numbers. This has driven the continued downward trajectory of our key intensity metrics. This is a strong performance supported by
continued investment in greener vehicles.
National Express division
(absolute emissions – all scopes)
ALSA
UK bus
UK coach
UK rail
North America
Bahrain
Germany
Leased vehicles and business travel
2013
(tCO2e)
303,351
143,485
110,317
42,816
2014
(tCO2e)
296,214
142,312
109,225
44,755
2015
(tCO2e)
311,985
138,822
106,203
43,408
2016
(tCO2e)
303,537
138,449
110,799
44,341
2017
(tCO2e)
313,608
132,586
105,333
4,038
2018
(tCO2e)
317,812
128,787
101,566
–
324,007
125,466
101,914
–
237,314
236,979
232,576
258,183
261,913
269,916
276,693
–
–
611
–
–
441
12,861
–
641
21,698
26,395
1,254
20,506
28,704
1,184
21,091
25,367
978
22,833
29,269
1,559
Group total
837,894
830,273
846,496
904,656
867,872
865,517
881,741
1.95%
-2.58%
0.34%
n/a
2.51%
8.26%
15.38%
59.41%
1.87%
2019
(tCO2e)
% change
(2018-2019)
North America and ALSA reported a tCO2e increase of 2.51% and 1.95% respectively, due largely to continued network growth.
The strength of the UK performance continued, with UK bus seeing a 3,321 tCO2e reduction, a direct result of the continued investment
in the fleet, although this is partly offset by the acquisition of NEAT in August 2019.
The increase in Germany is driven by the mobilisation of the Rhine-Ruhr Express significantly increasing the scale of the business.
Greenhouse gas (GHG) emissions by scope
The biggest increase in our total emissions data by GHG protocol in absolute terms is the 14,252 tCO2e increase in Scope 1. This was expected
due to the continued growth in the business resulting in higher passenger kilometres. However, emissions have increased by a lower percentage
than the growth in passengers numbers. The introduction of greener vehicles is helping to deliver this change.
Global GHG emissions data (tCO2e)
2014
2015
2016
2017
2018
2019 Change YOY
Combustion of fuel & operation of facilities
(GHG Protocol Scope 1)
Electricity, heat, steam and cooling purchased for
own use (GHG Protocol Scope 2)
Other upstream emissions
(GHG Protocol Scope 3)
Total*
754,859
771,922
799,929
801,063
809,330
823,582
1.76%
67,186
66,317
95,107
60,682
48,564
49,938
2.83%
8,228
8,257
9,620
6,127
7,623
8,221
830,273
846,496
904,656
867,872
865,517
881,741
7.84%
1.87%
Intensity metrics
Applying the global total tCO2e from the above table to our intensity metrics we show a year-on-year decrease of 2.02% tCO2e / m pass km,
our lowest figure since our reporting started in 2014, despite an increase in pass km of over 23% in that same period.
Intensity metrics
(tCO2e / £million revenue)
Group totals (m pass km)
Total tCO2e per m pass km
Total vehicle emissions intensity
(m pass km)
2014
445
37,450
22.46
2015
428
37,540
22.55
2016
430
41,107
22.01
2017
373
42,485
20.43
2018
353
44,488
19.46
2019
321
-27.80%
46,258
23.52%
19.06
-15.13%
-9.00%
3.98%
-2.02%
% Change
2014-2019
% Change
2018-2019
14.96
14.15
18.70
17.78
17.67
16.69
11.56%
-5.54%
47
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Risk management
Committed to
managing risk effectively
The Board recognises that the appropriate
management of risk is key to the delivery
of the Group’s strategic objectives and
the continued delivery of superior returns
for all of our stakeholders. As set out on
pages 12 and 13, we actively capitalise on
the opportunities impacting our industry
to ensure that the Group remains well
positioned to deliver on the evolving needs
of our customers. Our diversified business
model means that we have low operational
leverage with no single contract material
to the Group. This enables us to take on
a level of financial leverage in expanding
the business. As a leading international
transport company, however, the Group is
exposed to an evolving landscape of risks,
whether industry-wide or more specific to
the Group, which could potentially impact
performance or reputation negatively as
well as positively.
The Board remains ultimately responsible
for the effective management of risk in
the Group, and is committed to driving
continuous improvement and adopting
best practice in this crucial area. In
2019, the Group further reviewed its
risk governance structure. In addition
to the broad strategic responsibilities of
the Board, specific responsibilities were
added, and two or three times annually
the Board:
− reviews the principal risks faced by
the Group and approves the Group
Risk Register;
− approves the Group Risk Appetite
Statement; and
− reviews and approves the new Group
Emerging Risk Register.
The Audit Committee reinforces the
process further by conducting ‘deep dive’
reviews, either on specific risks such as
cyber security, or through discussions with
divisional executive leadership teams to
challenge their divisional risk registers.
48
Risk management framework
The effective management of risk is embedded in many ways in day-to-day
management activities, for example the usage of very granular, detailed KPI tracking
in monthly divisional reports, or robust due diligence on acquisitions. This is the
‘first line’ of the Group’s risk management structure where internal control and risk
management processes are based on the accepted ‘three lines of defence’ model,
summarised below.
Defence
Oversight
Board
Responsibility
Actions
– Sets strategic objectives
– Determines overall risk culture and appetite
– Establishes organisational structure with
defined lines of responsibility, delegated
authorities and clear operating processes
– Reviews and approves Group Risk Register,
Risk Appetite Statement and Emerging Risk
Register, two or three times annually
– Provides reasonable assurance that systems
of risk management, internal control and
governance are effective
– Conduct ‘deep dive’ reviews of divisional risk
registers, or specific Group risks
Third line
Audit Committee/
Group internal audit
Second line
Group
Executive Committee
– Support divisions with ‘first line’
responsibilities
Group functions
including Risk
– Coordinate and report on Group-level risks
– Build risk capability and understanding
First line
Divisional
Executive Committees
– Identify, assess and report key risks
– Regularly review and update divisional risk
Divisional management
registers
– Implement risk mitigation plans
Risk appetite
The Board recognises that continuing to deliver superior returns for shareholders and
other stakeholders is dependent upon accepting a level of risk. Our risk appetite sets
out how we balance risk and opportunity in pursuit of our strategic objectives.
Zero tolerance
The Group has zero tolerance for risk which may impact:
− The safety of our employees, customers or the general public
− Our reputation and brand
− Our legal and regulatory compliance
Core business/
operational
excellence
The Group has low
tolerance for risk in
its core operations.
Technology
The Group accepts
a moderate level of
risk in investing in and
adopting technologies
that will enhance
customer service or
improve operational and
safety performance.
Strategic
growth/M&A
The Group accepts
a moderate level
of risk in pursuing
new opportunities,
including potential
new markets.
National Express Group PLC Annual Report 2019 have been further segregated into those
requiring only a monitoring approach at
present, to those where actions are being
developed alongside the principal risks.
There are four risks that currently fall into
the latter category.
These broadly cover the risk of
disruption from integrators and/or
demand-responsive ‘MaaS’ operations as
well at the future possibilities offered by
autonomous vehicles.
It should be noted that the Group
considers all these areas to be significant
opportunities as well as risks.
Prioritising and reporting risks
The management of risk is embedded in
the day-to-day operations of divisional
management teams. A key element of this
is the regular review and update of detailed
‘risk registers’ in each division, in which
risks are identified and assessed in terms
of both the probability of the risk occurring,
and its potential impact.
Group-level risks are either derived
from a ‘top-down’ review, or from the
divisional risk registers, because either
the risk affects multiple divisions, or is of
a materiality in itself that is considered
of Group significance.
Each of these Group-level risks is then
assessed by the Board in terms of its
potential impact on the Group and its
key stakeholders. The Group prioritises
risk mitigation actions by considering risk
likelihood and potential severity.
Emerging risk
The Group has developed an Emerging
Risk Register which is reviewed and
approved by the Board. The Group
considers an emerging risk to be one that
is not currently having a material impact
on the business, but has a reasonable
likelihood of impacting future strategy
Principal risk matrix
or operations. The Group’s approach to
managing emerging risk exposure is to:
− establish a wide universe of potential
emerging risk, using horizon scanning
techniques; published external research
and peer/competitor review;
− assess these risks taking into account
our industry sector and market position,
and our strategy, to determine broad
relevance;
− consider the potential impact of each
risk on the Group’s strategy, finances,
operations and reputation, taking
into account the likelihood of the risk
occurring, and the speed with which it
may manifest; and
− develop actions to address the risks
where appropriate.
As with the Group’s principal risks, many of
the emerging risks present equal or greater
opportunities. For example, climate change
and ageing population demographics,
which are risks fundamental to many
sectors, are more of an opportunity than a
threat to the Group.
From a very wide universe of potential
emerging risks, the Group has, through
the above process, identified a number
of risks that warrant closer review. These
H
G
H
I
T
C
A
P
M
I
I
L
A
N
O
T
A
T
U
P
E
R
I
/
L
A
C
N
A
N
F
I
W
O
L
6
1
2
10
8
5
4
7
11
9
3
12
Macro/external risks
1 Economic conditions
2 Political/geopolitical/regulatory
landscape
3 Brexit
Strategic risks
4 Changing customer expectations
in a digital world
5 Alternative fuel vehicles (AFVs)
6 Competition and market dynamics
Operational risks
7 Attraction/retention of talent/HR/
labour relations
8 Cyber/IT failure/General Data
Protection Regulations (GDPR)
9 Terrorism
10 Safety, litigation and claims
11 Natural catastrophe/extreme
weather/loss of key facility
12 Credit/financing
LOW
LIKELIHOOD
HIGH
Key
Increase in risk during the year
Reduction in risk during the year
49
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Principal risks and uncertainties
Key
Core business/operational excellence
Strategic growth/M&A
Increase in risk during the year
Technology
New risk in the year
Reduction in risk during the year
Macro/external risks
1
2
Economic conditions
Political/geopolitical/
regulatory landscape
3
Brexit
Potential impact
– Declining economic conditions potentially
impact demand for discretionary travel
– Improving economic conditions may
impact the Group’s ability to recruit drivers
and other staff, or cause inflationary
pressure on costs
– Changes to government policy, funding
regimes or the legal and regulatory
framework may result in structural market
changes or impact the Group’s operations
in terms of reduced profitability, increased
costs and/or a reduction in operational
flexibility or efficiency
– Franchise renewal risk in Spain
– UK bus franchising or alternative models
– Financial or reputational cost of failure
to comply with changing regulations
or legislation
– Continued uncertainty around the terms of
the UK’s exit from the EU creates general
and specific risks in our markets in the UK,
Spain and Germany
– An economic downturn in the UK could
adversely impact demand for our services
– Reduced travel volumes to/from UK
airports could affect demand for our
UK coach services
– Supply chain disruptions could result
in respect of imports from the EU
Management/mitigation
– Geographical diversification of the Group
provides a natural hedge to some
economic risk
– Constant monitoring of the political
landscape and focus on effective
stakeholder management
– Strategic plans are stress-tested for
– Political risk is specifically considered
differing economic scenarios
when considering bids or new market entry
– Ongoing close monitoring of specific
Brexit-related risk issues
– Geographical diversification reduces
Group-level risk; exposure to UK market
is less than 25% of total revenue
– Exit from the UK rail market and focus
on international opportunities
– Strong strategic focus on people/talent
management and recruitment/retention
– Delivery of excellence in service
and operations
– Strategic alliances and partnerships are
used where appropriate to mitigate risk
– The Group carries out appropriate
lobbying and communication, highlighting
especially the importance of public
transport to central and local government
– Focus on operational excellence and
delivering value in our franchises
and contracts, and to our fare
paying customers
Opportunity
– Despite a generally unsettled economic
outlook, private consumption and demand
conditions for public transport continue to
be strong
– Political and social pressure continues to
grow on congestion and clean air, which
favours public transportation
– Increasing city regulation and investment
– Translated profits from our international
operations will increase in the event of
weakening Sterling
Change in risk in the year
– Economic growth is expected to slow
in our major markets, with continued
uncertainty driven by political conditions
and trade wars/protectionism
– Unemployment rates continue to fall in key
markets, causing ongoing pressure on
staff costs and turnover, especially in
North America
– Further diversification with Rabat/
Casablanca contracts
in bus and Bus Rapid Transit (BRT)
schemes
– Continued liberalisation of markets
in many territories
– The Spanish franchise renewals process
has restarted and is again subject
to challenge
– Continued strengthening of our
relationships with key political
stakeholders and our reputation
as a high quality, innovative partner
– Birmingham’s Draft Transport Plan is very
pro-public transport, demonstrating the
direction of travel amongst enlightened
local authorities
– While much of the uncertainty created by
the political deadlock has been removed,
risks remain in relation to the ultimate
terms of the exit
50
National Express Group PLC Annual Report 2019
Strategic risks
4
5
Changing customer
expectations in a digital world
Alternative fuel vehicles (AFVs)
6
Competition and
market dynamics
Potential impact
– Increasing expectations of customers
to be able to buy tickets and manage
their travel plans through a variety
of digital platforms
– Failure to develop applications and digital
channels that meet these increasing
expectations could affect profitability,
customer satisfaction and the business’
ability to capitalise on valuable customer
data to enable commercial initiatives
Management/mitigation
– Increasing popular, political and customer
– Competition arises from direct price
demand for alternative fuel (electric,
hydrogen etc.) vehicles
– Transition involves potentially material
changes in financing, maintaining
and operating the assets, creating
execution risk
– Requires significant change
to infrastructure
competition; inter-modal (e.g. coach vs.
rail); and, more recently, emerging threats
such as new market entrants or disruptive
technologies
– Changes in customer demographics
impact demand and the nature of
services required
– Potential ‘disintermediation’ risk created
by aggregators seeking to ‘own’ the
customer relationship
– Comprehensive digital strategies
– Environmental leadership with pledge to
– Commitment to service excellence,
developed in each division
– Divisional ‘digital scorecards’ are reviewed
monthly by the Group Executive
Committee to monitor the effectiveness
of various digital channels
never again buy a diesel bus in the UK and
launch electric vehicle procurement
competition in UK coach. Ambition to
reach zero emissions in UK bus by 2030
and UK coach by 2035
– Developing strategies for demand
– Cross-division executive leadership
responsive services
of AFV strategy
– Oversight by Chief Digital Officer
– Close engagement with new and existing
original equipment manufacturers
– Pilot testing underway in a number
of areas
providing the best solutions to
our customers
– Price leadership and value for money
– Revenue trends are closely monitored
and RMS deployed
– Investment in technology
– Focus on operational excellence – even
with an aggregator model, service delivery
is critical
– Targeted acquisitions and growth in the
most attractive markets
Opportunity
– Leadership in adopting new technologies
– AFVs present potential opportunities
– Ageing population in major markets
will enhance our service to existing
customers and attract new ones
– Millennials are an increasingly important
target market and more inclined to use
public transportation if the service is right
to reduce the cost base of the business,
while helping cities solve the challenges
of the drive for a cleaner air environment
– Total Cost of Ownership equivalence
by versus NPV by around 2024
creates additional paratransit opportunities
– Continuing urbanisation drives cities to
partner with high quality transportation
operators
Change in risk in the year
– Innovation programmes established in
– Order placed for 29 double decker EVs in
North America, UK and Spain
– Continued increases in bookings through
the UK complements ongoing pilots in Alsa
and North America
– Acquisition WeDriveU in the USA provides
entry and expertise in a significant new
market sector
online and digital mobile platforms
– Developed initial roadmaps for transition
– Continued roll-out of ticketless operations
to EV across all divisions
– Committed never to buy another diesel bus
in the UK
– Acquisition of ATG renamed National
Express Accessible Transport (NEAT)
in the UK strengthens stakeholder
relationships and expands market
51
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Principal risks and uncertainties continued
Key
Core business/operational excellence
Strategic growth/M&A
Increase in risk during the year
Technology
New risk in the year
Reduction in risk during the year
Operational risks
7
8
Attraction/retention of talent/
HR/labour relations
Cyber/IT failure/General Data
Protection Regulations (GDPR)
9
Terrorism
Potential impact
– Lack of available management talent/
leadership skills can inhibit growth
– Shortages in drivers and other key staff
can disrupt operations and lead to wage
and benefits cost inflation
– Increased unionisation and/or poor labour
relation presents increased risk of strike or
operational disruption
– Major IT failure could disrupt operations
and lead to loss of revenue, especially
in the coach businesses
– Data breach involving a loss of customer
data could result in reputational damage
and significant remedial costs
– Breach of the EU Regulation (GDPR) could
result in reputational damage and
additional costs
– Direct impact through asset damage,
disruption to operations and revenue loss
– Potential indirect impact from a general
reduction in the public’s appetite to travel
reducing demand and revenue
Management/mitigation
– The Group is committed to employee
engagement and invests in a number
of retention programmes
– Appropriate training is provided for
managers and supervisors
– Reward and recognition programmes are
established to further enhance employee
engagement
– Increased investment in cyber security,
including recruitment of specialised
resources across the Group, technical
measures to protect data assets and
the procurement of several services at
Group level
– Board approved governance structure and
– Close liaison with government agencies
and industry partners
– Major incident/emergency plans are
developed in all divisions
– Insurance coverage is available and in
place for some terrorism-related risks
– Risk assessment of any new business
cyber security strategy
growth opportunity
– Focus on the effective management of
– GDPR compliance plans in place, tailored
stakeholder and union relationships, and
the advice of specialist outside counsel
is sought where necessary
to each division’s exposure
Opportunity
– Ensuring we have an agile, skilled
– Strengthened resilience against cyber
– n/a
workforce will enable us to adapt to
emerging challenges and opportunities
threats and IT outages increases
awareness and expertise across the
Group and facilitates greater leverage
of technology
Change in risk in the year
– Low levels of unemployment in key
markets have led to recruitment and
retention challenges and cost inflation
– Established Diversity & Inclusion Council
– Cyber threat environment continues to be
challenging, as demonstrated by high
profile data breaches and ransomware
events in other companies
– Significant improvements in our resilience,
supported by an ongoing maturity
programme
– Preparations for California Consumer
Privacy Act (CCPA)
– UK Government threat level reduced from
‘severe’ to ‘substantial’, but we remain
very vigilant
52
National Express Group PLC Annual Report 2019
10
11
12
Safety, litigation and claims
Natural catastrophe/extreme
weather/loss of key facility
Credit/financing
Potential impact
– Major safety-related incident could
– Loss of a key location to either a
impact the Group both financially and
reputationally
– Higher than planned claims or cash
settlements could adversely affect
profit and cash outflow
– Non-compliance with regulations can
create legal and financial risk
man-made hazard such as fire, or natural
catastrophe such as a hurricane, can
result in asset loss and lost revenue
– Widespread events such as extreme
weather can also interrupt operations and
cause revenue loss even if the Group’s
assets are undamaged
– Contract-based operations such as North
America and Spanish urban are exposed
to late or non-payment risk from
customers, impacting Group liquidity
– A material increase in interest rates would
increase the Group’s cost of borrowing
– Material tightening in investment-grade
credit markets could impact the
Group’s liquidity
Management/mitigation
– Very strong safety culture driven from the
– Geographical diversification of the Group
Group Chief Executive
– Dedication to leading edge
safety technology
provides a natural hedge to this risk
– Established emergency and continuity
plans in each division
– Close monitoring of receivables and
appropriate provisions made for
possible non-collection
– Strong relationships with a number
– Appropriate insurance coverage for
– Insurance coverage is available and
of banks
accident-related claims to employees
and third parties
– Experienced claims management and legal
teams in each division
– All divisions have established safety
audit programmes, supported by Group
internal audit
in place for some hazard-related risks
– Appropriate liquidity maintained
through committed bank facilities,
finance lease programmes and debt
capital market issuances
Opportunity
– Continued relentless focus on safety and
investment in technology should facilitate
risk and cost reductions and enable
differentiation in our customer offering
– n/a
– Investment grade rating and proven track
record give efficient access to credit
markets enabling investment in growth
Change in risk in the year
– Zero responsible fatalities in the year
– Significant reduction in Fatality Weighted
Injuries (FWI), the Group’s key safety
metric
– Global insurance market conditions have
deteriorated significantly; the Group was
able to achieve satisfactory renewals due
to our commitment to safety and to
effective litigation/claims management
– General increase in extreme weather
events around the globe, including
hurricanes, storms and wildfires
– RCF extended for a further one year
– Fitch rating raised from BBB-/stable to
BBB/stable
– £664 million financing raised in US private
placement and bond markets to refinance
2020 debt maturities
53
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Non-financial Information Statement
Non-financial Information Statement
Non-financial Information Statement
The new non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006 require us to
provide information to help stakeholders understand our position on non-financial matters. The table below sets out where you can
find this information:
Requirement
Environment
Employees
Human rights
Social matters
Policies which govern our approach
Further information
– Group Environmental Policy
– Health & Safety Policy
– Equal Opportunities & Diversity Policy
– Workplace Rights Policy
– Human Rights Policy
– Modern Slavery Policy
– Whistleblowing Policy
– Privacy Policy
Responsible partner pages 37 to 47
Safety & Environment Committee Report
pages 94 to 98
Environmental performance pages 46 and 47
Responsible partner pages 37 to 47
Responsible partner pages 37 to 47
Audit Committee Report pages 87 to 93
– Rather than a specific policy, our approach
to social matters is framed by our
Community & Environment Value
Responsible partner pages 37 to 47
Anti-corruption and
anti-bribery
– Anti-bribery and Corruption Policy
– Purchasing Policy
Policy implementation,
due diligence and outcomes
Principal risks and impact
on business activity
Description of
business model
Non-financial key
performance indicators
Our Group policies are published on our website at www.nationalexpressgroup.com
Responsible partner pages 37 to 47
Audit Committee Report pages 87 to 93
Corporate Governance pages 57 to 78
(including Board activity during the year
page 65 and Audit Committee Report
pages 87 to 93)
Risk management pages 48 to 53
Audit Committee Report page 87 to 93
Our business model page 8
Our strategy and priorities pages 14 and 15
Key performance indicators pages 16 and 17
Environmental performance pages 46 and 47
Our 2019 Strategic Report, from the
inside front cover to page 54, has been
reviewed and approved by the Board.
Dean Finch
Group Chief Executive
27 February 2020
54
National Express Group PLC Annual Report 2019 Corporate Governance
Our Corporate Governance
Compliance Statement
The Board is accountable to shareholders
for its standards of governance and is
pleased to report that the Company has
applied the Principles and complied
with the Provisions of the UK Corporate
Governance Code issued by the Financial
Reporting Council (FRC) in July 2018
(which can be found at www.frc.org.uk) for
its financial year ended 31 December 2019,
with the exception of parts of Provisions
36, 37 and 38 as explained on page 106.
The Corporate Governance Report (pages
55 to 121), including the Reports of the
Nominations Committee (pages 79 to 86),
Audit Committee (pages 87 to 93) and
Safety & Environment Committee (pages
94 to 98), together with the Company’s
Directors’ Remuneration Report (pages
99 to 121), explain how the Company has
applied the Principles and complied with
the Provisions of the Code (other than
those parts of Provisions referred to
above) and are included in this statement
by reference.
Corporate Governance
Introduction to corporate governance
Chairman’s introduction to corporate governance
Governance framework
Board leadership and company purpose
Board of Directors
Board activity in 2019
Board decision-making
Purpose, Values and culture
Stakeholder relations
Division of responsibilities
Roles and responsibilities
Supplementary information on Board and Directors
Composition, succession and evaluation
Nominations Committee Report
Supplementary information on composition, succession
and evaluation
Audit, risk and internal control
Audit Committee Report
Supplementary information on audit, risk and internal controls
Safety & Environment Committee Report
Remuneration – Directors’ Remuneration Report
Annual Statement by the Remuneration Committee Chair
Remuneration at a glance and in context
Annual Report on Remuneration
Further information
Directors’ Report
Directors’ Responsibilities
p57
p59
p60
p65
p66
p69
p71
p76
p77
p79
p83
p87
p90
p94
p99
p103
p107
p122
p127
56
National Express Group PLC Annual Report 2019 Introduction to corporate governance
Chairman’s introduction to corporate governance
− our delivery in 2019 of yet another set of
record-breaking financial results;
− the achievement of our best ever safety
result;
− our increasing focus on environmental
matters;
− our continued drive for excellence in
everything we do; and
− our investment in our people, our
customers and the communities
we serve.
Purpose, Values and culture
During 2019, the Board articulated the
Company’s Purpose, rooting it in our
fundamental belief that high quality public
transport is critical to a clean, green and
prosperous future. Our Purpose is: “To
help lead a modal shift by making public
transport an increasingly attractive option
for all our customers whether they are
individuals, transport authorities, school
boards or businesses. We seek to do
this by earning our customers’ loyalty
by providing safe, reliable and great
value multi-modal services on clean and
green vehicles”. To assist us in achieving
our Purpose, we have retained our
existing Values — of Safety, Excellence,
Customers, People and Community &
Environment — but evolved the level of
ambition for delivery against each of these
as explained on pages 10 and 11 of the
Strategic Report. We believe this approach
will underpin the delivery of superior
outcomes for all our stakeholders.
We look further at our Purpose, and how it
is aligned with the Company’s Values and
strategy, on page 69. We also explain, on
page 70, how the Company has cultivated
a healthy corporate culture and the steps
the Board has taken during the year to
monitor that culture. We monitor our
culture as want to ensure that our people
are living by our Values as this will, in turn,
help us to fulfil our Purpose.
Board composition, succession
planning and diversity
Ensuring that the Board is composed of
Directors with the appropriate experience,
skills and diversity, particularly in their
thought and approach, is critical to good
decision-making.
We draw our strength from our varied
backgrounds and relevant experience in
At its simplest level,
we believe that good
corporate governance
is about having the best
people governing our
business and taking
decisions on its behalf
at every level of the
organisation”
either the industry, geography or culture in
which our business operates.
While the Board has enjoyed stability in
its membership over the last few years,
which has served the Company well, we
recognise the value that refreshing our
membership and bringing more diversity
into the Boardroom can bring to enhance
decision-making. To this end, during the
year under review we began to implement
our succession plans which resulted in the
appointment of two new Non-Executive
Directors – Ana de Pro Gonzalo and Karen
Geary – who joined the Board and certain
of its Committees on 1 October 2019.
In addition, from 31 December 2019,
two of the incumbent Non-Executive
Directors – Joaquín Ayuso and Jane
Kingston – stepped down from the Board
and its Committees. As explained in the
Nominations Committee Report on pages
79 to 86, the appointment of the new
Directors has enhanced the strength and
diversity of the Board and its Committees.
Over the next few years as we continue to
implement our succession plans, we will
seek to preserve and enhance that strength
and diversity further still.
We are equally cognisant of the importance
of developing a talented and diverse
senior management succession pipeline
and developing talent and enhancing
diversity, in all its forms, across the wider
workforce to ensure that we have the
best people to serve our customers and
the diverse communities in which we
operate. During the year, we therefore
also reviewed the Company’s senior
management succession plans and we
oversaw the establishment of the Group’s
Diversity & Inclusion Council and multiple
talent development and diversity initiatives
across the Group, further details of which
can also be found in the Nominations
Committee Report.
Sir John Armitt CBE
Chairman
Dear fellow shareholder
I am pleased to present the Company’s
Corporate Governance Report for the
financial year ended 31 December 2019.
Good corporate governance
Following the publication in 2018 of
the Financial Reporting Council’s new
UK Corporate Governance Code (the
2018 Code), my Board and I took the
opportunity during 2019 to re-assess what
good corporate governance means to us.
At its simplest level, we, as a Board,
believe that good corporate governance
is about having the best people governing
our business and taking decisions on its
behalf at every level of the organisation.
We consider that the best people are
those who are invested in the Company’s
Purpose, behave in accordance with
its Values and are fully engaged in
delivering its strategy. We also believe
that such people should be appropriately
incentivised and rewarded for their
commitment and delivery. Good corporate
governance is also about having a strong
system of internal control in place,
together with a programme of internal
and external stakeholder engagement.
This enables those who govern to fully
understand the risks, rewards and wider
implications of every decision they take
relating to our business. It also assists us,
as Directors of the Company, to comply
with our duties under Section 172(1) of the
Companies Act 2006.
We believe that we have good governance
in place which is contributing to the long-
term sustainability of the Company, as
evidenced by:
57
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Annual General Meeting
This year’s Annual General Meeting (AGM)
will be held at 2.30pm on Thursday, 7 May
2020 in the Banqueting Hall at Glaziers
Hall, 9 Montague Cl, London SE1 9DD.
All current Board Directors will be seeking
re-election to office, with the exception
of Ana de Pro Gonzalo and Karen Geary
who will be standing for election to office
for the first time. As the AGM provides an
opportunity for you to meet with and ask
questions of your Directors regarding this
Annual Report and the matters before the
meeting, I encourage you to attend and
look forward to seeing you there.
Finally, I would like to thank my fellow
Board Directors, the senior management
team and every single member of the
workforce for their hard work in 2019 and
their ongoing commitment as we continue
to seek to achieve our Purpose through
2020 and beyond.
Sir John Armitt CBE
Chairman
27 February 2020
Introduction to Corporate Governance
Chairman’s introduction to Corporate Governance continued
Stakeholder engagement and
Section 172(1) Statement
Engagement with the Company’s
stakeholders, including its workforce,
customers, suppliers, central and local
government bodies and regulators, is
key to enabling the Board to understand
stakeholder views, which better informs the
Board’s own decision-making and enables
the Company to build strong and lasting
relationships with such stakeholders. It is
also an important method of monitoring the
Company’s culture and assessing whether
we are living by our Values.
During the year under review, we have
therefore embraced the recommendations
of the 2018 Code that we, as a Board,
engage with our workforce and understand
the views of our stakeholders. We have
done so by supplementing our existing
‘Board in Action’ programme (as explained
in previous Annual Reports) with additional
focused workforce engagement events
and by putting in place additional means
of understanding other stakeholder views.
Details of this engagement and these
methods, together with an explanation of
why our approach to engaging with the
workforce is considered effective, are set
out on pages 71 to 75.
Our Section 172(1) Statement, explaining
how we, as the Company’s Directors, have
regard to stakeholder interests and other
factors in accordance with our duty to do
so under Section 172(1) of the Companies
Act 2006, is set out on page 9 of the
Strategic Report and incorporates pages
66 to 68 of this Corporate Governance
Report explaining how we have had regard
to such factors in our principal decisions
taken during the year. Additional information
about the way the Company engages
with employees can also be found in the
Directors’ Report on pages 125 and 126.
The Board and I remain committed to
our engagement with the Company’s
stakeholders, including its workforce,
to continue to inform our decision-making
and we look forward to more interaction
in the year ahead.
Strong system of financial
and operating control and risk
management
A key aspect of good corporate
governance is having a strong system of
control within which those who govern can
take decisions on behalf of the Company
and implement its strategy with a clear
understanding of, and controls to manage,
the risks and rewards involved in such
decisions and implementation. This is
achieved through the Company having an
established risk appetite, framework and
processes for identifying both principal and
emerging risks and putting in place actions
to manage and mitigate such risks.
The Board is responsible for setting
the Company’s risk appetite and both it
and its Audit and Safety & Environment
Committees play important roles in
monitoring and ensuring the management
of its principal and emerging risks.
Details of the Company’s risk appetite
and principal and emerging risks can be
found on pages 48 to 53 of the Strategic
Report. Information about the work of
the Audit Committee during 2019 in
monitoring and assessing the integrity of
the Company’s financial reporting and the
robustness of its system of internal control,
including its work on behalf of the Board
in conducting ‘deep dives’ into certain of
the Group’s principal risks and its divisions’
risk registers, can be found in the Audit
Committee Report on pages 87 to 93.
Information about the work of the Safety
& Environment Committee during 2019 in
overseeing the Company’s management
of safety and environmental matters —
which represent risks but also increasingly
opportunities — can be found in the Safety
& Environment Committee Report on
pages 94 to 98.
Fair Executive Director and
senior management remuneration
2019 was the second year of application
of the Directors’ Remuneration Policy
that was approved by shareholders at the
AGM in 2018 (the Policy). The Board’s
Remuneration Committee has therefore
been focused during the year on ensuring
that the Policy is continuing to operate as
intended to appropriately reward, retain
and incentivise the Executive Directors
who are driving the Company’s success.
It has done so by seeking to ensure that
the Company’s remuneration schemes
and their outcomes for Executive Directors
continue to be transparent, aligned with
the Company’s strategy and aligned with
the interests of, and returns delivered to,
shareholders. Due regard has also been
had by the Remuneration Committee when
determining Executive Director pay to the
Company’s workforce pay and related
practices (as explained on page 101 of the
Annual Statement by the Remuneration
Committee Chair) and to the interests of
the Company’s wider stakeholders. The
latter can be seen in the Committee’s
decision, following consultation with its
principal shareholders, to add two new
environmental performance measures to
the awards to be granted to Executive
Directors and senior management under
the Company’s Long-Term Incentive
Plan (LTIP) in support of the Company’s
ambition to reduce its carbon emissions
and provide its customers with sustainable
mobility services.
58
National Express Group PLC Annual Report 2019 Introduction to corporate governance
Corporate governance framework
The Company’s corporate governance framework, and its core component parts, are explained below:
Shareholders
The owners of the Company and the people to whom the Board is ultimately responsible.
Responsible for the leadership of the Board and ensuring that it operates effectively
to discharge its responsibilities.
Chairman
Board
Collectively responsible to the Company’s shareholders for the long-term sustainable success of the Company, by
providing effective leadership, establishing the Company’s Purpose and Values and monitoring its culture, setting
the Company’s strategy and overseeing its delivery within a framework of internal controls, setting the Company’s
risk appetite and reviewing its principal and emerging risks and taking other decisions which are reserved to it.
Board members act for the benefit of shareholders while taking into account the interests of a range of other
stakeholders and other factors, in accordance with their duties, including under Section 172(1) of the Companies
Act 2006.
+ Further information about the Board’s activities in the year under review can be
found on page 65.
Board Committees
Committees operate under the delegated authority of the Board and within formal terms of reference.
Their key responsibilities are set out below:
Nominations
Committee
Audit Committee
Reviews the structure, size, composition and effectiveness of the Board
and its Committees. It oversees succession planning for the Board and
senior management, having due regard to talent and diversity, and makes
recommendations to the Board for the nomination of new Directors.
Reviews and monitors the Group’s financial accounting and reporting
processes and the integrity of published financial statements. It reviews the
Group’s system of internal control, including its internal audit function and the
independence and effectiveness of the external auditor.
Safety & Environment
Committee
Reviews and monitors the Group’s strategies, policies and standards, risk
exposures and objectives in relation to safety and environmental matters and
the Group’s performance against such matters.
Remuneration
Committee
Disclosure
Committee
Reviews and recommends to the Board the framework and policy
for remuneration of the Chairman, the Executive Directors and senior
management, and for implementing the Directors’ Remuneration policy.
Maintains governance procedures, systems and controls for the identification,
treatment and disclosure of inside information in accordance with applicable
laws.
+ Further information about the activities of the Board’s principal Committees can be
found on pages 79 to 102
Board Executive Committee
A Committee currently comprising the Group Chief Executive and Group Finance Director operating under the
delegated authority of the Board and within formal terms of reference. It acts to review and approve various
executive matters, including bids, contracts and acquisitions, financing arrangements and expenditure below the
levels reserved to the Board.
Group Executive Committee
An advisory and reporting body to the Group Chief Executive comprised of divisional management and Group
heads of function. It acts to review and oversee the safety, operational and financial performance of the Group
and discuss, formulate and approve proposals for onward consideration by the Board or its Committees.
59
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Board leadership and company purpose
Board of Directors
The right mix of skills
and experience
1
Sir John Armitt CBE
Chairman
Dean Finch
2
Group Chief Executive
Chris Davies
3
Group Finance Director
Matt Ashley
4
Group Business Development Director
5
6
Jorge Cosmen
Deputy Chairman
Lee Sander
Senior Independent Director
7 Dr Ashley Steel
Independent Non-Executive Director and
Chair of the Remuneration Committee
1
2
3
4
5
6
7
60
National Express Group PLC Annual Report 2019
8
9
Mike McKeon
Independent Non-Executive Director
and Chair of the Audit Committee
Chris Muntwyler
Independent Non-Executive Director
and Chair of the Safety & Environment
Committee
11 Karen Geary
Independent Non-Executive Director
12 Ana de Pro Gonzalo
Independent Non-Executive Director
13 Joaquín Ayuso
Independent Non-Executive Director
10 Matthew Crummack
14 Jane Kingston
Independent Non-Executive Director
Independent Non-Executive Director
+ See pages 62 to 64
for biographies and, in
respect of the continuing
Directors, their key
strengths in supporting the
Company’s strategy
8
9
10
11
12
13
14
61
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Board leadership and company purpose
Board of Directors continued
+ See pages 60 and 61 for portraits
1 Sir John Armitt CBE N SE IA
Chairman
Key strengths in supporting
the Company’s strategy:
− Has a strong track record in
developing and delivering against
successful strategy
− Has acquired a deep understanding
of the passenger transport sector
enabling him to identify and capitalise
on opportunities and manage and
mitigate risks
− Takes personal leadership of safety
programmes and has created the
Company’s strong safety culture
− Has a strong focus on driving
operational excellence
− Is a strong people manager, identifying
and developing talent at senior level
Current external appointments:
None
3 Chris Davies
Group Finance Director
Appointed: May 2017
Experience: Chris has more than 25 years’
financial, treasury, commercial and IT
experience. He has a strong global track
record in these fields across developed
and emerging markets having previously
served as Group Financial Controller and
Treasurer and then Interim Group Chief
Financial Officer at Inchcape plc, and
Chief Financial Officer (North America)
at Diageo plc until 2012, prior to which
he held several other senior roles.
Chris has significant strategic experience
having previously held senior strategy roles
in both developed and emerging markets.
He is a qualified management accountant.
Key strengths in supporting
the Company’s strategy:
− Provides strong financial and strategic
support to the Group Chief Executive in
leading the business
− Has strengthened the finance function
to support the Company’s growing
business and evolved the Company’s
risk management processes to better
identify and manage risks to the delivery
of strategy
− Has a focus on building strong
relationships with equity and debt
investors, ensuring a clear understanding
among them of the Company’s strategy
Current external appointments:
None
Appointed: January 2013 and as Chairman
February 2013
Experience: Sir John has extensive
experience in the transport, engineering
and construction sectors, including of
working with government at ministerial
level. He also has significant board-level
experience both as a chairman and chief
executive having held chairman roles at the
Government Commission on the Thames
Estuary, the Olympic Delivery Authority
and the Engineering and Physical Science
Research Council, and chief executive
roles at Network Rail, Costain Group PLC
and Union Railways.
He was awarded a CBE in 1996 for
his contribution to the rail industry and
received a knighthood in 2012 for his
services to engineering and construction.
Key strengths in supporting
the Company’s strategy:
− Provides strong leadership of the Board
in fulfilling its role of overseeing the
development and delivery of Company
strategy
− Ensures healthy debate and appropriate
support for and challenge of executive
management in their delivery of strategy by
non-executive directors
− Provides leadership in stakeholder relations
Current external appointments:
− Non-Executive Director, Berkeley Group
Holdings PLC
− Non-Executive Director, Expo 2020
− Chairman, City & Guilds Group
− Chairman, National Infrastructure
Commission
2 Dean Finch
Group Chief Executive
Appointed: February 2010
Experience: Dean has more than 30
years’ commercial, financial and operational
experience in the transport sector gained in both
Europe and North America. He has a proven
track record of improving safety and operational
performance and delivering financial success in
bus, coach and rail businesses.
He also has substantial executive leadership
and listed company experience having served
as Group Chief Executive at Tube Lines and
Group Finance Director and Group Chief
Operating Officer at First Group plc, where he
held various other senior roles.
Dean is a qualified chartered accountant and
began his career at KPMG LLP specialising in
corporate transaction support services.
4 Matt Ashley
Group Business
Development Director
Appointed: May 2015 and to his current role
August 2019
Experience: Matt brings significant
international financial, corporate and
operational experience to the Board.
Within National Express, he has previously
held Group and divisional finance and
operational roles, including Group Finance
Director and President and CEO, North
America. Prior to National Express, Matt has
supported complex corporate transactions
for several multi national companies in his
role as Director (transport, infrastructure
and listed companies) at Deloitte LLP,
where he began his career as an auditor.
Matt is a qualified chartered accountant.
Key strengths in supporting
the Company’s strategy:
− Brings his financial and analytical skills
together with his deep understanding of
transport sector operations to identify and
capitalise on new business opportunities,
supporting the Company’s growth strategy
Current external appointments:
None
5 Jorge Cosmen N SE
Deputy Chairman
Appointed: December 2005
Experience: Jorge has accumulated
extensive experience in international
business. He currently serves as President of
the Company’s ALSA division and, prior to its
acquisition by National Express in 2005, he was
corporate manager of the ALSA Group and
has worked in banking, sales and distribution.
Jorge has an International MBA from the
Instituto de Empresa in Madrid.
Key strengths in supporting
the Company’s strategy:
− Deploys his extensive experience and his
deep knowledge of the Group’s business
in supporting executive management to
deliver strategy
− Provides invaluable insight into
international transport matters and assists
in identifying opportunities and risks
− Assists the Company in building and
maintaining strong relationships with the
Group’s stakeholders
Current external appointments:
− Non-Executive Director, Bankia SA
62
National Express Group PLC Annual Report 2019 Key strengths in supporting
the Company’s strategy:
− Has significant experience consulting
on the development and implementation
of strategy, including for organisations
in growth mode and operating in the
technology sector, supporting the
Company’s growth and technology
strategic pillars
− Offers wide-ranging insights based on
the breadth of industries she has advised
− Has a strong focus on the retention,
reward and incentivisation of executive
management in the delivery of strategy
Current external appointments:
− Non-Executive Director, GoCo Group plc
(previously Gocompare.com Group plc)
− Non-Executive Director, British
Broadcasting Corporation (BBC), where
she is also the Nations Representative
for England
8 Mike McKeon A SE I
Non-Executive Director
Appointed: July 2015
Experience: Mike has wide-ranging
international experience in financial and
business management across a number of
different sectors, having previously served as
Chief Financial Officer at Severn Trent plc and
Chief Financial Officer at Novar plc. Earlier
in his career, he held various senior business
roles both in the UK and overseas at Rolls-
Royce plc, CarnaudMetalbox, Elf Atochem
and PwC. He also held the positions of
Senior Independent Director and Chairman
of the Audit Committee at The Merchants
Trust PLC from 2008 to 2017.
Mike is a chartered accountant.
Key strengths in supporting
the Company’s strategy:
− Provides strong oversight of the
Company’s financial management and
internal controls, helping to sustain a
controlled environment in which the
Company’s strategy can be delivered
− Has experience developing and
delivering strategy in organisations
with a strong customer focus
− Has oversight of operational excellence
programmes designed to enhance
customer service and manage cost,
supporting the operational excellence
pillar of the Company’s strategy
Current external appointments:
None
6 Lee Sander A N R SE I
Senior Independent
Director
Appointed: June 2011
Key strengths: Lee has a wealth of
experience in the transportation, engineering,
construction and architectural sectors. He
currently serves as President, Americas for
Bombardier Transportation and, prior to that,
held a number of roles including Group Chief
Executive (Global Transportation) at AECOM,
Chief Executive Officer at the Metropolitan
Transportation Authority of New York,
Managing Director (Global Transportation
and US Infrastructure) at Hatch and Senior
External Adviser at McKinsey & Company.
Lee was also founder of the Rudin Center for
Transportation Policy and Management at
New York University.
Key strengths in supporting
the Company’s strategy:
− Has significant experience advising on the
development of and managing the delivery
of strategy in the transport sector
− Deploys his extensive management
and advisory experience in the US
mobility industry to assist executive
management with the development of
strategy in North America
− Provides valuable insight into US
school board and transit authority
stakeholder relationships
Current external appointments:
− President Americas, Bombardier
Transportation
− Chairman Emeritus, Regional Plan
Association
− Vice Chairman, Greater Jamaica
Development Corporation
7 Dr Ashley Steel R A SE I
Independent
Non-Executive Director
Appointed: January 2016
Experience: Ashley has significant
international consultancy experience gained
with KPMG LLP and has acted as an adviser
to FTSE listed and Fortune 500 boards,
including in relation to strategy development,
organisation effectiveness, risk management
and human resources and M&A, across
multiple sectors including transport,
infrastructure, technology, media,
professional services and business services.
She was previously a Non-Executive Director
of the Civil Aviation Authority and Ince & Co
LLP.
She has a PhD in Management from Henley
Business School.
9 Chris Muntwyler SE A N I
Non-Executive Director
Appointed: May 2011
Experience: Chris has significant
international experience in the transport,
logistics and technology sectors. Having
previously held various senior executive
roles at Swiss Air and the positions of Chief
Executive of DHL Express (UK) Limited and
Managing Director (Switzerland, Germany
and Central Europe) at DHL Express, he is
now a management consultant, specialising
in strategy development, leadership guidance
and customer and process orientation.
Chris was also a member of the CBI
President’s Committee from 2007 to 2008.
Key strengths in supporting
the Company’s strategy:
− Provides strong oversight of the Company’s
safety and environment programmes which
support the sustainability of Company’s
business model and delivery of strategy
− Has experience of corporate acquisitions
and integrations and technology innovation,
supporting the growth and technology
pillars of the Company’s strategy
Current external appointments:
− President and CEO, Conlogic AG
− Non-Executive Director, Österreichische
Post AG
Committee membership1 &
independence status key
Committee Chair
A Audit
N Nominations
R Remuneration
SE Safety & Environment
I Independent
IA Independent on appointment
1
Committee membership is shown as at
31 December 2019
63
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Board leadership and company purpose
Board of Directors continued
+ See pages 60 and 61 for portraits
10 Matthew Crummack
R SE I
Non-Executive Director
Appointed: May 2015
Experience: Matthew has extensive
international management experience
across multiple functions in consumer
product and digital service industries.
He currently serves as the CEO of GoCo
Group plc and, prior to that, held a number
of roles up to Chief Executive Officer at
lastminute.com, was Senior Vice President
(Lodging, Europe and US) at Expedia and
held various senior roles at Nestlé UK and
Procter & Gamble.
Key strengths in supporting
the Company’s strategy:
− Has extensive and current executive
management and operational
experience, enabling him to provide
advice and challenge to executive
management in their delivery of strategy
− Has proficiency in the management
of technical operations and online
customer sales and marketing
platforms, supporting the Company’s
operational excellence and technology
strategic pillars
Current external appointments:
− Chief Executive Officer, GoCo Group plc
(previously Gocompare.com Group plc)
11 Karen Geary R SE I
Non-Executive Director
Appointed: October 2019
Experience: Karen is an experienced
human resources professional, having
served in a number of senior and executive
HR roles in international transport and
technology industries, including at Stena
Line Limited, The Sage Group PLC,
WANdisco plc and, most recently, as Chief
HR Officer at Micro Focus International
plc. She also served as a non-executive
director and chair of the remuneration
committee at Micro Focus International plc
prior to taking on the executive role there
and has recently taken on a non-executive
director role at ASOS plc.
Karen is a Chartered Member of the Institute
of Personnel & Development (MCIPD) and
a Member of the British Psychological
Society (BPS).
Key strengths in supporting
the Company’s strategy:
− Maintains a crucial focus in the
boardroom on people, and the
Company’s reward and retention, talent
development, engagement and diversity
programmes, supporting the people who
deliver all three pillars of the Company’s
strategy
− Adds strength to the oversight of
executive retention and remuneration
− Has experience of strategic
management of people matters in
organisations as they go through growth
or transformation, supporting the
Company’s growth strategy
Current external appointments:
− Non-Executive Director and chair of the
remuneration committee of ASOS plc
12 Ana de Pro Gonzalo
A SE I
Non-Executive Director
Appointed: October 2019
Experience: Ana has significant
financial and general management
experience having worked for a number
of multinational companies across a
variety of industries. She is currently the
serving Chief Financial Officer at Amadeus
IT Group S.A., having previously been
General Manager of Sacyr Vallehermoso
and Chief Financial Officer of Metrovacesa
S.A. She has also held a non-executive
director position at Merlin Properties
SOCIMI, S.A.
Key strengths in supporting
the Company’s strategy:
− Adds strength to the oversight of
the Company’s financial reporting
and risk management, lending support
to the control environment for the
delivery of the Company’s strategy
− Offers valuable insights into the
development of the Company’s
technology strategy
− Has managed the development
and implementation of strategy
in organisations as they go through
growth or transformation, supporting
the Company’s growth strategy
Current external appointments:
− Chief Financial Officer, Amadeus IT
Group, S.A.
− Independent Director and member
of the Global Steering Group for
Impact Assessment, Consejo Aesor
Nacional Español
Further details about the number of Board and Committee meetings held during 2019, the Directors’
attendance at those meetings and the Board’s and its Committees’ processes are set out on pages 77
and 78 of this Corporate Governance Report.
64
13 Joaquín Ayuso N SE I
Non-Executive Director
Appointed: June 2011
Resigned: December 2019
Experience: Joaquín has considerable
international management and operational
experience in the transportation,
infrastructure and finance sectors, in
particular having worked for Ferrovial SA
for over 35 years in various capacities,
including as Chief Executive Officer and
latterly Board Vice Chairman, a role he held
until 2019. He also previously held non-
executive director positions at Hispania
Activos Inmobiliarios SA, BUDIMEX and
BAA plc.
External appointments (as at
31/12/2019):
− Non-Executive Director and chair of
the risk committee, Bankia SA
− Senior Advisor (Spain and Portugal),
AT Kearney
14 Jane Kingston N R SE I
Non-Executive Director
Appointed: February 2014
Resigned: December 2019
Experience: Jane is an accomplished
human resources professional with
significant experience across a range
of industry sectors and international
territories in developing people, people
strategy and business culture. She was
previously Group Human Resources
Director at Compass Group PLC and BPB
plc and held senior human resources
roles at Enodis PLC, Blue Circle PLC (now
Lafarge SA) and Coats Viyella PLC.
External appointments (as at
31/12/2019):
− Non-Executive Director, Inchcape plc
where she is also chair
of the remuneration committee
− Non-Executive Director, Spirax-Sarco
Engineering plc where she is also chair
of the remuneration committee
Committee membership1 &
independence status key
Committee Chair
A Audit
N Nominations
R Remuneration
SE Safety & Environment
I Independent
IA Independent on appointment
1
Committee membership is shown as at
31 December 2019
National Express Group PLC Annual Report 2019 Board leadership and company purpose
Board activity in 2019
The key business and activities of the Board during the year were as follows:
Strategy and
operations
Financial
performance
− Conducted an in-depth review of, and approved, the Group’s 2020-2022 strategy and 2030 Vision
− Reviewed and approved material bid, contract and M&A proposals and assessed performance of completed
acquisitions vs. plan one year on
− Received presentations from each of the Group’s principal divisions on their performance vs. strategy and
budget and their priorities and initiatives
− Received reports on and discussed the Group’s technology strategy and approved technology investments
− Assessed the performance of the Group’s operational excellence programme and approved excellence initiatives
− Monitored competitor and market activity
− Monitored the economic, legislative and geopolitical landscape, particularly as regards the UK General
Election, Brexit, the Spanish long-haul concessions renewal process and ongoing increased price
competition and wage pressure in North America
− Approved the Company’s annual budget, business plan and KPIs, and monitored performance against them
− Reviewed and approved the Group’s full and half year results and interim trading updates
− Approved the payment of the interim dividend and recommended the final dividend
− Approved the Company’s Annual Report, including its fair, balanced and understandable nature
− Reviewed and confirmed the Group’s viability statement and going concern status
− Reviewed the Group’s capital, debt and other liquidity arrangements, and approved the Company’s debut
US private placement, the renewal of its £1.5 billion Euro Medium Term Note programme and the issue of
notes thereunder and a number of other debt facilities
− Approved the Group’s tax strategy and treasury policy
− Considered and approved material bids, acquisitions, contracts, expenditure and guarantees
Risk management,
safety and internal
control
− Reviewed and approved the Group’s risk appetite and reviewed the Group’s principal and emerging risks
and the processes for identifying, and actions to mitigate, the same
− Received reports from the Chair of the Safety & Environment Committee on its activities, including its
oversight of the implementation of the Group’s Global Safety Policies
− Received reports from the Chair of the Audit Committee on its activities and assessments
− Reviewed and approved the Group’s annual renewal of its insurances
− Reviewed and validated the effectiveness of the Group’s system of internal control
− Approved amendments to the Group’s delegated authorities framework
− Reviewed and approved revised whistleblowing policies
Leadership
and people
− Received recommendations from the Nominations Committee on the appointment of new Directors, the
re-election of Directors and other advice regarding the structure, size and composition of the Board, and
approved the Company’s Notice of Annual General Meeting
− Reviewed and actioned succession plans for the Board and senior management, having regard to skills,
experience and diversity
− Received reports from the Chair of the Remuneration Committee on its activities, recommendations
regarding remuneration strategy and decisions regarding Chairman, Executive Director and senior
management pay, and reviewed and approved Non-Executive Director fees
− Reviewed quarterly human capital reports, including updates on talent development programmes and
diversity enhancement initiatives
Engagement,
environment
and community
− Reviewed feedback from investors and analysts and the output of engagement with major shareholders and
other stakeholders
− Reviewed workforce engagement activities and outcomes, including the results of the Group’s staff surveys,
and received reports on the Non-Executive Directors’ workforce engagement activities
− Received a presentation from a major customer and discussed other customer, supplier and business
partner relationships
− Received and considered stakeholder reports from each of the Group’s principal divisions
− Received reports from the Chair of the Safety & Environment Committee on its environment activities,
including the adoption of new ‘climate science’ and other KPIs
− Reviewed the activities of, and approved a financial commitment to, the Company’s charitable and
community foundation
Legal and
governance
− Received regular updates on legal and regulatory matters
− Received briefings on and discussed corporate governance developments, including in relation to the 2018
Code and the Companies (Miscellaneous Reporting) Regulations 2018
− Reviewed the results of the internal Board and Committee effectiveness evaluation
− Reviewed and approved the matters reserved to the Board and its Committees’ terms of reference
− Approved the Group’s annual Modern Slavery and Human Trafficking Statement
Further details about the number of Board and Committee meetings held during 2019, the Directors’ attendance at those meetings and the Board’s and its
Committees’ processes are set out on pages 77 and 78 of this Corporate Governance Report.
65
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Board leadership and company purpose
Board decision-making
In making decisions, the Company’s Directors are cognisant of all their legal duties, including their duty under Section 172(1) of the
Companies Act 2006 to act in the way that is most likely to promote the success of the Company for the benefit of its members as a
whole and to have regard (among other matters) to the factors set out in Section 172(1)(a) to (f) of the Companies Act 2006. Examples of
some of the principal decisions taken by the Board during the year and an explanation of which factors the Directors had regard to when
reaching such decisions, including those set out in Section 172(1)(a) to (f) of the Companies Act 2006, are set out in the table below:
Key of factors considered
Financial impact
Reputation
Acting fairly between members
Long-term impact
Community & environment
Fostering business relationships
Employees
Directors’ consideration of factors in accordance with s.172(1)
− The contract would generate revenues of c.€1 billion over its 15-year term and
contribute to the delivery of the Company’s growth strategy by further expanding the
urban bus segment of the Company’s ALSA business
− The Company’s investment in a brand new urban bus fleet would improve both the
safety of the bus operation and reduce its impact on the environment through newer
vehicles emitting fewer harmful emissions
− The Company’s commitment under the contract to redesign the urban bus network
and introduce a new ticketing and payment system should enhance passengers’
experience of urban buses for the benefit of the Casablanca community
− The contract award would mean the assumption by the Group of the incumbent
operator’s drivers who, through becoming part of the Group and being subject to the
Group’s Global Safety Policies, would benefit from risk profiling and being provided
with further training or other actions to reduce risk profiles
− The acquisition would enable the Company to access a new UK market, creating potential
opportunity in the longer term for further growth in this market
− The acquisition would secure the continued provision in the West Midlands of these vital
community services
− The acquisition would secure the employment of c.600 of the employees who worked for
the seller companies in administration
− Improvement of the fleet to be carried out immediately post acquisition would improve the
safety and reliability of these vital services and reduce harm to the environment through
fewer emissions from the improved fleet
− The acquisition would result in all transferring employees being paid at the least the Real
Living Wage and having access to wider employment opportunities within the National Express
Group
− The acquisition would strengthen the Company’s UK bus business’ relationship with two
of its key stakeholders: Transport for West Midlands and Birmingham City Council, which
are invested in the continuation of these vital community services and keen to see the
improvements in the services that the National Express Group is able to offer
Acquisition of West Midlands Home to School and Ring and Ride
services business – having regard to other stakeholder interests
One of the principal reasons for the Company’s UK division’s acquisition of the
business of providing Home to School and Ring and Ride services out of the
administration of the previous provider was to assist Transport for West Midlands
– with whom the Company’s UK bus business has been working in alliance to
provide public transport services in the West Midlands over many years – in securing
the continued provision of these vital services. The Company also had regard to
Birmingham City Council’s interest in securing these services in accordance with its
statutory duty to do so.
Board decision
Successful bid for and
award to the Company’s
ALSA division of a
15-year contract to
operate urban bus
services in Casablanca,
Morocco
Acquisition by the
Company’s UK division
of the business of
providing Home to
School and Ring and
Ride services for
vulnerable children
and adults in the West
Midlands (out of the
administration of the
previous provider)
Casablanca contract – having
regard to other stakeholder
interests
Subsequent to the award of the
Casablanca urban bus contract to
the Company’s ALSA division, the
Casablanca transit authority requested
ALSA to start providing services under
a transitional contract in advance of
commencement of the formal contract
to secure the continued provision of
services to the public. The Company
had due regard to the authority’s
interest in acceding to such request.
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National Express Group PLC Annual Report 2019
Board decision
Investment by the
Company’s UK division
in a new hosted
datacentre
Investment by the
Company’s ALSA and
North America divisions
in new vehicles
Extension of the
Board’s workforce
engagement
programme
Adoption of new
environmental KPIs
Directors’ consideration of factors in accordance with s.172(1)
− The investment would enhance the functionality and capacity of the Company’s UK
division’s datacentre, enabling the UK division to secure customer data, provide access to
wider sales channels and speed up the development of customer applications, delivering
on the Group’s strategic aims of growing its business and enhancing technology
− While the project would involve upfront capital expenditure, over the longer term it would
have a positive NPV reducing operating expenditure in connection with the datacentre to
below current annual levels
− The investment would foster new relationships with IBM and Vodafone as the joint
suppliers working together to deliver the new hosted datacentre solution, building on the
existing relationships the Company has with each such supplier independently
− The investment would involve the transfer of certain of the Company’s UK division’s
employees to the suppliers, but their rights would be protected through such transfer
− The new datacentre solution would include enhanced cyber security measures, reducing
the likelihood of a successful cyber attack on the Company and the consequent
reputational risk
− Purchasing new vehicles, with long-term useful economic lives, would provide valuable
assets to the Company’s operating subsidiaries allowing them to continue to provide
their commercial services and/or perform their contracts over the long term
− Purchasing new vehicles would enable the Group to comply with its legal obligations
under its customer contracts to operate services with vehicles under a certain age or
meeting a certain specification, averting breach of contract and the risks arising from
it, including financial penalties, potential contract termination and potential loss of
operating licence
− Purchasing new vehicles would maintain the Group’s long-term and valued
relationships with its preferred vehicle suppliers who, due to volumes and value of
orders placed, supply reliable and quality products and after-sales services and offer
significant savings against list prices
− Purchasing new vehicles would assist the Company in achieving its environmental
targets as all new vehicles comply with mandated vehicle emissions standards and
over 50% of ALSA’s vehicle orders in the year were for hybrid vehicles
− Further engagement between the Board and the Group’s workforce would enable the
Board to hear the ‘voice of the workforce’ more clearly on the issues that matter to the
Board and to the workforce, helping the Board to better have regard to those issues
when making decisions
− Further engagement between the Board and the Group’s workforce would enhance
the Company’s reputation as a good employer which is keen to engage with and listen
to its workforce
− The adoption of ‘science-based’ KPIs, based on the science of how industry can
contribute to containing global warming to a temperature increase of no greater than
2°C above pre-industrialisation levels, would demonstrate the Group’s commitment to
playing its part in society’s goal of controlling climate change
− Further action against climate change by the Company would enhance its reputation
and credibility as an environmentally conscious company
UK datacentre outsourcing – having regard to employee interests
Employee interests were a key consideration in the outsourcing of the UK datacentre as it would involve the transfer of the
employment of certain of the Company’s UK division’s specialist IT employees to the new service provider under the Transfer of
Undertakings (Protection of Employment) Regulations 2006 (TUPE). In approving the outsourcing, the Board took into account the fact
that TUPE would operate to protect the fundamental employment rights of those employees through the transfer.
The Board also had regard to the wider benefits to the Group (and consequently all its retained employees) of the outsourcing which
would serve to enhance the security of customer data and thereby reduce the risk of a successful cyber attack. It would also help to grow
customer sales through enhanced functionality and capacity of the UK division’s datacentre and improve customer loyalty through new
customer applications, assisting growth of the UK business and, in turn, further opportunities for employees.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Board leadership and company purpose
Board decision-making continued
Board decision
Acquisition by the
Company’s North
America division of
WeDriveU, the premier
corporate shuttle
service provider in
Silicon Valley, USA
Refinancing of c.£650
million of maturing Euro
notes, Sterling bonds
and other debt facilities
through the Company’s
debut US private
placement of notes and
the issue of notes under
the Company’s EMTN
programme
Directors’ consideration of factors in accordance with s.172(1)
− The acquisition would deliver favourable financial returns against all three metrics
which the Group uses to assess acquisitions and contribute to the delivery of
the Company’s growth strategy, both immediately by the entry into the large and
fast-growing US corporate shuttle market and longer term through leveraging the
combination of WeDriveU’s brand and experience and the Group’s base and quality
of operations to grow the business across North America and beyond
− By providing an entry point into the US corporate shuttle market which, by its nature
provides drivers with more regular and less seasonal work than the school bus
business, the acquisition would create more employment opportunities for the Group’s
current employees working in school bus and, through growth of the Group’s corporate
shuttle segment, more employment opportunities generally
− The acquisition would enable the Company to foster new business relationships with
WeDriveU’s impressive customer base, which includes major blue-chip corporates
− The acquisition could potentially expose the Company to higher reputational risk
as a result of the regulatory and legal claims environment in California, USA, where
WeDriveU operates. This would be mitigated by WeDriveU’s high operating standards
as demonstrated through its safety record (as ascertained through due diligence), and
through the Group’s ability to enhance those standards further through implementation
of the Group’s Global Safety Policies
− The acquisition would enable the Company to serve the communities in which
WeDriveU operates by providing commuter shuttle bus services connecting people
with their work, and in a way that reduces the impact on the environment by reducing
reliance on personal cars
− The refinancing would secure the liquidity required for the Company to execute its
long-term strategic plans over the 7-12 year blended tenor of the new debt
− The new debt would be secured on very favourable financial terms, both as regards
coupon and having regard to delayed draw features (reducing double cost of carry)
− The refinancing would enable the Company to develop lending relationships with
certain debt investors that were new to the Group, and build on those with debt
investors that already lend to the Group
− The decision to secure debt rather than equity funding would help to ensure that
shareholders, including small shareholders who may not be able to take up their rights
in a rights issue, would benefit equally from the delivery of the Company’s strategy
funded by debt
Acquisition of WeDriveU –
having regard to employee
interests
The Board’s regard to the importance
of retaining and incentivising the
management team of WeDriveU
strongly influenced the structure of the
acquisition, with the Company initially
acquiring 60% of the equity, with put
and call options over the remaining
40% equity which continues to be
held by the management. The value
of these options depends on the
success of the WeDriveU business
over the next three years aligning the
Company’s and such management’s
interests in maximising that value.
To ensure that the Company’s Directors
have regard to all factors that are
relevant when taking decisions, the
papers prepared by the Executive
Directors, senior management and
the Company Secretary which seek
a decision from such Directors have
always drawn attention to the relevant
factors that should be taken into
account.
In the year under review, this practice
has been enhanced by the inclusion in
such papers of a dedicated appendix
which collates the factors referred to in
Section 172(1)(a) to (f) of the Companies
Act 2006.
The minutes of the Company’s Board
and Committee meetings are also
increasingly recording how relevant
factors, including those referred to in
Section 172(1)(a) to (f) of the Companies
Act 2006, have been taken into account,
allowing Directors to refer back and
remind themselves of the rationale for
decision-making as required, including
when called upon to take similar or
related decisions in future.
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National Express Group PLC Annual Report 2019
Board leadership and company purpose
Purpose, Values and culture
Purpose
During the year under review, the Board reviewed and articulated the Company’s Purpose to ensure that it reflects the Board’s current
view of the Company’s role in society. Such Purpose is best articulated when put into the context of the Company’s Vision and Belief, its
approach to achieving its Purpose and its view of how it will succeed in achieving its Purpose, as set out below:
Our Vision is:
to be the world’s premier mass transit operator with services offering leading safety, reliability
and environmental standards that customers trust and value
This Vision is rooted
in a Belief that:
driving modal shift from cars to high quality mass transit is fundamental to a safe, green and
prosperous future
Our Purpose
therefore is:
We will achieve
this through an
Approach:
We judge
Success as:
to help lead this modal shift by making mass transit an increasingly attractive option for all our customers
whether they are individuals, transport authorities, school boards or businesses. We seek to do this by
earning our customers’ loyalty by providing safe, reliable and great value multi-modal services on clean
and green vehicles
that seeks social and environmental leadership to ensure we are a good employer and partner, while
using technology to make our services increasingly easier to access, safe and efficient. It is this model
of progressive partnership that: delivers industry-leading services for our customers and communities;
secures rewarding careers for our people; and generates sustainable returns for our shareholders
being seen by 2030 as the world’s premier mass transit partner, with a reputation for industry-leading
safety, reliability and value for money across a portfolio of easily accessible multi-modal services. At the
forefront of technological innovation, National Express will lead the transition to zero emission vehicles,
maintain its safety leadership and pioneer new ways to access transport. Our staff will see us as an
employer of choice and customers will rely on us as an operator they can trust, with services that help
meet their needs while also having a positive impact on their communities. This will, in turn, drive strong,
consistent returns for our shareholders
Alignment of Purpose, Values and strategy
As explained on page 2, the Company’s existing
Values of: Safety, Excellence, Customers, People
and Community & Environment fully support the
achievement of its Purpose, just as they support the
three core pillars of the Company’s strategy: growth,
excellence and technology. This diagram illustrates
how the Company’s Purpose, Values and strategy
are aligned:
Community & Environment:
We serve the communities where we
operate by providing mobility services
which connect people to jobs, leisure,
friends and family, in a way that reduces
harm to the environment vs. other forms
of transport, earning our customers’
loyalty and delivering on
our growth strategic
priority
Excellence: The excellence of
our operations, including through
investment in technology, enhances
our customers’ experience and earns
their loyalty, delivering on each
of our growth, excellence and
technology and strategic
priorities
h n o l o g y |
c
e
Operational E
x
c
e | Gro w th | T
e
n
e
ll
Our Purpose: to help
lead a modal shift to make
mass transit an increasingly
attractive option for all our customers
whether they are individuals, transport
authorities, school boards or businesses.
We seek to do this by earning our
customers’ loyalty by providing safe,
reliable and great value multi-modal
services on clean and green
vehicles
l
o
o
g
c
n
lle
e
c
x
E
l
a
n
o
i
t
a
r
e
p
O
|
y
c
e
|
G
r
o
w
t
h
|
T
e
c
h
n
o
lo
g
y | Operatio
n
h
c
lence | Growth | Te
n
al E
xcel
Safety: The safety of our operations
gives our customers trust in our
services and earns their loyalty,
delivering on our excellence and
growth strategic priorities
People: We invest in our people
by respecting their rights, rewarding
them fairly and developing their talent,
creating a workforce who serve our
customers’ needs well and thereby
earn their loyalty, delivering on our
excellence and growth strategic
priorities
Customers: Our customers sustain
our business and its profitability and
cash flow, allowing us to reinvest
profit and cash to continually
expand and improve our services,
delivering on our growth
strategic priority
69
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Board leadership and company purpose
Purpose, Values and culture continued
Culture
Our Values make clear our priorities and
form the foundations of the Company’s
culture. One Value — Safety — is our
highest priority and underpins everything
we do. We, as a Board, believe, through
the activities we have undertaken to
monitor the Company’s culture, that it is
one of ‘safety first’ and that our people are
truly living by this and our other Values.
The Group’s Values Awards are the
strongest evidence of this. The Values
Awards are an annual event which
involves people from across the global
business nominating their colleagues for
demonstrating behaviours which exemplify
the Values. The exceptional number and
quality of nominations received each year
is a testament to how our people live by
our Values. The nominations process,
awards events and publication of awards
winners across the Group also serve to
remind people of our Values and what they
mean in practice.
While the Values Awards raise awareness
of and recognise and reward the
behaviours that demonstrate our Values,
there are multiple other input actions which
contribute to the creation of a healthy
corporate culture. These include:
− our corporate policies, reviewed and
approved by the Board, which set a clear
expectation, and mandate, for every
member of the workforce to perform
the Company’s business with integrity
and in accordance with applicable laws,
including its anti-bribery and corruption,
anti-slavery and human trafficking, data
protection and whistleblowing policies
and procedures;
− fair and transparent employee
policies and practices which ensure
that workers’ rights are respected in
accordance with applicable laws, their
contracts and recognised collective
bargaining agreements, together with a
number of programmes and initiatives
which support the health and wellbeing
of the workforce, develop its talent and
promote its diversity;
− supplier protocols and procedures which
seek to ensure that our key suppliers
operate their businesses and respect
their workers’ rights in the same way
that we do;
− the creation and implementation of Global
Safety Policies and Standard Operating
Procedures which seek to ensure the
safety, efficiency and consistency of our
operations across the world by ensuring
that every member of the workforce
knows what is expected of him or her
and understands the processes he or she
must follow to meet those expectations;
− the application and monthly assessment
by divisional executive teams and
the Group Executive Committee of
safety and operational KPIs to enable
management to continually monitor
and drive improvements in the safety,
reliability and efficiency of our services;
− the work of divisional and Group support
functions which enforce the Group’s
policies, procedures and standards at
every level and location of the business
around the world, including dedicated
safety and operational excellence teams,
finance, procurement, HR and legal
functions both at Group level and within
every division and the Group internal
audit function; and
− the use of visual reminders at the
Group’s sites across the world of the
Company’s Values, whether in the form
of posters on noticeboards, stickers on
vehicles or screensavers on computers,
which serve to constantly remind people
about the Values.
In addition to the Group’s Values Awards,
we, as a Board, use a number of other
methods to monitor the Company’s culture
and assess whether our people are living
by our Values. These include
− reviews, in the Boardroom, of the
outcomes of staff surveys, customer
satisfaction scores and whistleblowing
reports. Those can give insights into
what the Company does well and what
could be improved, as well as any
particular areas of concern;
− the Board’s collective and Directors’
individual visits to the Company’s
sites and operations (further details
of which are set out on pages 71 and
72). During such visits Directors have
the opportunity to talk to members of
the workforce, customers and other
business partners and get a real view
of how people, both internally and
externally, feel about working for and
with the Company;
− the new workforce engagement events
(discussed further on pages 72 and 73)
which give Non-Executive Directors
more one-on-one time with members
of the workforce to discuss the issues
which matter most to them, which can
reveal the true culture of the Company;
and
− Directors’ attendance at various
Company events, such as:
− divisional management conferences,
which the Executive Directors attend
to hear about and help direct the
priorities of each division to ensure
they are aligned with the Company’s
Purpose, Values and strategy;
− the NX Network annual conference,
attended by both Executive and
Non-Executive Directors, which
brings together management trainees
and high potential individuals from
across the Group and allows the
Directors to hear from them about
the opportunities they have and
challenges they face; and
− the NX Group Values Awards
presentation dinner hosted by the
Group Chief Executive and attended
by other Executive and Non-Executive
Directors giving them the opportunity
to meet the nominees and hear about
the work or actions they have been
nominated for and their wider views
about the Company.
Through all these monitoring activities,
the Board is satisfied that the Company’s
culture is aligned with its Values.
Where staff surveys, workforce
engagement events or other interactions
between Directors and members of the
workforce or other stakeholders have
revealed matters that can be improved
upon or have flagged concerns, the Board
has discussed these and is content that
management is putting action plans in
place that are designed to drive those
improvements or address those concerns.
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National Express Group PLC Annual Report 2019 Board leadership and company purpose
Stakeholder relations
The Board recognises the value of engaging directly with
members of the workforce to ensure an understanding of their
views and, in turn, enhance the quality of its decision-making.
As described in the Company’s previous
Annual Reports, the Directors have for a
number years participated in a programme
of engagement with the workforce
through their collective visits as a Board,
and individual visits by Non-Executive
Directors, to the Company’s operations.
The programme gives Directors the
opportunity to meet with and talk to a wide
variety of members of the workforce, from
drivers and vehicle technicians to their
line managers and those working in the
functions which support them. The Non-
Executive Directors in particular have found
these activities invaluable in enhancing
their understanding of the Company’s
operations, safety programmes, excellence
initiatives and successes and challenges
through being able to see and hear about
them directly. Accordingly, the Board has
continued with this programme in the year
under review.
Further engagement between Board
members and the workforce has taken
place during the year when the Chairs
of the Audit and Safety & Environment
Committees undertook their annual internal
control audit and safety audit visits (as
discussed in the Audit Committee and
Safety & Environment Committee Reports
on pages 89 and 98 respectively). The two
newly appointed Non-Executive Directors,
Ana de Pro Gonzalo and Karen Geary, also
visited some of the UK division’s operations
as part of their induction (further details of
which are set out on pages 85 and 86).
Board visit to Madrid, Spain
In June 2019, the Board travelled to Spain
to visit the ALSA division’s operational site
in Madrid, where the Directors engaged
in discussions with members of the ALSA
workforce about operational initiatives
designed to enhance the customer
experience and observed a demonstration
of the technology used to exercise real-time
management of the Spanish coach network.
The day’s activities were followed
by a dinner, co-hosted by the Deputy
Chairman of the Board and ALSA’s Chief
Executive, which various members
of ALSA’s workforce, as well as other
ALSA stakeholders, attended, giving the
Directors opportunity to have discussions
with such stakeholders.
Board visit to California, USA
In September 2019, the Board travelled
to California, USA, to undertake a full
programme of events, starting on the
first day with a series of small-group
sessions during which members of
the North America division’s workforce
presented the division’s strategic
priorities and discussed with the
Board how they were being delivered.
The day concluded with an informal
dinner with the same members of the
workforce during which the discussions
about those matters and many
more continued.
The next day the Board met with
one of the Company’s major corporate
shuttle customers (as discussed
further on page 75), following which
it proceeded to visit three of the
North America division’s school bus
and transit customer service centres
based in and around the Bay Area to
see the progress being made by them
against the division’s strategic priorities
and the Group’s safety standards and
operational excellence programmes.
While in the Bay Area, the Board also
visited the headquarters of WeDriveU,
the corporate shuttle provider acquired
by the Company earlier in the year.
During this visit the Directors met with
and talked to a number of WeDriveU’s
employees about a variety of topics,
including how they service their
customers’ needs and how they engage
with their own workforce. The Board
was also able to see a demonstration of
a new safety technology WeDriveU had
invested in.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Board leadership and company purpose
Stakeholder relations continued
Chairman’s visits to Bahrain
and Coventry & Aston, UK
Sir John Armitt:
− visited the Kingdom of Bahrain
to speak to the workforce of the
Company’s Bahrain joint venture
about the progressive work they
have been doing, with the support
of the Ministry of Transport, to
redesign the Bahrain bus network
and to continue to embed the
Group’s Global Safety Policies; and
− visited the Company’s Coventry
and Aston depots to see the
UK bus and National Express
Accessible Transport operations
(NEAT) at work and speak to
some of the workforce whose
employment had recently
transferred to the Group.
As he reported back to the Board
following these visits:
I could see the
impact of the Global
Safety Policies and I was
particularly impressed
by the fantastic spirit
and attitude of the
NEAT drivers and the
professionalism that
the UK division has
brought to this business
since its acquisition earlier
in the year”
Deputy Chairman’s visits to
Morocco and Switzerland
Jorge Cosmen:
− visited Rabat in Morocco, where he
observed first-hand the intensive
work of the local team to mobilise the
significant new contract won by the
Company last year; and
− visited some of the urban bus and
ski transfer shuttle operations in
Switzerland that were acquired by
ALSA over the last few years.
As he reported back to the Board
following these trips:
Members of the
workforce now have
a real appreciation that
the Company is in growth
mode. I was pleased
to see how motivated
the teams are to deliver
our new contracts in
Morocco, and to serve
both our transport
authority clients and the
people of Morocco well”
In view of the success of this collective
Board and individual Director programme
of engagement to date and having regard
to the Provisions of the 2018 Code,
the Board determined to continue its
existing engagement programme but also
supplement it with additional ‘workforce
engagement events’. While the Board,
supported by the Company Secretary
and divisional HR teams, is still developing
the precise shape of these events,
they currently take the form of informal
roundtable discussions between one
or two Non-Executive Directors and 10
to 20 members of the workforce drawn
from a variety of roles, during which
either topics that are pertinent to the
Board’s discussions and/or topics that are
important to the workforce are discussed.
The Non-Executive Directors attending
the events feedback their observations
to other Directors at the next following
Board meeting, which prompts further
discussions. Since the programme
commenced, three of these events have
taken place, one in each of the UK, the
USA and Spain, details of which are set
out on the next page.
The Board’s approach to workforce
engagement is a variant of the 2018 Code
recommendation of having a designated
Non-Executive Director responsible for
engaging with the workforce.
It also enables Non-Executive Directors
who are best placed, in terms of their
own background and skills (including
language skills) to participate in workforce
engagement events.
The Board considers its approach more
effective than having a single designated
Non-Executive Director because:
− the sheer size of the Group’s workforce
(with over 51,000 employees, plus
many other workers);
− the geographical spread of the Group’s
operations (across eight countries over
four continents); and
− the cultural variations within the
workforce across the Group (including
as regards languages spoken),
mean it is better to share this
responsibility, and privilege, among
all the Non-Executive Directors.
This way, more Non-Executive Directors
can also hear the views of the workforce
for themselves and bring their different
observations back into the Boardroom.
The Board also considers its approach
more effective than having a Director
appointed from the workforce or a formal
workforce advisory panel as there would
be less free flow of ideas and information in
the more formal settings of Board meetings
or panel meetings than there can be at
informal roundtable discussions (and as
there already is during Board and Director
visits to operations).
In view of the breadth of the Company’s
geography and number of different types
of worker that make up its workforce,
there would also be inherent difficulties
in ensuring that any individual worker
Director or panel of workers would be truly
representative of all the Group’s workers
in such a way as to ensure the Board can
really hear the voice of the workforce, in the
way that it can via the Board’s approach.
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National Express Group PLC Annual Report 2019 US workforce engagement event
The Chairman and Jane Kingston, a Non-Executive Director,
attended a roundtable discussion with a group of workers from
the Concord, California, school bus customer service centre. The
group included drivers, vehicle technicians and supervisors.
This event started from the premise of a more open agenda, with
the workforce members attending invited to share their views
generally on what they considered the Company did well and
what it could do better. It also gave the Directors the opportunity
to ask the workforce about the various safety and excellence
programmes the Group had implemented over the last few years
and the workforce the opportunity to ask Directors about the
Company’s strategy and direction.
When reporting back to the Board on the event, Ms Kingston
observed that “the members of the workforce participated in
the event in a very open way, sharing their views about both
positives and negatives”. She relayed some examples of the
views shared, noting that drivers had praised the training they
had received saying how well it had served them and that vehicle
technicians had raised concerns about lack of spare parts but
confirmed improvements were now being made. One of the
Group’s major new excellence programmes was also discussed,
and ideas were shared about how to communicate the rationale
for the programme better, which prompted a Board discussion
when the event was reported back to the Board. As Ms Kingston
also observed: “It was lovely to hear from the school bus drivers
that the best part of their job was looking after the children”.
As Mr Cosmen explained at the next following Board meeting:
“I was pleased to see how deeply the commitment to safety is
rooted in the business and that our workforce see safety, as we
do as a Board, as a key way in which we differentiate ourselves
from other transport providers. I was interested to learn about
the different ways we are communicating with the workforce
and how technology is making a difference even with this. I was
also impressed by how aware our people are of the Company’s
strategy and the risks and opportunities we face as a business”.
Mr Cosmen also recommended these events to his fellow Non-
Executive Directors, noting that “lots can be learned from them”.
UK workforce engagement event
Mike McKeon, a Non-Executive Director, attended the
Company’s UK division headquarters in Birmingham where,
after touring the coach station and customer service centre
and receiving a presentation from the IT and digital teams, he
hosted a roundtable discussion with a group of workers made
up of drivers, vehicle technicians, coach station staff, bus
revenue inspectors, and representatives of the UK customer
service and UK IT and digital teams.
In view of the Group’s strategic priorities of growth, technology
and excellence, which are often discussed in the Boardroom,
the event was given a notional theme of ‘putting the customer
first’ and discussions centred on how the UK division was
putting the customer first in order to increase patronage and
grow the UK bus and coach businesses through technology
and excellence. Topics discussed included the new contactless
ticketing technology on buses, the ‘NX Way’ philosophy of how
contact centre staff are trained to provide customer service
and the new IT applications being developed to improve the
customer experience.
On the day, the discussions went wider to cover topics that the
members of the workforce were keen to discuss, including how
bodycams and DriveCam are making revenue inspectors and
drivers feel safer at work and how the outsourcing of the UK
datacentre is impacting people and the way they work. As Mr
McKeon observed when he discussed the event with the Board:
“While these latter topics were not ‘on point’, it demonstrates
the success of the event that people are willing to talk openly
about subjects that matter to them, which can inform the Board’s
thinking and decision-making on these or similar matters”.
Spanish workforce engagement event
Jorge Cosmen, the Deputy Chairman, hosted a roundtable
discussion in Madrid with approximately 20 members of ALSA’s
Spanish workforce, including drivers, service technicians, depot
workers and sales agents who were drawn from multiple regions
of Spain, from the North West to the Mediterranean. The event
focused on seeking to answer the question: ‘are we living by our
Values?’, with a particular focus on Customers and Safety Values.
Members of the workforce shared their views on what ALSA
does well with its customers and what can be improved,
whether ALSA is considered a safe company by its customers
and which features of ALSA’s services, in terms of both
safety and comfort, are most valued by its customers. Recent
technological developments were also discussed, such as the
MiALSA app which ALSA uses as a means to communicate
with its employees. Members of the workforce raised questions
about matters of more individual concern to them and also
asked Mr Cosmen about the Company’s strategy, including
in regard to the Spanish concessions renewal process and
international expansion.
73
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Board leadership and company purpose
Stakeholder relations continued
The Board is committed
to maintaining a two-way
dialogue with its investors. The
purpose of the dialogue is to
keep investors informed about
the Company’s strategy, its
performance against strategy,
its principal and emerging
risks and developments
which impact, positively
and negatively, on strategy
or performance. It is also to
understand investors’ views on
such matters as well as their
investment parameters and
priorities.
The Chairman, supported by the Senior
Independent Director and the Executive
Directors, has overall responsibility for
ensuring this communication is effective.
The Executive Directors, with the support
of the investor relations team and
operational management, have undertaken a
comprehensive investor relations programme
during the year, aligned to the Company’s
financial reporting calendar and other events,
by holding a number of meetings with
existing and prospective equity investors and
research analysts and giving presentations
to investors and analysts following the full
and half year results. Details of this investor
relations programme are set out in the
box on this page.
A number of analysts published equity
research notes covering the Company during
the year but, as anticipated following the
introduction of MiFID II, analyst coverage
has again reduced in the year, with only
seven analysts currently providing coverage.
Details of the firms that currently follow the
Company appear in the Investors section
of the Company’s website. As a result, the
Company is engaging more frequently with
investment banks’ sales teams and attending
more investor conferences to ensure that
investors continue to receive timely updates
and information on the Group’s strategy
and financial and operational performance.
In addition, the Company has hosted a
few non-deal roadshows in the past year,
including meeting with investors in the USA
and France.
As the Board was active in the year
in implementing its Board succession
plans, as described in the Nominations
Committee Report on pages 79 and 80,
certain of the Non-Executive Directors also
met directly with some of the Company’s
principal shareholders to hear their views
2019 investor relations programme:
− Closed period
− 2018 full year results announcement and presentation to investors and analysts (London)
JAN
FEB
MAR
− Chairman meeting with Cosmen family (largest shareholder)
− Investor roadshow in respect of 2018 full year results (London and Edinburgh)
APR
MAY
− Non-deal investor roadshow (London)
− Meeting with HSBC sales desk
− Other investor meetings
− Trading Update and conference call with analysts and investors
− AGM (Birmingham)
− Non-deal US investor roadshow (Boston, Minneapolis and Des Moines)
− Non-deal investor roadshow (London)
JUN
− Investor meetings at investor conference (London)
− Meeting with Berenberg sales desk
JUL
− 2019 half year results announcement and presentation to analysts and investors
− Other investor meetings
− Other investor meetings
− Investor roadshow in respect of half year results (London)
− Investor meetings at investor conferences
− Meeting with sales desks at HSBC and Jefferies
− Other investor meetings
− Meeting with Exane BNP Paribas sales desk
− Q3 Trading Update and conference call with analysts and investors
− Investor meetings at investor conference (Paris)
− £414 million private placement with roadshow for debt investors in the US and UK
− Other investor meetings
− Meeting with sales desks at Royal Bank of Canada and Jefferies
− Investor meetings at investor conferences
− £250 million bond placing with roadshow for debt investors in the UK
− Other investor meetings
− Non-deal investor roadshow (London)
AUG
SEP
OCT
NOV
DEC
on such plans. The Chairman and Senior
Independent Director, as well as other Non-
Executive Directors, have made themselves
available to equity investors to discuss other
matters as required.
The whole Board is kept fully informed of
the views of shareholders via regular reports
from the Executive Directors on their investor
relations activities and via feedback from
the Chairman, Senior Independent Director
and other Non-Executive Directors on their
engagement. The Company’s brokers and
investor relations advisers also provide
regular confidential feedback on investor
views, perceptions and opinions.
The AGM provides all shareholders with the
opportunity to meet with and ask questions
of Directors regarding this Annual Report and
the matters before the meeting.
Details of the Company’s 2020 AGM can be
found in the 2020 Notice of AGM. The Board
actively encourages shareholders to
attend this meeting.
The Group’s treasury team maintains regular
dialogue with the Group’s key relationship
banks and other potential lenders to discuss
the Group’s debt needs and debt service.
The Group Finance Director, supported
by the Group Treasurer, has also met debt
investors in the UK and USA during the year
to discuss various topics such as the full
and half year results and credit rating
movements, and to issue notes in both
the US private placement market and
the Sterling public bond market.
Investors can find more information
about the Company in the Investors
section of the Company’s website,
www.nationalexpressgroup.com/investors.
74
National Express Group PLC Annual Report 2019 Board leadership and company purpose
Stakeholder relations continued
The Board also recognises
the value of understanding
stakeholders’ views to inform
the Board’s decision-making
by providing greater context
for and understanding of the
implications of its decisions on
relationships with others.
Engagement with the Company’s other
stakeholders, such as government ministry
and local council customers, transit authority
and school board customers, passengers
and suppliers, is typically undertaken
by the Company’s divisions. They use a
variety of well established methods, such
as governance meetings and customer
satisfaction surveys, to ensure that they
understand such stakeholders’ views.
Further details of the Company’s key
stakeholders, their expectations of us and
our priorities in acting as their trusted partner
are set out on page 2 of the Strategic Report.
In addition, the Executive Directors have
regular contact with key stakeholders as
required to meet the Company’s needs.
For example the Group Chief Executive
will, together with his divisional managers,
meet with key customers and suppliers. The
Group Finance Director, supported by his
treasury team, maintains close relationships
with the Company’s debt providers (as
noted on page 74). The Chairman and the
Deputy Chairman will each also meet with
passenger transport industry stakeholders
to discuss either transport matters generally
or the Company’s business specifically, the
relevant outputs of which are relayed to the
wider Board.
Non-Executive Directors have typically
obtained their understanding of stakeholder
views through the regular reports made
to the Board by the Executive and other
Directors noted above and through their
regular discussions with senior management,
including during visits to operations.
During the year under review, the Board
has taken additional steps to further that
understanding. A new item on the Board’s
agenda in 2019 was the presentation to the
Board by each of the Company’s principal
divisions of a stakeholder report, explaining
who the division’s key stakeholders are, how
the division engages with them and what
impact stakeholder views have had on the
division’s business. Some examples of how
stakeholder views have directly impacted
on the Board’s key decisions are set out on
pages 66 to 68.
In addition, the Non-Executive Directors
and, on occasion, the whole Board have had
the opportunity during the year to engage
directly with some of the Company’s key
stakeholders, such as during its visit to
Madrid in June when the Directors met with
a number of ALSA’s key stakeholders at the
dinner co-hosted by the Deputy Chairman,
and during its visit to California in September,
when the whole Board met with Google, one
of the Company’s most important corporate
shuttle customers at Google’s offices in
Silicon Valley.
During the meeting, Google’s Transportation
Program Manager explained to the Board
Google’s philosophy for the provision of
shuttle buses to its employees, the benefits
such provision brings and some of the
challenges that still need to be resolved, and
he explained Google’s approach to procuring
and managing shuttle services. Google’s
Transportation Program Manager was also
able to offer some insights into what the
future might hold for Google’s business and
what that means for its corporate shuttle
needs. The meeting was hugely valuable to
the Board in enriching its understanding of
the corporate shuttle market, which is a fast-
growing business segment for the Company.
75
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Division of responsibilities
Roles and responsibilities
Roles and responsibilities
The Board has agreed a clear division of responsibilities between the Chairman and the Group Chief Executive. Other Directors’ and the
Company Secretary’s roles are also clearly defined to assist in enhancing the effectiveness of the Board. A summary is set out below:
Chairman
Sir John Armitt CBE¹
− Provides overall leadership and ensures effectiveness of the Board
− Sets the agenda, character and tone of Board meetings and discussions
− Maintains an effective working relationship with the Group Chief Executive
− Provides the Board with an understanding of shareholders’ objectives and other stakeholders’ views
− Leads the annual performance evaluation of the Board, its Committees and the Directors and
ensures that each Non-Executive Director makes an effective contribution
Deputy Chairman
Jorge Cosmen²
− Maintains a close dialogue with the Chairman and the Group Chief Executive
− Supports and deputises for the Chairman as required
− Assists the Group Chief Executive in strategic delivery and oversight of operational activities
as requested
Group Chief Executive
Dean Finch3
− Develops the Group’s strategy for consideration and approval by the Board and provides
effective leadership of the executive team in its delivery of strategy
− Develops the Group’s business model and manages the Group’s operations
− Oversees the development and implementation by the executive team of the Group’s
corporate, safety and environmental policies and standards
− Establishes and services relationships with key stakeholders
− Reinforces the Group’s Values and sets expected workforce behaviours
− Communicates (with the Group Finance Director) the Group’s financial performance and
strategic progress to investors and analysts
− Ensures the Board is kept fully appraised of the Group’s operational and safety performance
and of risks and opportunities that may affect or contribute to the delivery of strategy
Group Finance Director
Chris Davies3
− Responsible for the financial stewardship of the Group’s resources through appropriate
accounting, financial and other internal controls
− Directs and manages the Group’s finance, tax, treasury, IT, risk management, insurance and
internal audit functions
− Communicates (with the Group Chief Executive) the Group’s financial performance and
strategic progress to investors and analysts and manages investor relations
− Chairs the Group’s Diversity & Inclusion Council
Group Business
Development Director
Matt Ashley3,4
− Responsible for the Group’s business development, through the identification and
development of major strategic projects, including M&A, major bids and contract
opportunities, major asset use initiatives and operational and supply chain efficiency
programmes
− Works with the Group’s Commercial Director, divisional management and other Group function
heads to implement such strategic projects
Senior Independent
Non-Executive Director
Lee Sander
− Acts as sounding board for the Chairman and a trusted intermediary for other Directors
− Available to investors to discuss any concerns that cannot be resolved through the normal
Chairman or Executive Director channels
− Leads the Board in the annual performance evaluation of the Chairman and in developing the
Independent Non-
Executive Directors
Mike McKeon, Jane
Kingston5, Chris Muntwyler,
Joaquín Ayuso5, Dr Ashley
Steel, Matthew Crummack,
Ana de Pro Gonzalo6 and
Karen Geary6
Company Secretary
Jennifer Myram
long-term plans for Chairman succession
− Meets with the Non-Executive Directors without the Chairman present at least annually and
more often as required to discuss Board matters
− Monitor and scrutinise the Group’s performance against its strategic goals and financial plans
− Provide an objective perspective on the Board’s deliberations and decision-making, drawing
on their collective broad experience and individual expertise and insights
− Monitor and assess the Group’s culture, use appropriate and effective means to engage with
the workforce and acquire an understanding of other stakeholders’ views
− Assess the effectiveness of and support and constructively challenge the Executive Directors
− Play a lead role in the functioning of the Board’s Committees
− Provides advice and support to the Board, its Committees, the Chairman and other Directors
individually as required, primarily in relation to corporate governance matters, and training and
development needs
− Responsible, with the Chairman, for setting the agenda for Board and Committee meetings
and for high quality and timely information and communication between the Board and its
Committees, and between the Directors and senior management as required
− Ensures that Board and Committee procedures are complied with
Independent on appointment
¹
² Non-independent Non-Executive Director
³ Executive Director
4 Completed his two-year assignment as President and CEO, North America and
was appointed as Group Business Development Director on 31 August 2019
5 Stepped down from the Board on 31 December 2019
6 Appointed to the Board on 1 October 2019
76
National Express Group PLC Annual Report 2019 Division of responsibilities
Supplementary information
Board and Committee meeting attendance
The activities of the Board and its Committees are carried out in scheduled meetings over one or two-day periods during the year.
Additional meetings are held and other arrangements made to consider and decide ad hoc matters outside of scheduled meetings.
The table below sets out the Board and Committee membership and attendance by members at meetings held in 2019. All Directors
attended all meetings, other than as explained in the notes to the table. Those absences should not be viewed in any way as detracting
from the clear commitment of these Directors to their roles. All Directors also attended the AGM on 9 May 2019.
Board
Nominations
Audit
Safety &
Environment
Remuneration
Attendance at meetings
Total meetings in 2019
Executive Directors
Dean Finch, Group Chief Executive
Chris Davies, Group Finance Director
Matt Ashley, Group Business Development Director1
Chairman and Non-Executive Directors
Sir John Armitt CBE
*
Jorge Cosmen
Lee Sander2
Mike McKeon
Chris Muntwyler3
Dr Ashley Steel
Joaquín Ayuso
Jane Kingston
Matthew Crummack
Ana de Pro Gonzalo4
Karen Geary4
–
–
–
*
–
–
–
–
–
–
–
–
–
–
*
–
–
–
–
–
–
–
*
–
–
–
–
–
–
–
*
–
*
–
* Board Chairman or Committee Chair. During 2019, Jane Kingston served as Remuneration Committee Chair from 1 January 2019 until 9 May 2019 and
Dr Ashley Steel served as Remuneration Committee Chair from 9 May 2019 until 31 December 2019
1 Matt Ashley could not attend the November 2019 Board meeting due to a last-minute conflict with the Company’s other business
2 Lee Sander was unable to attend the February 2019 Remuneration Committee meeting due to his inbound flight to the UK being delayed
3 Chris Muntwyler was unable to attend the July 2019 Board, Nominations and Audit Committee meetings due to a prior other commitment that was notified to
and approved by the Chairman at the beginning of the year
4 Ana de Pro Gonzalo and Karen Geary both joined the Board and the Committees of which they were members during the year on 1 October 2019 and attended
all meetings held in the year after their appointments
Independence
The Board reviews the independence of its
Non-Executive Directors as part of the annual
Board and Director evaluation process. The
Nominations Committee also considers
Non-Executive Director independence on an
ongoing basis as part of its consideration of
the composition of the Board.
Sir John Armitt was considered
independent on his appointment as
Chairman. On the advice of the Nominations
Committee, the Board considers all the
current Non-Executive Directors to be
independent, except for Jorge Cosmen
for the reasons explained on page 83.
Notwithstanding that they will reach their
nine-year tenure on the Board during 2020,
the Board also considers that both Lee
Sander and Chris Muntwyler will continue
to be independent throughout 2020 for the
reasons explained on page 83. In addition,
notwithstanding that Dr Ashley Steel and
Matthew Crummack are both directors of
GoCo Group plc, and this cross-directorship
could be seen to impair their independence,
the Board does not consider it does on the
basis that both demonstrate independence of
thought and offer challenge, including of each
other’s views.
Conflicts of interest
The Board operates a policy to identify and
manage situations declared by Directors (in
accordance with their legal duty to do so)
in which they or their connected persons
have, or may have, an actual or potential
conflict of interest with the Company. The
Board considers such situations as they
arise and decides whether to authorise any
conflict based on the overriding principle
that a Director must at all times be able
to consider and exercise independent
judgement to promote the success of the
Company. The policy has been in place and
operated effectively throughout the year.
A register of Directors’ actual or potential
conflicts, together with conflict authorisations
previously given by the Board, is maintained
by the Company Secretary.
No Director conflict situation currently exists
save in respect of Jorge Cosmen (the Deputy
Chairman) as he is a member of the Cosmen
family which is a substantial shareholder
in the Company and has close links with
the Group’s business (see page 83). This
conflict has been authorised by the Board
on the basis that Mr Cosmen’s knowledge
of the international transport market and his
entrepreneurial approach bring significant
value into the Boardroom.
Mr Sander’s position as President,
Americas, Bombardier Transportation
is kept under review by the Board as a
situation which could give rise to a conflict
of interest as a result of the lease by the
Company’s German Rail subsidiary of
Bombardier trains for its RME concession.
However, as all decisions relating to
the Bombardier trains are taken by the
Company’s German Rail subsidiary
(of which Mr Sander is not a director), the
cost of the lease is paid for through the
RME concession subsidy and other costs
charged by Bombardier to the Company’s
German Rail subsidiary in 2019 were
less than 0.03% of the Group’s annual
revenue, no actual or potential conflict of
77
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Division of responsibilities
Supplementary information continued
Board and Committee processes
The Board has a formal schedule of matters
reserved for its approval, which include:
strategy; risk appetite and review of Group-
wide principal and emerging risks; major
M&A, contracts and bids; share capital,
debt financing and other liquidity matters;
financial results and budgets; key policies;
Board and Committee membership; and
governance. Other matters, responsibilities
and authorities have been delegated by the
Board to its standing Committees, comprising
its Nominations, Audit, Safety & Environment,
Remuneration and Executive Committees.
Any matters outside of these fall within the
responsibility and authority of the Group
Chief Executive and/or the Group Finance
Director. The schedule of matters reserved
to the Board and the terms of reference of
each Committee, which are reviewed and
approved by the Board annually, can be
found on the Company’s website at www.
nationalexpressgroup.com.
The Chairman and the Company Secretary
are responsible, in consultation with the
Group Chief Executive and Chairs of the
Committees, for maintaining a scheduled
12-month programme of business for the
Board and its Committees, with flexibility
for additional business to be discussed
as required. The programme ensures that
all necessary matters are covered and
appropriate time is given for discussion and, if
thought fit, approval of relevant business.
At each scheduled Board meeting, the Board
rigorously reviews updates from the Executive
Directors, the Group General Counsel and
Company Secretary on Group and divisional
safety, operating and financial performance,
investor relations, legal compliance and
corporate governance. Other regular Board
agenda items include strategic proposals
(including those relating to M&A, major
contract bids and capital allocation), risk
management (including reviews of risk
appetite and Group-level risks), tax and
treasury updates, human capital updates
(including on employee relations, talent
development and diversity promotion) and
workforce and stakeholder engagement.
Committee Chairs also provide summaries
of the main decisions and recommendations
arising from Committee meetings to ensure
non-members are kept up to date with the
work undertaken by each Committee. Senior
management and external advisers regularly
attend both Board and Committee meetings,
where detailed discussions on specific
matters on which their input or advice is
needed take place. The Board also seeks
to hear external viewpoints inside and
outside the Boardroom, including from
customers, suppliers and experts in areas
relevant to the Company’s strategy.
In advance of each Board and Committee
meeting, Directors receive via a secure web
portal high quality papers, prepared by the
Executive Directors, senior management,
the Company Secretary and/or external
advisers where appropriate, on the agenda
items to be discussed. The secure web
portal also gives Directors immediate access
to a range of other resources, including
previous meeting papers, minutes, financial
reports, business presentations, investor
reports, Company policies and governance
guidelines, and details of Board and
Committee procedures.
If a Director is unable to attend a meeting
due to illness or exceptional circumstances,
they will still receive all supporting papers
in advance of the meeting and are directed
to discuss with, and provide input, opinion
and voting instructions to, the Chairman or
relevant Committee Chair on the business to
be considered at that meeting. The Company
Secretary provides direct feedback to the
absent Director on the key decisions taken
at the meeting.
The Board has access to the Company
Secretary for support and advice as required,
and the Company operates a policy which
allows Directors to obtain, at the Company’s
expense, independent professional advice
where required to enable them to fulfil their
duties effectively.
In addition to Board and Committee
meetings, the Non-Executive Directors
hold private meetings without the Executive
Directors present, including to discuss
Executive Director performance. There
are also opportunities during the year for
Directors to have informal discussions
outside the Boardroom, either between
themselves or with senior management
or external advisers. In addition and
as explained on pages 71 to 75, Non-
Executive Directors also participate in a
number of workforce and other stakeholder
engagement activities during the year.
interest currently exists or is expected to
arise. Should a decision need to be taken
by the Company in connection with the
Bombardier trains, Mr Sander would not
participate in that decision.
Commitment and external
appointments
Directors’ commitment is reviewed as
part of the Board and Director evaluation
process and the Nominations Committee
also keeps it under regular review. All
Directors are expected to commit sufficient
time to the Board and the Company as
is necessary to carry out their duties as a
director. On the advice of the Nominations
Committee, the Board considers that,
notwithstanding external appointments
that some of them may have, all the
Directors are able to devote sufficient time
to the Company. Information on Directors’
external appointments can be found on
pages 62 to 64.
If a Non-Executive Director wishes to
take on an additional external appointment,
they are required to seek permission
from the Board. The Board will take into
consideration the time commitment
required by the Non-Executive Director in
their role as a Board Director, Committee
Chair or Committee member in giving any
such permission. Prior to the appointment
of the two new Non-Executive Directors,
their other commitments were carefully
considered by the Nominations Committee
as part of the appointment process. Ms
de Pro Gonzalo’s executive position at
Amadeus IT Group, S.A. was considered
an attribute as it confers on her recent and
relevant experience in the areas in which
the Board was looking to strengthen itself.
Ms Geary’s subsequent appointment as
a non-executive director and chair of the
remuneration committee at ASOS plc, for
which she obtained prior approval from the
Board, was also considered an attribute
in reinforcing her non-executive director
experience. These other roles were also
not considered to unduly detract from their
commitments to the Company.
Executive Directors are permitted
to hold one external FTSE 100 non-
executive directorship, or other significant
appointment, with a non-competing
company provided they first obtain Board
approval to do so. No such external
appointments are currently held by any
of the Executive Directors.
A register of Directors’ external
appointments is maintained by the
Company Secretary.
78
National Express Group PLC Annual Report 2019 Composition, succession and evaluation
Nominations Committee Report
The Nominations Committee’s ambition is to ensure
we have the best people governing our business today and
excellent and diverse talent in the pipeline to potentially
govern the business tomorrow”
Sir John Armitt CBE
Committee Chair
Primary role
To monitor the balance of skills, knowledge,
experience, independence and diversity of
the Board and its Committees. To ensure
that appropriate procedures are in place
for the nomination, training and evaluation
of Directors. To develop and facilitate
the implementation of succession
plans for the Board, its Committees
and senior management.
initiatives and their effectiveness
− Lead a rigorous and transparent process
for identifying, interviewing and selecting
candidates to serve as Directors on the
Board and its Committees and make
recommendations to the Board for
their appointment
− Assist the Chairman with the annual
evaluation of the effectiveness of the
Board, its Committees and the Directors
The Committee’s terms of reference,
reviewed and approved annually, are
available on the Company’s website
at www.nationalexpressgroup.com
Key responsibilities
− Monitor the structure, size and
composition (including the skills,
knowledge, experience, independence
and diversity) of the Board and its
Committees and make recommendations
to the Board regarding any changes
− Develop and implement effective
succession plans for the Board, its
Committees and senior management,
having regard to the skills and expertise
needed to ensure the long-term
sustainable success of the Company,
including by overseeing the development
of a diverse talent pipeline and monitoring
the Company’s diversity policies and
Activity highlights
− Reviewed the structure, size and
composition of the Board and its
Committees, including the skills,
experience, independence and
diversity of its members, in anticipation
of Non-Executive Director changes
to the Board and its Committees
− Led the process to recruit two new
Non-Executive Directors with relevant
skills and experience to the Board
and certain of its Committees, thereby
enhancing their strength and diversity
− Reviewed the Board and senior
management succession plans,
including via a review of potential
internal successors for executive and
senior management positions and
other high potential talent
− Reviewed the Board’s Diversity &
Inclusion Policy and the Company’s
diversity initiatives
Membership, meetings and attendance
Committee member¹
Sir John Armitt CBE (Chair)2
Jorge Cosmen
Lee Sander3
Chris Muntwyler3,4
Joaquín Ayuso3
Jane Kingston3
Meetings
attended
Appointed
01.01.13
01.12.05
01.06.11
11.05.11
01.06.11
26.07.16
1 Committee membership is shown as at 31 December 2019. Since the end of the year, Joaquín
Ayuso, Jane Kingston, Chris Muntwyler and Lee Sander have stepped down from the Committee
and Dr Ashley Steel, Matthew Crummack, Karen Geary, Mike McKeon and Ana de Pro Gonzalo
have been appointed to the Committee
Independent Non-Executive Director
2 Chairman of the Board
3
4 Mr Muntwyler was unable to attend the July Committee meeting due to another commitment that
was notified to and approved by the Chairman at the beginning of the year - please see page 78
for the Board’s process for ensuring Directors’ involvement in meetings they cannot attend
Other attendees: Company Secretary, Group Chief Executive and Group Human Resources
Director. Further information about the Committee members is set out on pages 60 to 64
Dear fellow shareholder
I am pleased to present the Nominations
Committee Report which explains our work
during 2019.
The Committee’s ambition is to ensure
we have the best people governing our
business today and excellent and diverse
talent in the pipeline to potentially govern
the business tomorrow. The best people
will have the necessary experience and
skills to shape and support the Company’s
strategy, including through bringing diverse
perspectives to bear on strategic decisions
in a way that complements and reflects
the diversity of the Company’s business.
Board and Committee composition
and succession planning
2019 was a busy year for the Committee as
we began to implement the succession plans
we have previously developed to ensure
the continued effectiveness of the Board
and its Committees, having regard to the
Company’s strategic priorities.
On 1 October 2019, two new independent
Non-Executive Directors – Ana de Pro
Gonzalo and Karen Geary – joined the Board
and certain of its Committees1. Ms de Pro
Gonzalo is the serving Chief Financial Officer of
Amadeus IT Group, S.A. and, prior to this, she
held a number of financial and management
roles in various industries. Her strong financial
credentials and deep managerial experience,
including in a major technology company,
bring additional strength to the Company’s
Board and its Audit Committee. Ms Geary has
served in many executive and non-executive
HR roles over her career, including currently
as a non-executive director and chair of the
remuneration committee of online retailer
ASOS plc. She brings her focus on people into
the Boardroom and Remuneration Committee.
Further details of the new Directors’ experience
and their key strengths, together with those
of their fellow Directors, in supporting the
Company’s strategy are set out on page 64.
1 Ana de Pro Gonzalo joined the Audit Committee,
Karen Geary joined the Remuneration Committee
and both of them joined the Safety & Environment
Committee, in each case effective from 1 October
2019. In addition, since the end of the year, both
Ms de Pro Gonzalo and Ms Geary have joined the
Nominations Committee
79
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Composition, succession and evaluation
Nominations Committee Report continued
Effective from 31 December 2019, two of
the Company’s Non-Executive Directors –
Joaquín Ayuso and Jane Kingston – also
stepped down from the Board
and its Committees1, Mr Ayuso as he
was approaching his retirement and Ms
Kingston in view of her commitments
on other UK listed company boards. On
behalf of the Board, I would like to extend
my sincere thanks to Mr Ayuso and Ms
Kingston for their long and valued service
to the Company.
The Committee expects to continue to
implement its succession plans for the
Board and its Committees into 2020 and
beyond to further enhance their strength
and diversity.
The general approach taken by the
Committee to succession planning is to
maintain and regularly review a matrix
of the Directors’ experience and skills to
ensure that the Board and its Committees
are composed of individuals who have the
right experience and skills to enable them
to shape (and, in the case of the Executive
Directors, deliver) the Company’s strategy
and to monitor and assess the effectiveness
of the Company’s control environment and
the management of risk. A summary of
the current matrix is set out on page 83.
In the case of Executive Directors, this is
supplemented by my and my fellow Non-
Executive Directors’ continual assessment
of their performance. In the case of Non-
Executive Directors, the Committee also
carefully considers their independence and
other commitments. Through these means
and having regard also to the Board’s
Diversity & Inclusion Policy (as set out on
the next page), the Committee is best able
to identify any gaps in skills, any further
development and diversity needed and the
best time to implement succession plans.
The effectiveness of the Committee’s
succession plans is demonstrated by the
new Non-Executive Director appointments
in 2019 having filled the potential gaps
in experience and skills, and reduction in
diversity, that would have resulted from the
two Directors leaving the Board in 2019.
The process that the Committee followed,
together with the particular considerations
it took into account, in identifying and
nominating the two new Non-Executive
Directors is set out in the diagram below.
Following their appointment and prior to
attending their first Board and Committee
meetings, both new Non-Executive
Directors also undertook a comprehensive
induction programme, details of which
are set out on pages 85 and 86.
Senior management
succession planning
During the year, the Board, led by the
Committee, has also undertaken its
usual programme of senior management
succession planning. Senior management for
these purposes includes the members of the
Group Executive Committee (GEC) who are
direct reports to the Group Chief Executive
as well as all those talented individuals
who have demonstrated the potential for
promotion to higher or broader positions in
the Group’s senior management structure.
Establish a sub-committee of the Nominations Committee and co-opted Directors to lead the process
Engage external recruitment agents (Russell Reynolds*) to conduct the non-executive search and prepare candidate specifications
Review a long-list of candidates and condense to a short-list of those who best meet the Company’s requirements, having
regard to the following considerations:
Background, skills
and experience
Independence and
other commitments
Diversity to complement
the Company’s own
diversity
Other individual
attributes, including
likely fit with but ability
to challenge the Board
dynamics
Conduct interviews between sub-committee members and short-listed candidates and condense to a preferred list of
candidates (two candidates for each role)
Conduct interviews between other Board members, including the CEO and CFO, and the preferred candidates
Nominations Committee makes recommendations to the Board regarding which of the preferred candidates best fulfils the
Board’s and its Committees’ needs
1 Joaquín Ayuso and Jane Kingston have both stepped down from the Nominations Committee and the Safety & Environment Committee and Ms Kingston has
also stepped down from the Remuneration Committee
* Russell Reynolds Associates was engaged to conduct the Non-Executive Director search in view of their knowledge of the Company’s current Board members,
international reach, strong credentials and participation in the voluntary code of conduct to address gender diversity on UK listed company boards of directors.
Beyond their appointment by the Company to conduct executive and non-executive searches, Russell Reynolds does not have any connection with the
Company or its individual Directors
80
National Express Group PLC Annual Report 2019 The Board’s Diversity & Inclusion
Policy is:
– to achieve and then maintain at
least 33.3% female representation
on the Board
– to ensure that its membership reflects
the diversity of the geographies and
customers that the Group serves
– to respect the differences of its
members and value and encourage
the diversity of thought that such
differences can bring
in each case within the context of Board
members having, between them, the
experience and skills required to support
the development, oversight and delivery
of the Company’s strategy
The programme includes a detailed annual
review of such senior managers’ experience
and skills and their progress and notable
achievements during the year to ascertain
their potential for further career progression,
including potential succession as Executive
Directors. I and my fellow Non-Executive
Directors also keep the performance of
potential successors to Executive Director
roles under regular review throughout the
year when they present to the Board and
when we visit the Company’s operations.
This gives us the opportunity to observe
senior managers’ working practices and
relationships with their stakeholders
first-hand. Our review complements
the Executive Directors’ assessment of
these individuals’ performance in their
employment through a formal process of
mid and full year reviews and continual
feedback and support. This programme
enables the Board to identify any gaps in
the senior management succession pipeline
and any requirements for senior managers’
further development.
During the year, the Board’s senior
management succession plans were put
into action through the promotion of Gary
Waits, Chief Executive of the North America
student transportation business, and Judith
Crawford, Chief Executive of the North
America transit and shuttle business, to the
Group Executive Committee, where they now
sit alongside Tom Stables, Managing Director
UK & Germany, Francisco Iglesias, Chief
Executive of ALSA, and others reporting
directly to the Group Chief Executive.
These promotions were made in view of
the continued growth of the North America
division and in recognition of Mr Waits’ and
Ms Crawford’s development under Mr Ashley
during his two-year assignment as CEO and
President North America.
Board and Company
commitment to diversity
The Board is committed to ensuring diversity,
in all its forms (including as regards gender,
ethnic and social background), both at
Board and senior management level and
throughout the Company’s workforce.
This is because we believe diversity can:
− improve decision-making at all levels
of the business by ensuring that diverse
perspectives are brought to bear in
those decisions;
− attract and retain the best talent
by developing a culture of inclusion
where all individuals are respected
and supported to reach their full
potential; and
− better serve our customers, other
stakeholders and the communities in
which we operate by ensuring that the
diversity of our workforce demographic
is representative of the diversity of
such stakeholders.
This commitment is aligned with our
People and Customers Values, which in
turn support our strategy of growth by
retaining and winning business through
having the best talent delivering the best
service for our customers.
Our commitment is confirmed in the Board’s
Diversity & Inclusion Policy, as articulated
in the box above. While progress has been
made towards the Board’s objective of
having one third female representation in
2019, it has not yet achieved this objective
so the Committee will keep this under review
in continuing to implement the Board’s
succession plans in 2020 and beyond. During
2020, the Board will also review its Diversity &
Inclusion Policy in light of the Parker Review.
Importantly, however, the Board has
achieved in 2019 its objective of maintaining
a membership, including Directors from
the UK, Spain, Switzerland and the USA,
which reflects the geographic diversity of the
Group and its customers. The outcome of
the Board’s effectiveness evaluation (further
details of which can be found on page 84)
also confirms that Board discussions
demonstrate diversity of thought and include
the different perspectives this brings.
A further demonstration of the Board’s
commitment can be seen in the Company’s
establishment of a new Diversity & Inclusion
Council, chaired by the Group Finance
Director and comprising representatives
from all the Group’s divisions. The Council’s
objective is to coordinate diversity strategies
across the Group and monitor and report on
the progress made against such strategies.
In its first year, the Diversity & Inclusion
Council’s focus was on enhancing gender
diversity across the Group, as evidenced
through multiple initiatives and activities
undertaken in 2019, including:
− the Group’s celebration of International
Women’s Day through a variety of
activities across the divisions designed
to raise awareness of women at work,
including via social media posts featuring
female employees from a variety of roles
talking about their work experiences;
− the UK division’s re-writing of a number
of job advertisements to seek to attract
more female job applicants;
− the ALSA division’s renewal of
its collaboration agreement with
the Fundación Mujeres (Women’s
Foundation), the roll-out of targeted
recruitment campaigns to attract female
drivers and the delivery of specific
training programmes for female drivers;
− the North America division’s
implementation of a new remote working
policy for support centre staff, which
can benefit all workers but particularly
benefits female workers where they are
primary caregivers;
− the German Rail business’ participation in
the annual Mädchen-Zukunftstag (Girls’
Day), supported by various German
Federal Government and German industry
organisations, during which girls are
introduced to business and the different
roles they can assume in business; and
− the Bahrain bus business’ initiative to
recruit more female drivers, assisted by
the relaxation of the laws on female drivers
in certain Middle East regions.
81
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Composition, succession and evaluation
Nominations Committee Report continued
To support the Board’s focus on building
a strong and diverse senior management
succession pipeline, all the divisions have
also in the year adopted and implemented
specific policies and practices, such as
recruiting more female graduates into
management and management trainee roles
and including more female employees in
leadership skills development programmes.
These initiatives have resulted in
improvements in gender diversity at a number
of levels of the business, from the Board
to the divisions and sub-divisions:
− female representation on the Board
increased from 17% in 2018 to 28.5% at
the end of 2019 (but, with the departure
of two Directors on 31/12/2019, currently
stands at 25%)
− female representation on the GEC has
increased from 29% in 2018 to 31% at the
end of 2019
− female representation among the direct
reports to members of the GEC has
increased from 29% in 2018 to 30% in
2019
− in the North America business, which is
the Group’s largest division, 58% of the
workforce are female (an increase from
57% in 2018)
− in the German Rail business, which is one
of the Group’s smallest sub-divisions, the
percentage of female workers has grown
to 12% (from 10% in 2018)
The charts opposite illustrate the gender
balances of the Board, the GEC and direct
reports to members of the GEC as at the end
of 2019.
The Group’s workforce already benefits
from significant ethnic and cultural diversity
reflecting the different countries and cultures
in which the Group operates (with statistics
harder to produce in view of the restrictions
on gathering ethnicity data), but activities
continue across the Group to seek to
maintain and respect that diversity. A key
example is the UK division’s work with the
Strive Group in the West Midlands to create
an external diversity forum through which
local businesses can share best practice
and support each other in becoming more
inclusive. It also commissioned in 2019 an
internal survey to understand the cultural
and religious events that local workers wish
to celebrate.
Board and Committee
independence, commitment
and effectiveness
I am pleased to confirm that, through
all the Board and Committee changes
which took place in 2019, the Board
has remained composed of a majority
of independent Non-Executive Directors
and that none of the Directors have any
unauthorised conflicts of interest.
I am also pleased to confirm that all
Directors, including those who served the
Company throughout the year under review
and those who have recently joined the
Board, have, during their tenures to date,
demonstrated clear commitment to their
roles. Further information about Directors’
independence (including of those Directors
who will reach their nine-year tenure on the
Board during 2020), the Board’s conflicts of
interest policy and Directors’ commitment
is set out on pages 77 and 78.
During the year, the Committee facilitated
the second internal evaluation of the
effectiveness of the Board and its
Committees in its current three-year
evaluation cycle, ahead of a planned
external evaluation in 2020. I also
undertook a review of the independence,
effectiveness and commitment of each
of the Non-Executive Directors, with the
Senior Independent Director undertaking
the same review of myself, the results
of which were taken into account in the
evaluation. The outcome was that the
Board and its Committees continue to
operate effectively under the leadership of
myself, as Chairman, and the Chairs of the
Committees, having particular regard to
the combination of the veteran wisdom of
longer-serving Directors and fresh insights
from new Directors and the ability of
Directors to openly discuss and challenge
matters in the Boardroom. As such, the
Committee is satisfied with the value of
both the collective dynamic of, and the
individual contributions made by, the
Directors. Further details of the evaluation
can be found on page 84.
Directors’ election and
re-election
Based on the above conclusion, the
Board, on the advice of the Committee, is
recommending to shareholders the election
to office of Ana de Pro Gonzalo and Karen
Geary and the re-election to office of all other
serving Directors at this year’s AGM.
Further information
The Committee believes that its work
in 2019 has advanced its ambition as
stated at the outset of this Nominations
Committee Report. Further information
about the Committee’s work is set out on
pages 83 to 86.
Sir John Armitt CBE
Chairman
27 February 2020
28.5%
31%
Gender Diversity
Board of Directors
14
71.5%
Female
Male
4
10
GEC members
16
69%
Female
Male
5
11
Reports into GEC members
30%
105
70%
Female
Male
32
73
82
National Express Group PLC Annual Report 2019 Composition, succession and evaluation
Supplementary information
Board composition, succession
planning and diversity
During nine months of the year under
review, the Board was composed of 12
Directors, comprising three Executive
and nine Non-Executive Directors. Its
composition increased (temporarily) to
14 Directors in the last three months of
the year following the appointment of
two new Non-Executive Directors on
1 October 2019 and prior to the resignation
of two Non-Executive Directors on
31 December 2019.
As explained on page 80, the Committee
keeps the structure, size and composition
of the Board and its Committees under
continual review by reference to a matrix
of the Directors’ experience and skills and
with due regard to its Diversity & Inclusion
Policy. A summary of the matrix is shown
below and demonstrates the breadth of the
current Directors’ experience and skills.
Director independence
As part of its continual review, the
Committee assesses the independence
of individual Directors and the balance of
independent Directors on the Board and its
Committees. The Board, on the advice of
the Committee, considers that all Directors
who are seeking election or re-election
to office at the Company’s AGM in 2020,
other than the Executive Directors and
Jorge Cosmen, are, and will throughout
2020 remain, independent.
Mr Cosmen is not considered to be
independent due to the interests the
Cosmen family holds in shares in the
Company and Mr Cosmen’s close links
with the Group’s business.
Mr Cosmen’s extensive experience of
the transport industry and the political
and economic environments within which
it operates, combined with his deep
understanding of the Group’s business and
his entrepreneurial approach, enables him to
provide the Board with superior insights on
strategic and operational matters affecting
the Group.
In May and June 2020 respectively,
Mr Muntwyler, who chairs the Safety &
Environment Committee, and Mr Sander,
the Senior Independent Director, will
have served for nine years on the Board.
Notwithstanding such tenure, their fellow
Directors consider that both Mr Muntwyler
and Mr Sander continue to demonstrate
strong independence of thought and
approach, including in their challenge,
where appropriate, of Executive Directors.
Notwithstanding its strong view of their
continuing independence, in February 2020
and as part of its longer term succession
plans the Board approved certain
changes to the composition of the Board’s
Committees to mitigate any concerns
shareholders may have about lack of
independence. Mr Muntwyler and Mr
Sander have both stepped down from the
Nominations and Audit Committees and Mr
Sander has also stepped down from the
Remuneration Committee. In addition, the
Board plans during 2020 to appoint a new
Senior Independent Director.
Subject to re-election by shareholders,
both Mr Muntwyler and Mr Sander will
continue on the Board while it continues
with it succession plans as they make
strong contributions to the Company’s
leadership. Mr Muntwyler’s relevant skills
and experience gained from having worked
for a number of European transport and
logistic companies in executive roles
and subsequently non-executive and
consulting roles, combined with the
passion he demonstrates and perceptions
he offers in his role as Chair of the Safety &
Environment Committee, including through
his annual safety visits, enable him to
provide valuable assistance to the Board in
its oversight of operational and sustainable
business matters. The breadth and depth
of Mr Sander’s experience in the transport
and infrastructure industry, focused in the
North American markets, also gives the
Board ongoing and valuable insights into
these important markets for the Group.
Director commitment and
conflicts
As part of its continual review, the
Committee also has regard to individual
Directors’ other commitments and interests
to ensure they do not interfere with their
responsibilities to the Company or give
rise to any actual or potential conflict of
interest. The Board, on the advice of the
Committee, considers that all Directors
who are seeking election or re-election
to office at the Company’s AGM in 2020
have sufficient time and capacity to fulfil
their responsibilities. Save in respect of
Mr Cosmen’s potential conflict of interest
which has been authorised by the Board,
the Committee also does not consider that
any Directors have any actual or potential
conflicts of interest. Further information
about Directors’ attendance at Board and
Committee meetings and the Board’s
Conflicts of Interest Policy is set out on
page 77.
Transport
industry
experience 1
UK listed
company
experience 2
Operational/
Management
experience
Finance/
Accounting
experience
HR/
Remuneration
experience
IT/Digital
experience
International
business
experience
Business
advisory
experience
Director
Sir John Armitt CBE
Jorge Cosmen
Dean Finch
Chris Davies
Matt Ashley
Lee Sander
Mike McKeon
Dr Ashley Steel
Chris Muntwyler
Matthew Crummack
Ana de Pro Gonzalo
Karen Geary
Joaquín Ayuso
Jane Kingston
1 For Non-Executive Directors, excluding via their non-executive directorships with the Company
2 For all Directors, excluding via their directorships with the Company
83
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Composition, succession and evaluation
Supplementary information continued
Director effectiveness
A performance evaluation of the Board, its Committees and the individual Directors is conducted annually within a three-year cycle, by
an external evaluation in the first year of the cycle followed by two successive internal evaluations. As illustrated by the chart below,
2019 was the third year of the cycle so a second internal evaluation was undertaken ahead of a planned external evaluation at the
commencement of a new cycle in 2020.
In line with the cycle illustrated, the 2019 internal evaluation was conducted by way of the Directors completing anonymous online
questionnaires regarding the Board and those Committees of which they were members and was supplemented by one-to-one
discussions between the Chairman and individual Directors.
2017
Year 1
External
2018
Year 2
Internal
2019
Year 3
Internal
Evaluation by selected
independent consultants
(specific basis and
approach agreed)
Evaluation focused on reviewing
core effectiveness and areas
identified for development from
the Year 1 external evaluation
(questionnaire based)
Evaluation focused on
reviewing the effectiveness
of new initiatives and progress
on areas identified for development
from the Year 2 internal
evaluation (questionnaire based
plus one-on-one interviews)
The questionnaires surveyed various topics relating to effectiveness, from the leadership and composition of the Board and its
Committees, to the quality of information and support provided to them, how well the Board and its Committees were considered to
have achieved their objectives, how good the opportunity for debate and challenge in Board and Committee meetings was and how well
Directors considered that the Board and its relevant Committees had oversight of the Group’s strategy and its management of risk. In
addition, specific questions were added to poll Directors’ views on the approach taken by the Board and its Committees during the year
to the 2018 Code, in particular as regards workforce engagement and understanding stakeholder views. Directors’ views were also sought
on how well the Board and its Committees had addressed the areas for development identified in the 2018 internal evaluation.
The Company Secretary, in consultation with the Chairman of the Board and Chairs of the Committees, analysed the results of the evaluation
by reference to the scores given and the specific observations made, commendations given or improvements suggested, following which
such results were presented to and discussed by the Board and its Committees.
The overall outcome of the evaluation was very positive, demonstrating that the Board and each of its Committees continue to function
effectively with a high level of probity, integrity and independence, through the mediums of both open and challenging debate in meetings
and appropriate engagement outside of meetings.
Both the key strengths and the relatively few areas for further attention identified by the 2019 internal Board and Committee evaluation are
shown in the boxes below:
Key strengths
− Commendation for the CEO’s informative reports and
willingness to discuss successes and challenges
− Open and constructive dialogue in both Board and
Committee meetings
− Collaborative and effective communication between all
Board members
− Excellent engagement with, and support where appropriate
from, senior management
Areas for further attention
− Board succession planning to remain high on the Board’s
agenda to ensure that succession plans continue to be
implemented
− More focus to be given by the Safety & Environment
Committee to environmental matters to reflect the Group’s
new ambitions and commitments in this area
− Continue to review and implement the best methods for
ensuring that the Board understands stakeholder views
− High level of understanding by all Board members about
− Further external viewpoints to be brought into the
the Group’s businesses, opportunities and risks
− Strong leadership of all Board Committees and
effective discharge by the Committees of their primary
responsibilities
Boardroom as and when appropriate
84
National Express Group PLC Annual Report 2019 When comparing the outcome of the 2019 evaluation against the principal areas identified for increased focus in the 2018 evaluation, the
following progress can be noted:
Area for increased focus
Progress during the year under review
Implement the Board’s succession plans and review the composition and
membership of the Audit and Remuneration Committees to ensure they each
comprise the right mix of skills and experience
Increase the time and attention given by the Safety & Environment Committee
to the Group’s environmental objectives and its performance against them
Continue to consider and implement the Board’s and Committees’ plans to
address the changes introduced by the 2018 Code, particularly regarding
workforce engagement and taking account of stakeholder views in the
Board’s decision-making processes
Continue to bring more external viewpoints to the Board’s attention
On the recommendation of the Nominations Committee, the Board appointed
two new independent Non-Executive Directors, one with a strong financial and
management background who has joined the Audit Committee and the other a
seasoned HR professional with experience of executive remuneration who has
joined the Remuneration Committee
The Safety & Environment Committee has assessed the Group’s new
environmental ambitions and reviewed and approved new seven-year
environmental KPIs and the Group’s performance against them, further details
of which are set out in the Safety & Environment Committee Report
The Board’s and Committees’ plans to respond to the 2018 Code have been
implemented in all areas other than some relating to remuneration which have
been delayed pending liaison with shareholders as part of the 2021-2023
Directors’ Remuneration Policy review, as explained in the Annual Statement
by the Chair of the Remuneration Committee
The Board’s workforce engagement programme has been extended by Non-
Executive Directors participating in additional workforce engagement events,
as explained on pages 71 to 73, and new methods for the Board to understand
stakeholder views have been implemented, as described on page 75
During 2019, the Board received an insightful presentation from one of the
Company’s major US corporate shuttle customers, further details of which are
set out on page 75. More presentations from external speakers are included in
the Board’s 2020 agenda
Director induction
On joining the Board, whether in an executive or non-executive role, each Director undertakes a structured and comprehensive induction
programme comprised of certain basic modules and additional bespoke modules tailored to the requirements of their role. This programme
is designed to fast-track a new Director’s understanding of the Group’s Purpose, Values, strategy and operations, thereby equipping him or
her to perform his or her role. Details of the induction programme, organised by the Company Secretary in conjunction with the Chairman,
for the two new Non-Executive Directors who joined the Board during 2019, is illustrated by the diagram below:
Meetings with the Chair of
the Audit and Remuneration
Committees, external auditors
and external remuneration
advisers
Guidance on
corporate governance
arrangements, including
the Board and Committee
agendas and procedures, Board
succession planning and Board
evaluation – provided by the
Company Secretary
Provision of
background reading
materials, including
previous Board and
Committee minutes, strategy
and business presentations,
relevant Company policies
and Board procedures
Non-Executive Director
Induction Programme
Meetings with
members of the UK
division management team,
including the UK Managing
Director and a number of his
direct reports, to discuss
business and operational
performance
Meetings with the
Chairman, Executive
Directors and members
of senior management, to
discuss Company Purpose,
Values, strategy and its
safety priority
Participation in a site tour
of a coach station and bus
depot to view the business
operations on the ground and
meet the front-line teams
85
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Composition, succession and evaluation
Supplementary information continued
Through the induction I was able
to gain real insight into the Company’s
strategy and operations and I enjoyed
visiting the sites and meeting the teams”
Ana de Pro Gonzalo
Non-Executive Director
The induction was invaluable in
obtaining a better understanding of the
complexities of the Group and context in
which it operates, which will assist me in
discharging my responsibilities”
Karen Geary
Non-Executive Director
Director ongoing training
Directors also have the opportunity to participate in an ongoing programme of training, including training on their directors’ duties and
other legal responsibilities (provided by external legal advisers), training on takeover market activity (provided by external financial
advisers) and the seminars provided by the Deloitte Academy. Various activities on the Board’s agenda also serve to enhance their
understanding of the business, as explained below:
Directors’ understanding of the business
During the year under review, in addition to their receipt of regular reports from the Group Chief Executive and Group Finance
Director on the business and financial results and risks and opportunities, as well as regular reports from the Group General Counsel
and Company Secretary on legal and corporate governance matters, Directors’ understanding of the business was enhanced by:
− detailed briefings given by each of the Group’s major business divisions in which such divisions presented, and the Board
reviewed, their progress against strategic objectives and budget;
− focused briefings on the three core pillars of the Group’s strategy, being growth (in the form of a review of the performance of
acquisitions one year on); technology (in the form of a review of the opportunities presented by the Group’s technology initiatives
and the risks presented by transport industry disruptors); and operational excellence (in the form of a review of the Group’s
programme of delivering excellence through the development and implementation of best practice and the development of talent
to implement such programme);
− a special presentation from the Group’s procurement function on its approach to purchasing and engagement with key supplier
stakeholders; and
− quarterly reports on human capital, organised around seven key objectives of: employee engagement; diversity and inclusion;
resourcing and retention; talent management; benefits, reward and recognition; employee relations; and enhancing HR effectiveness.
86
National Express Group PLC Annual Report 2019 Audit, risk and internal control
Audit Committee Report
Mike McKeon
Committee Chair
A key focus of the Audit Committee has been
supporting the Board in the continued evolution of the Group’s
risk management framework and processes. This gives the
Board a strong degree of assurance that both those principal
and emerging risks which could adversely affect the delivery
of the Company’s strategy or impact negatively on its financial
performance or business operations are being identified and
managed appropriately”
Primary role
To assist the Board in fulfilling its
oversight responsibilities by reviewing
and monitoring the integrity of the
Group’s published financial information,
the adequacy and robustness of the
Group’s system of internal control and
risk management and the adequacy
and effectiveness of its internal and
external audit processes
The Committee’s terms of reference,
reviewed and approved annually, are
available on the Company’s website at
www.nationalexpressgroup.com
Key responsibilities
− Monitor the integrity of the Group’s
published financial information and
review and challenge where appropriate
any significant financial judgements and
estimates made by management
− Evaluate the adequacy, robustness and
effectiveness of the Group’s internal
financial and other controls
− Support the Board in evaluating the
adequacy, robustness and effectiveness
of the Group’s risk management
systems, both for identifying, managing
and mitigating principal risk and
identifying and mitigating, where
possible, emerging risks
− Review the Group’s policies, processes
and controls for the detection and
prevention of fraud, bribery and modern
slavery and for compliance with
applicable laws, regulations and codes
of conduct
− Approve the activities, review the
findings and assess the effectiveness of
the Group’s internal audit function
− Monitor the activities, review the
findings and assess the independence
and effectiveness of the external auditor
− Review the contents of the Company’s
Annual Report and Accounts and
advise the Board whether, taken as
a whole, they are fair, balanced and
understandable and provide the
information necessary for shareholders
to assess the Company’s position and
performance, business model and
strategy
Membership, meetings and attendance
Committee member¹
Mike McKeon (Chair)2
Lee Sander2
Chris Muntwyler2,3
Dr Ashley Steel2
Ana de Pro Gonzalo2,4
Meetings
attended
Appointed
03.07.15
01.06.11
11.05.11
01.01.16
01.10.19
1 Committee membership is shown as at 31 December 2019. Since the end of the year, Mr Sander and
Mr Muntwyler have stepped down from the Committee
Independent Non-Executive Director
2
3 Mr Muntwyler was unable to attend the July Committee meeting due to a pre-approved other
commitment - please see page 78 for the Board’s process for ensuring Directors’ involvement in
meetings they cannot attend
4 Ms de Pro Gonzalo was appointed on 1 October 2019 and there was only one Committee meeting in
the year since her appointment
Activity highlights
− Scrutinised the Company’s half and full
year financial statements
− Assessed and challenged the
robustness of the Group’s going
concern and viability statements
− Monitored the implementation and
impact of accounting standard IFRS 16
− Monitored the findings and
effectiveness of the internal audit
function as a more focused third line of
defence function
− Supported the Board in the
identification and management of
risk, including via a detailed review of
divisional risk
− Reviewed progress made by the Group
against one of its principal Group risks -
cyber security breach
− Reviewed and approved changes to the
Group’s treasury policy and considered
and confirmed the Group’s tax strategy
− Reviewed the results of an anti-
bribery risk assessment conducted by
management during the year
− Commenced preparations for an
external audit tender in 2020
Other attendees: Company
Secretary, Chairman of the Board,
Group Chief Executive, Group
Finance Director, Group Financial
Controller, Group Director of
Insurance & Risk, Head of Group
Internal Audit and representatives of
the external auditor, Deloitte.
Further information about the
Committee members is set out on
pages 60 to 64.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Audit, risk and internal control
Audit Committee Report continued
Dear fellow shareholder
I am pleased to present the Audit
Committee Report for 2019 which explains
the important role the Committee plays
in the Company’s governance framework
by supporting the Board with assessing
the integrity of the Company’s financial
reporting and assessing the adequacy and
effectiveness of the Company’s management
of risk and internal controls.
A key focus of the Audit Committee in the
year under review has been supporting the
Board in driving the continued evolution of
the Group’s risk management framework and
processes, giving the Board a strong degree
of assurance that both those principal
and emerging risks which could adversely
affect the delivery of the Company’s
strategy or impact negatively on its financial
performance or business operations are
being identified and managed appropriately.
Evolution of risk management
In 2018 the Board articulated for the first
time its risk appetite and developed its risk
matrix within which the Group’s principal
risks were both identified and assessed
for their impact and likelihood. The Board
also responded early to the 2018 Code by
creating an emerging risk register. 2019
has seen the Board, with the support of
the Committee, build on this evolution of
the Group’s risk management framework
and processes through the clarification of
the respective roles and responsibilities
of the Board and Committee. The Board
remains responsible for reviewing both
the Group’s principal and emerging risks.
The Committee has assumed the role of
conducting ‘deep dives’ into particular
Group risks, detailed reviews of divisional
risk registers and reviewing reports from
the Group’s internal audit function on
the effectiveness of the Group’s risk
management controls. This allocation
of responsibility is illustrated in the
tables below:
Confirmation of the Board’s robust
assessment of the Company’s emerging
and principal risks, together with a
description of the principal risks and the
procedures in place to identify emerging
risks, are set out on pages 48 to 53
of the Strategic Report. A description
of the Company’s emerging risks can
also be found there. I explain below the
Committee’s activities in supporting
the Board with the identification and
management of risk in the year under
review.
Divisional risk management
The Committee’s detailed review and
challenge of the UK division’s risk register
comprised an analysis of the processes to
identify risk, to develop actions plans to
manage risk and to create accountability
for such activities. The Committee also
considered the work of the Group’s
internal audit team in giving assurance
that such processes were being followed.
The Committee was pleased to note
the robustness of the UK division’s
processes, the high level of engagement
by the UK division’s workforce with such
processes and the commercial benefits
achieved via the conversion of certain
risks into opportunities through their active
management.
The Committee is scheduled to undertake
detailed reviews of the North America and
ALSA divisions’ risk registers in 2020 and
will report on them next year.
Cyber security
At the Board’s request and in view of the
ever-increasing threat of cyber attacks,
their potential high impact on operations
and the severity of sanctions that can and
are being imposed by relevant regulators
for any resulting personal data breaches,
the Committee conducted a ‘deep dive’
into one of the Group’s principal risks –
cyber security breach.
Board risk management
responsibilities
− Consider and approve the Group’s risk
appetite
− Review and approve the Group’s
principal risk register and its processes
to identify such risks and actions to
manage them
Audit Committee risk
management responsibilities
− Conduct ‘deep dives’ into specific
Group risks, as requested by the
Board
− Undertake detailed reviews of the
divisions’ risk registers and their
processes to identify and manage risk
− Review and approve the Group’s
− Review internal audit reports on the
emerging risk register and its processes
to identify such risks
effectiveness of Group and divisional
risk management controls
In 2018 the Company commissioned
IBM to conduct a global review of the
Group’s cyber security arrangements and
advise the Company on the next stage
of their development. A key focus of the
Committee in 2019 has been to continually
monitor and assess the Group’s progress
against the recommendations made by
IBM. These covered three core initiatives:
security leadership and resources; security
strategy, framework and policies; and
general IT practices. The Committee has
overseen significant activity by the Group,
led by management and assisted by new
dedicated IT security resource, to create
and commence implementation of detailed
actions plans to address each of these
initiatives. Such plans support the Group’s
strategic priorities, including investment in
and development of technology to advance
the customer offering (by enhancing the
security of such offering) and growth (by
ensuring that new businesses acquired
are subject to detailed cyber due
diligence pre-acquisition and are promptly
wrapped within the Group’s cyber security
arrangements post-acquisition).
The Committee is assured by the progress
made by the Group in the year, although,
with the ever-increasing incidence and
sophistication of cyber attacks and the
consequent need for the Group to remain
vigilant, the Committee expects cyber
security to remain one of its key areas of
focus into 2020 and beyond.
Refocused internal audit activities
In 2019, the Committee reviewed the work
of the Group’s internal audit (IA) function
against a plan which was refocused, under
the supervision of the Committee, on its
role as the core third line of defence in
the Group’s three lines of defence (3LOD)
model of internal control as illustrated on
page 91.
In the first half of the year, the IA team
carried out, with the divisions, an extensive
exercise to formally agree and document
against each divisional risk the controls
around them and the allocation of
responsibility for those controls among
the Group’s first, second and third
lines of defence. The output included a
rationalisation of the internal audit plan for
the second half of the year to refocus the
IA team’s efforts on auditing the controls
around the Group’s principal risks as
well as the most material divisional risks
(with the Group’s first and second lines
of defence responsible for the controls
of other divisional risks). The IA resource
was reallocated around these priorities,
with external resource engaged to provide
specialist assurance where required.
88
National Express Group PLC Annual Report 2019 Further information and looking
ahead
Further information about the Committee’s
activities during the year, including its
work on financial reporting matters, its
review of the Company’s system of internal
control and its oversight of the Company’s
relationship with its external auditor,
are set out on pages 90 to 93.
Looking ahead, the Committee is
cognisant of a number of key external
reviews that will likely impact its future
work. These include the review into the
quality and effectiveness of audit by Sir
Donald Brydon and previous reviews on
the UK audit market and the workings of
the UK regulator, the FRC.
While it remains unclear what action the
UK Government will take in response to
these reviews, the Committee notes the
actions already being taken by the FRC
and will have regard to these and any
future developments in carrying out its
work during 2020.
I hope you find the information in this
report and on the following pages about
the Committee’s work helpful and I will be
pleased to answer any questions you have
about it at this year’s AGM.
Mike McKeon
Audit Committee Chair
27 February 2020
The Committee also reviewed a number
of detailed reports on the findings of IA’s
refocused audits, together with a report
from PwC which was commissioned by the
IA team to undertake a specialised audit
of the Group’s cyber security programme.
From these, the Committee has gained
valuable assurance on the effective
operation of internal controls (including
the IA third line of defence control itself).
The Committee is also pleased to have
observed that the work undertaken to
reallocate responsibility for certain of the
first and second lines of defence is driving
a cultural change within the Group by
increasing awareness of, and engagement
at all levels of the business with, internal
controls. This should serve the Group well
for the future.
Preparation for external
audit tender
To ensure compliance with applicable law
and in view of the tenure of the Company’s
incumbent auditor – Deloitte – the
Committee took certain preparatory steps
during the year towards an external audit
tender which will take place in 2020. These
included inviting six audit firms to register
their interest in participating in a tender
and undertaking a review, with the input
of firms that expressed an interest, of their
independence by assessing the work they
currently undertake for the Group. Of the
six that were invited, three have declined to
be considered for the 2020 tender.
One explained that it was not their current
policy to take on new audit engagements.
Another, after due consideration and
discussion with myself and the Group
Finance Director on scope, stated that
they did not believe they had adequate
resources to carry out the audit. The final
firm declined as a result of not being able
to attain adequate independence from the
Group to carry out the audit.
The Committee therefore expects to
undertake the audit tender, with the three
firms that have indicated their willingness
to tender, in the second half of 2020.
Following its conclusion, the Committee
will make recommendations to the Board
on the appointment of an auditor for a
new term starting from 1 January 2021,
following which the Board will consider
and make its own recommendation
to shareholders for approval at the
Company’s 2021 AGM. The Committee
will report further on the audit tender
process and outcome next year.
Committee composition
and effectiveness
The Committee’s composition was
fully compliant with all relevant
recommendations of the 2018 Code
throughout the year under review.
As a result of the implementation of
the Board’s wider succession plans,
the membership of the Committee
was supplemented in the year by the
appointment of Ana de Pro Gonzalo. Ms de
Pro Gonzalo has significant financial and
managerial experience from her role as the
serving Chief Financial Officer of Amadeus
IT Group, S.A., a number of managerial
positions she held prior to this, and her
training and practice as an auditor in the
early part of her career. The Committee
welcomes Ms de Pro Gonzalo to its
membership, particularly as it supplements
the number of members with recent and
relevant financial experience.
The Committee’s performance was
evaluated as part of the 2019 internal
evaluation of the effectiveness of the
Board and its Committees. The outcome
of the evaluation confirmed that the
Committee continues to operate highly
effectively and determined that Committee
members have good oversight of, and
are able to raise appropriate challenges in
respect of, important financial matters, such
as management’s significant accounting
judgements and the implementation of new
accounting standards.
Committee engagement
In September 2019, I, on behalf of the
Committee, visited a number of our school
bus and transit operations in Chicago and
Toronto, primarily to learn more about
two major programmes designed by the
Group’s Delivering Excellence team to
address ongoing operational challenges.
Hearing directly about such programmes
from the people involved in their
development and implementation and
seeing their impact on the ground enables
me and, through sharing my observations
with my fellow Committee members, the
Committee to better understand how
operational changes are affecting financial
performance. This in turn enhances our
effectiveness as a Committee when
reviewing the Group’s financial results.
My visits supplement the Board’s other
workforce engagement activities, details of
which can be found on pages 71 to 73.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit, risk and internal control
Supplementary information
Financial reporting
The Committee is responsible for considering
and satisfying itself, having consulted
with Deloitte LLP, that the Company and
Group have adopted suitable accounting
policies and appropriately applied the same,
that management has made appropriate
accounting judgements and estimates and
that the conclusions reached by management
as regards the Company’s going concern
status and its long-term viability are
appropriate. Further details of the work
performed by the Committee in the discharge
of these duties is set out below.
Going concern and viability
The Committee has reviewed the Company’s
going concern status and viability statement,
including by conducting a careful assessment
of the rationale for the three-year viability
period, the nature of the incidence of risks
modelled during such period and the
potential aggregate financial impact of such
risks. The Committee is satisfied, in particular
having regard to the successful refinancing
by the Company of a significant portion of its
debt during the year and the upgrade in its
credit rating, that management’s conclusions
that the Company is viable and a going
concern, as supported by the views of the
Company’s auditor, are appropriate.
New accounting standard
Following significant preparatory work
undertaken during 2018, which involved a
detailed review of the terms of all the Group’s
leases, throughout 2019 the Committee
monitored the Group’s implementation of
new accounting standard IFRS 16 ‘Leases’
in respect of those leases which were to
be accounted for in accordance with such
standard. Further details of the impact
of IFRS 16 are set out in note 2 of the
Consolidated Financial Statements.
Significant accounting judgements
and estimates
The preparation of the Consolidated Financial
Statements requires the application of certain
judgements and estimates. The Committee
considered the following significant
accounting judgements and estimates as part
of its review of the Consolidated
Financial Statements:
Significant judgement/estimate
Committee action and conclusion
Goodwill impairment (see notes 1 and 14 to the Consolidated Financial Statements)
The Committee considered whether the carrying value of
goodwill held on the Group’s Balance Sheet at the year end
(£1,486 million) should be impaired.
The potential risk is that this goodwill cannot be supported by
the future cashflows of the business, particularly in relation to
the ALSA (£778.1 million) and North America (£679.4 million)
businesses, with the key estimation being made in relation to
the application of discounted cash flows on a value in use basis.
The discount and future growth rates applied are highly sensitive
to change because both must reflect a long-term view of the
underlying growth rate of relevant countries’ economies.
The Committee considered a detailed report from management
which explained the impairment analysis and testing undertaken
on the value of the ALSA and North America goodwill balances.
These were modelled on forecast cash flows, discounted using
a country-specific weighted cost of capital (WACC) and a
terminal value based on a perpetual growth rate and, in the case
of ALSA’s goodwill, were tested according to various impact
scenarios based on assumptions made on the outcome of the
Spanish long haul concession renewal programme.
The Committee concluded, based on management’s careful
analysis and testing which demonstrated that there were
healthy levels of headroom in the asset valuation, and following
consultation with Deloitte and additional sensitivity testing following
their challenge on the Spanish concession assumptions, that it
concurred with management’s view that there is not a material
risk of recoverability. As such, neither the ALSA nor North America
goodwill assets as at the balance sheet date are impaired.
Insurance and other claims provisions (see note 1 to the Consolidated Financial Statements)
The Committee considered the adequacy of the provisions
associated with insured and other claims arising predominantly
from traffic accidents and employee incidents, particularly in
North America.
The estimation of such provisions, including those arising
on acquisition, is based on an assessment of the expected
settlement of known claims together with an estimate of
settlements that will be made in respect of incidents incurred
but not yet reported at the balance sheet date.
The Committee considered and discussed with management a
report prepared by the Group Risk & Insurance Director with the
input of the Group General Counsel which set out details of the
status of the North America and other material open claims made
against members of the Group. This report gave their assessment,
made with the benefit of advice from external legal counsel and
insurance brokers, on the likely outcome of such claims, together
with an explanation of the methodology used to determine the
value of provisions for such claims, based on which management
was of the view that the level of provision was appropriate.
Given the level of uncertainty, complexity and judgement
involved in making these estimations there is a risk that the
eventual outcome could be materially different from that
estimated and provided for.
The Committee concluded that management’s estimation of
the provision for North America insurance and other claims
was within an acceptable range of the potential outcomes and
accordingly was fairly stated.
WeDriveU put option liability (see note notes 1 and 25 to the Consolidated Financial Statements)
The Committee considered whether the value of the liability
ascribed to the put option in respect of the remaining 40% of the
shares in WeDriveU was reasonable.
The Committee considered and discussed with management
the valuation of the put option based on key assumptions made
around the projected net debt forecasts, and the expected
timing of exercise of options, together with specific testing and
challenge by Deloitte of that calculation and those assumptions.
Based on management’s estimation of the liability and Deloitte’s
extensive testing and challenge of the same, the Committee
has satisfied itself of the reasonableness of management’s
assessment of the put option liability.
90
National Express Group PLC Annual Report 2019 While not significant financial matters, the Committee also carefully considered and reviewed the Company’s accounting for: other
business combinations made in the year under review; financial instruments; the application of IFRIC 12 to the Rabat contract; the
Group’s leases in accordance with IFRS 16; and the Group’s principal pension schemes. The Committee is satisfied that the judgements
and estimates made by management on these matters, which Deloitte has concurred with, are reasonable and that they have been
appropriately accounted for or otherwise disclosed in the Consolidated Financial Statements.
Internal control and risk management
The Committee is responsible for monitoring the adequacy and effectiveness of the Company’s system of internal control. It also supports
the Board in its activities in identifying and managing risk. The latter is covered in the Audit Committee Chair’s letter on page 88. The
information about the former is set out below and should be read in conjunction with the Audit Committee Chair’s letter on page 88.
System of internal control
The Company’s system of internal control is based on a three lines of defence model as illustrated in the diagram below:
Board of Directors
Audit Committee
3rd line of defence
Group internal audit function to assess effectiveness of, and
audit compliance with, first and second-level controls
2nd line of defence
Specialist Group functions to advise the Company and support the divisions in the areas of safety, finance, legal, treasury,
tax, human resources, pensions, risk and insurance, information technology and cyber security
1st line of defence
Detailed divisional controls and procedures in the areas of safety, driver standards and operations, vehicle standards and maintenance,
and divisional teams to advise on finance, legal, human resources, information technology and communications
These lines of defence include the following activities:
− Regular Board and Committee meetings throughout the
− Monthly and weekly divisional executive meetings at which
year, to consider a structured programme of agenda items
determined by reference to Board reserved matters and
Committee Terms of Reference and the needs of the business
− Annual strategy review by the Board, performed following
detailed input from the divisions and relevant Group functions,
and development and implementation of divisional plans to
deliver against Group strategy
− Annual and monthly budget reviews, performed at Group and
divisional level
− A devolved organisational structure below Board level with
clear leadership, allocation of responsibility and reporting lines
− Monthly GEC meetings at which all Group functional heads
report to the CEO/CFO on key successes, challenges,
developments in the month and pre-agreed KPIs
divisional management teams discuss key successes,
challenges, developments in their businesses and agree actions
− Approved delegated authorities to ensure all major decisions
relating to business change, including via M&A and bids, and
significant capital and operating expenditure are taken at the
appropriate level
− Group and supporting divisional policies and procedures
regarding tax and treasury compliance, anti-bribery and
corruption, modern slavery and human trafficking, and data
usage and protection
− Audits by the Group internal audit function
− Group-wide whistleblowing procedures
− Global Safety Policies and Standard Operating Procedures to set
high and consistent standards of safety and operation across the
Group, and achieve safe and efficient operating outcomes
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit, risk and internal control
Supplementary information continued
Board reserved matters and
delegated authorities
The Board reserves to itself decisions
relating to the most material matters,
including significant acquisitions
and disposals, capital and operating
expenditure, accounting policies, treasury
and tax policies, and material decisions
relating to employees, pensions and
litigation. The Board’s reserved matters
are available on the Company’s website
at www.nationalexpressgroup.com
The Board delegates a number of key tasks
and responsibilities to its principal standing
Committees, comprising its Nominations,
Audit, Remuneration and Safety &
Environment Committees, details of which
are set out on page 59 and in the reports
given by the principal standing Committees
in this Corporate Governance Report. It also
delegates certain other material decisions
that are executive in nature to its Executive
Committee, comprised of the Group Chief
Executive and Group Finance Director.
The Board and its Committees ensure
the preservation of these controls to
themselves and delegation of other
decisions to appropriate levels of divisional
management and/or Group functional
heads through its Group delegated
authorities framework, which is regularly
reviewed and approved by the Board.
Treasury strategy and
compliance
The Company maintains a treasury policy
which sets the approved level and nature
of the Group’s debt and hedging facilities
and the headroom to be maintained under
them. The Committee regularly reviews
the treasury policy, approves changes
to it where appropriate and monitors the
Company’s compliance with it. During the
year, two such reviews were completed.
Tax strategy and compliance
The Company’s tax strategy can be found
on the Company’s website. From time
to time, the Committee will review the
Company’s tax strategy to ensure that
it remains appropriate. The Committee
also regularly receives updates from
management about the Group’s tax affairs,
including the status of any tax audits and
tax compliance matters.
During the year, the Committee undertook
such a review and, following discussion
and having regard to the Group’s risk
appetite and the importance of its
relationship with its regulators including
HMRC and other tax authorities, the
Committee concluded that the Group’s
tax strategy remains appropriate.
Anti-bribery and corruption
The Company has a zero tolerance
approach to bribery and corruption, as
confirmed by the Company’s anti-bribery
and corruption policy and the supporting
local policies that apply to members of its
Group and its Bahrain joint venture. The
Company and the members of its Group
also have in place a range of procedures,
including regular training targeted at
members of its workforce, Group and local
gifts and hospitality policies and Group and
divisional procurement, contracting and
partnering practices, which are designed to
prevent bribery.
In the year under review, under the
supervision of the Committee the Group
undertook an assessment of the risk of
bribery in each of its business divisions and
Group functions and, having regard to the
outcome of such assessment, local plans
have been put in place to develop additional
specific procedures to mitigate the highest
exposures to risk, which plans are expected
to be implemented during 2020.
Data privacy
The Company respects the personal data
privacy of its customers, members of its
workforce and other individuals in respect
of whom it and members of its Group
process personal data. The Company and
Group therefore have in place policies
which mandate the lawful processing
and protection of such personal data in
accordance with applicable laws, and
procedures which are designed to achieve
the same. Further information about the
Group’s significant and ongoing work on
its cyber security programme, as one such
measure of protection, is discussed in the
Audit Committee Chair’s letter on page 88.
The Company will continue to monitor
legal developments and best practice
in this important area, including the
introduction of new data privacy laws in
California and other US States in which the
Company’s subsidiaries operate, and take
appropriate steps to ensure compliance
with the same.
Whistleblowing
The Company is supportive of a culture
in which both members of its workforce
and other stakeholders feel able to raise
concerns, in confidence if preferred.
To this end, the Company and Group
have in place comprehensive policies
and procedures which are designed
to enable the workforce and others to
raise any concerns they have, including
a confidential whistleblowing helpline.
A summary of the Group’s whistleblowing
policy and the helpline telephone numbers
appear on the Group’s website.
In line with the 2018 Code, the Group’s
whistleblowing arrangements, together
with reports arising from them, are regularly
reviewed by the Board and the Committee
can confirm, on behalf of the Board, that
during the year under review the Board
conducted a full review of the Group’s
whistleblowing arrangements. This resulted
in the Board approving amendments to the
Group’s and its divisions’ policies to ensure
they expressly refer to whistleblowing
arrangements being accessible by the
workforce in its widest sense and in
relation to concerns they may have about
any form of wrongdoing, as envisaged by
the 2018 Code.
Internal audit
The purpose of the Company’s Internal
Audit (IA) function is to provide the
Committee with assurance on the
effectiveness of the Company’s internal
controls through independent observation
and objective assessment of such
controls, including those designed to
prevent incidents of fraud, theft and
other wrongdoings. This is done via a
programme of audits undertaken by
IA throughout the year against a plan
reviewed and approved by the Committee.
In addition to its ongoing oversight of IA’s
work, as set out in the Committee Chair’s
letter the Committee is responsible for
monitoring the effectiveness of the IA
function. In this regard, the Committee
was pleased to see the IA team take
a number of steps during the year to
enhance its profile, including the issue of
periodic internal newsletters to highlight
the purpose and value of IA’s work. A new
‘value scorecard’ was also developed
by which parts of the business whose
work was subject to internal audit could
score IA against various criteria. IA scored
particularly well against the objectivity
and efficiency criteria. As a result of IA’s
refocused work and the assurance it
gives, and having regard to the scores
awarded through the value scorecard, the
Committee is satisfied that the Company’s
IA function continues to be effective.
Internal control effectiveness
As noted above, the Committee
is responsible for monitoring the
effectiveness of the Company’s internal
system of control. In respect of the Group
tax accounting function, the Committee
reviewed and assessed the need to
address some control findings in relation
to its oversight of tax accounting in
certain parts of the Group. It is satisfied
that management has a plan in place to
address these findings and will review
its implementation in 2020. Other than in
relation to this area of technical non-cash
accounting, no significant weaknesses or
control failures were found and identified
opportunities to strengthen control have
been taken and will themselves be subject
to regular review as part of IA’s work.
92
National Express Group PLC Annual Report 2019 External audit effectiveness
The Committee reviewed the effectiveness
of Deloitte’s performance as auditor shortly
following completion of its work by means
of an evaluation. This took the form of
questionnaires completed by members of
the Group and divisional finance teams and
was supplemented by feedback from the
Executive Directors and members of the
Committee, together with consideration of
the FRC’s latest Audit Quality Inspection
Report on Deloitte.
The evaluation confirmed that Deloitte
continues to perform its audit work to
a high standard, in particular as a result
of its comprehension of the Company’s
business, control processes and the
matters on which significant accounting
judgements or estimates are required and
its appropriate validation or challenge
of management’s views.
Tender and re-appointment
As noted in the Committee Chair’s letter,
the Committee will put the statutory
audit out to tender during 2020 with a
view to appointing an auditor for the year
commencing January 2021. Pending
such tender and on the recommendation
of the Committee, the Board is proposing
a resolution at the Company’s 2020 AGM
to re-appoint Deloitte as external auditor
for its 2020 financial year.
Fair, balanced and
understandable
Having carefully reviewed the content of
the 2019 Annual Report, and considered
a paper from management explaining
the approach taken in preparation of the
Annual Report, including having regard
to all applicable laws, the FRC’s best
practice guidance and the 2018 Code, and
having heard the views of its auditors, the
Committee recommended, and in turn the
Board confirmed, that the 2019 Annual
Report, taken as a whole, is fair, balanced
and understandable and provides the
necessary information for shareholders
to assess the Company’s position and
performance, business model and strategy.
External Audit
The Committee is responsible for reviewing
both the effectiveness of the Company’s
external audit process and the auditor’s
independence and objectivity.
Auditor and audit plan
Having first been appointed as auditor on
1 January 2011, on the recommendation
of the Board Deloitte LLP was re-appointed
by shareholders at the Company’s 2019
AGM to conduct a statutory audit and
express an opinion on the Consolidated
Financial Statements and the Company’s
Financial Statements. The current external
audit partner (appointed with effect from
1 January 2016) is Stephen Griggs, Head
of Audit and Risk Advisory for Deloitte in
the UK.
The 2019 external audit plan prepared by
Deloitte was based on the performance
of full scope audit procedures for each
of the Company’s UK and Germany,
North America and ALSA divisions.
Following consideration and consultation
with management, Deloitte’s audit plan,
together with its audit fee proposal (of £1.5
million), was approved by the Committee.
Non-audit services and
independence
The Company operates a non-audit services
policy which sets out the circumstances in
which its audit firm may be considered and
engaged to provide permitted non-audit
services as well as the services which its
audit firm is prohibited from providing, for
the purpose of safeguarding the auditor’s
objectivity. The Committee reviewed the
policy during the year and concluded that it
remained fit for purpose. It also reviewed the
Company’s compliance against the policy,
which was confirmed by reference to a list
of non-audit services provided by Deloitte
during 2019. These comprised only the
interim review of the half-year results, the
total value of fees for which was £0.1 million,
representing c.7% of the Group’s audit fee
for the year under review.
Having regard to the above, together with
Deloitte’s report submitted to the Committee
confirming its independence by reference
to the firm’s internal safeguards and also
the length of tenure of both the audit
firm (of less than 10 years) and the audit
engagement partner (of less than five years),
the Committee assured itself of the ongoing
independence of Deloitte.
93
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit, risk and internal control
Safety & Environment Committee Report
The Group has delivered its best ever safety
performance, attaining for the first time Target Zero
with no responsible fatalities in the year. This is a
truly commendable achievement in respect of which
I congratulate Dean Finch, his management team
and every member of the workforce who, through their
relentless focus and intensive efforts on improving
safety over many years, have made it happen”
Chris Muntwyler
Committee Chair
Primary role
To oversee the effectiveness of the
Group’s safety, health and wellbeing
and environment strategies, policies,
targets and initiatives, to assess the
Group’s performance against them, and
to monitor the Group’s exposure to, and
management of, risk in these areas.
The Committee’s terms of reference,
reviewed and approved annually, are
available on the Company’s website at
www.nationalexpressgroup.com
Key responsibilities
− Monitor the Group’s safety, health
and wellbeing and environmental
leadership, performance and culture
− Review the Group’s strategy and
framework of policies, targets,
programmes and initiatives for
managing safety risks across
the Group and for managing the
Group’s impact on the environment
− Review the Group’s performance
against these matters and assess the
integrity of external reporting of that
performance
Activity highlights
− Monitored the Group’s performance
against its safety and environmental
policies and targets
− Reviewed major accidents and incidents
and the action plans developed or
lessons learned in response to them
− Reviewed local health and wellbeing
programmes for the workforce
− Reviewed and approved the adoption
of new environmental KPIs and
monitored the Group’s performance
against them
− Received updates on new
environmental regulations and the
development of environmental
reporting best practice
Membership, meetings and attendance
Committee member¹
Chris Muntwyler (Chair)2
Sir John Armitt CBE3
Jorge Cosmen
Lee Sander2
Mike McKeon2
Dr Ashley Steel2
Joaquín Ayuso2
Jane Kingston2
Matthew Crummack2
Ana de Pro Gonzalo2,4
Karen Geary2,4
Appointed
Meetings
attended
11.05.11
01.01.13
01.12.05
01.06.11
03.07.15
01.01.16
01.06.11
26.02.14
06.05.15
01.10.19
01.10.19
1 Committee membership is shown as at 31 December 2019. Since the end of the year, Mr Ayuso
and Ms Kingston have stepped down from the Committee
Independent Non-Executive Director
2
3 Chairman of the Board
4 Ms de Pro Gonzalo and Ms Geary were appointed on 1 October 2019. There was only one
Committee meeting in the year since their appointment
Other attendees: Company Secretary, Executive Directors, Group Safety Director and
Head of Property. Further information about the Committee members is set out on pages
60 and 64.
94
Dear fellow shareholder
I am pleased to present the Safety &
Environment Committee Report for the
year under review. The Company’s safety
performance in 2019 has been exceptional.
The Company has also taken important
steps during 2019 to seek to continue to
reduce its impact on the environment.
These results and actions reflect the
Company’s appreciation of its role and
responsibility in wider society to provide
safe mobility services in a sustainable way.
The Committee plays an important role
in the Company’s corporate governance
framework, supplementing the Board’s and
Audit Committee’s oversight of the Group’s
management of risk and system of internal
control. It does so by maintaining a specific
and dedicated focus on monitoring and
reviewing the effectiveness of the Group’s
safety and environmental strategies,
policies and targets.
Safety governance, policies
and programmes
Dean Finch, the Group Chief Executive,
has overall responsibility for safety,
supported by the Group Safety Director
and divisional managing directors.
Together they set the tone from the top
by ensuring that the safety of the Group’s
passengers, workforce and other road
users – which is one of the Group’s five
core Values – is also the Group’s number
one priority. The results of the Group’s
employee surveys undertaken in the
year – in which questions asked about
whether we live by our Safety Value scored
consistently highly – confirm that this
safety leadership has been translated into
an embedded culture of ‘safety first’ across
the Group.
During the year under review, the
Committee has monitored the
Group’s safety plans and reviewed the
implementation and effectiveness of the
Group’s safety policies and processes.
It has also continued to review all major
safety accidents and events, together with
the Group’s response to them, to ensure
that any appropriate lessons are learned
from them.
National Express Group PLC Annual Report 2019
Safety performance
In 2019 the Group has delivered its best
ever safety performance, attaining for the
first time Target Zero with no responsible
fatalities in the year. This is a truly
commendable achievement in respect
of which I congratulate Dean Finch, his
management team and every member of
the workforce who, through their relentless
focus and intensive efforts on improving
safety over many years, have made
it happen.
The combination of zero responsible
fatalities and fewer major and lost time
injuries across the Group over the 12
months to 31 December 2019 means that
the Group has also achieved, in 2019, its
lowest ever Fatalities and Weighted Injuries
(FWI) Index score since this measure was
introduced by the Group in 2011. The
2019 FWI score is over 83% lower that the
Group’s FWI score in 2011 and more than
half the Group’s previous lowest ever FWI
score achieved in both 2017 and 2018. The
graph at the bottom of this page illustrates
these impressive reductions.
In view of these excellent safety results,
the Committee was able to confirm to the
Remuneration Committee that there was no
event in the year under review which would
trigger the ‘safety underpin’ – the feature of
the Directors’ Remuneration Policy which
permits the Remuneration Committee to
use discretion to reduce Executive Director
remuneration and which is also applied to
senior managers’ remuneration.
The focus of these plans in 2019 has been
to complete, consolidate and embed the
implementation across the business of the
Group’s five new Global Safety Policies. As
a result management’s unyielding focus on
driving this implementation and following
assurance given to the Committee by the
Group’s Internal Audit team about the
progress being made, the Committee is
pleased to report that the Group remains
on track to achieve full implementation by
the end of 2020.
Key examples of activity undertaken by the
Group in the year in implementing the five
new Global Safety Policies include:
− the further roll-out of DriveCam, which
is now installed on the entire UK fleet,
over 21,000 vehicles in the USA and over
1,350 vehicles in Spain, together with the
regular provision to drivers of DriveCam
coaching, with the effectiveness of that
coaching improving across all divisions;
− the implementation of driver risk
profiling for all drivers, which gives
drivers risk scores based on a range
of factors including DriveCam events,
driving assessments, accidents and
customer complaints, and also gives
them access to their risk scores through
downloadable apps or other means;
− the continued provision of training for
drivers, supervisors and managers in
modules such as driver risk profiling,
DriveCam coaching, speeding and
hazard awareness, as well as the
provision of training to over 200 more
driver evaluators on best practice for
driver evaluation; and
− the continued enforcement by the Group
of its zero tolerance attitude to speeding
and mobile device usage by drivers,
through re-training, discipline or, where
appropriate, dismissal of drivers.
During the year, the Group has also
advanced its other safety programmes and
developed ad hoc new safety initiatives to
address common risks, including:
FWI per million miles operated
− the World Class Maintenance
Programme, which seeks to promote
best practice across vehicle
maintenance practices and procedures
by the creation and adoption of
Standard Operating Procedures
throughout the Group;
− a new vehicle fire action plan,
which promotes best practice
maintenance methodologies to reduce
the risk of vehicle fires arising from
vehicle component wear or software
faults; and
− a specific action plan for raising
awareness among UK bus drivers
of the risk of low bridge strikes.
The Committee members have been
pleased to observe, first-hand when
they have visited the operations as part
of the Board’s engagement programme
(as described on pages 71 to 73), how
the Group’s workforce has continued
to embrace the Target Zero message
and ambition.
Target Zero is the campaign that was
launched in 2017 to accompany the five
new Global Safety Policies. It promotes
a clear and simple message to every
member of the workforce – that any fatality
is unacceptable and that the Company’s
ultimate goal is to achieve a year of zero
responsible fatalities. The message was
refreshed in the year by using examples of
recent accidents and incidents on posters
and videos displayed across the Group’s
operational sites to raise awareness of
them and seek to prevent repeat incidents.
The Committee believes that the
programme of change, created by the
new Global Safety Policies and enhanced
by the Target Zero campaign, has helped
to drive a cultural change throughout
the Group in the way that members of
the workforce view safety as their own
responsibility and priority. This cultural
change has, in turn, contributed to the
Group’s outstanding safety performance.
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0.00
2011
2012
2013
2014
2015
2016
2017
2018
2019
Million miles
FWI/million miles
800
700
600
500
400
300
200
100
0
95
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit, risk and internal control
Safety & Environment Committee Report continued
The Group’s UK
coach business is the
only organisation in
the transport sector to
have been awarded the
British Safety Council’s
Sword of Honour for
five consecutive years
and its UK bus business
was commended for
being the safest public
transport company of
all those audited by the
British Safety Council
across the world in the
year”
The Group’s robust safety management
systems have once again been recognised
through a number of industry accolades
and accreditations in 2019:
− the British Safety Council awarded both
UK coach and UK bus the prestigious
Sword of Honour for a fifth and
fourth consecutive year respectively,
recognising their commitment to
excellent standards of health, safety
and environment management;
− the UK division retained, in both UK
coach and UK bus, its ISO 45001
certification relating to occupational
health and safety;
− ALSA retained, in both Spain and
Morocco, its ISO 39001 certification
relating to road traffic security and
its CSEAA safety certificate, and was
awarded the highest excellence scores
through the certification process; and
− the North America business renewed
its ANSI/AIHA Z10 certification, which
recognises the business for having the
management programmes to support
the safe operation of activities related
to student and transit transportation
services within the USA and Canada.
The Group’s UK coach business is the only
organisation in the transport sector to have
been awarded the British Safety Council’s
Sword of Honour for five consecutive years
and its UK bus business was commended
for being the safest public transport
company of all those audited by the British
Safety Council across the world in the year.
Management’s view, endorsed by this
Committee, is that many of the Group’s
safety programmes and practices are likely
to be industry-leading. For example, the
Group considers that, in North America,
it has the strictest screening programme
for new drivers in the industry, the strictest
safety monitoring system for drivers of any
school bus company and its school buses
have more on-board safety equipment
than any other operator. The Committee
believes that these industry-leading safety
programmes and practices lead to superior
safety performance.
To date, while the Committee has been able
to assess the Group’s safety performance
by reference to its FWI score and other
internally set KPIs, it is harder to assess its
performance relative to other passenger,
freight or other transit providers as there
is no mandatory public reporting of safety
performance data in the industry.
In this context, the Committee welcomed
in the year a report prepared by Lytx,
the third party supplier of the Group’s
DriveCam technology, which benchmarked
the Group’s ‘DriveCam risk score’ – the
measure which Lytx uses to ascribe
relative risk ratings to drivers – against
Lytx’s transit customer base. This gave
the Committee first-time insight into the
Group’s relative driver safety performance
against that of a sub-set of the wider
industry. The Committee was extremely
pleased to learn that every one of the
Group’s divisions achieved a lower
DriveCam risk score than the Lytx industry
average risk score. The Group’s UK bus
business’ DriveCam risk score was also
the lowest, and therefore the best, among
all Lytx’s customers. This benchmarking
has reinforced the Committee’s view of
the industry-leading status of the Group’s
safety programmes.
The superiority of the Group’s safety
programmes is also helping us to realise
other important benefits. These include
financial benefits as a result of the Group
being involved in fewer road traffic
incidents and being subject to fewer
insured claims. This, in turn, reduces
the Company’s exposure to insurance
deductibles and assists the Company in
maintaining acceptable premium rates on
its motor insurance policies.
Health and wellbeing
of the workforce
The Group is committed to promoting
the health and wellbeing of its workforce
through a series of division-led
programmes and initiatives which focus
on occupational health as well as the wider
physical and mental health of workers.
In 2019, these included:
− in the UK division:
− further visits by the Health Bus – the
mobile clinic staffed by medical
professionals who can offer
confidential health advice and checks
to employees – to our UK offices and
depots, which received over 1,100
visitors in the year, bringing the total
visitors since its introduction to 7,810;
− continued promotion of the Employee
Assistance Programme which offers
mental health wellness assistance to
employees, including via a new app
which allows employees to track how
they feel with a pathway to further
support if needed;
− in the North America division:
− continued promotion of the Wellness
Screening Programme – which
incentivises employees to undertake
full biometric screenings, giving them
early warning of medical conditions
enabling them to seek early treatment
– supplemented by a disease
management and pharmacy support
programme which assists employees
with serious health conditions to best
manage those conditions;
− development of the wider Wellbeing
Plan, which has focused in the year on
driving behavioural changes among
workers to improve their health and
wellbeing, supported by regular
newsletters raising awareness of
particular health topics such as breast
cancer and heart health;
− in the ALSA division:
− participation in the Pulse Project, which
is about working with other companies,
educational organisations and medical
professionals to conduct health
research aimed at improving drivers’
physical and psychological condition;
− continued promotion of the For Your
Health programme, which encourages
employees to improve their lifestyle
and personal wellbeing through
physical activity, good nutrition and
self-care for mental health, supported
by the regular For Your Health blog
accessible to employees via the
internet or the miALSA app on which
health and wellbeing information
is published.
Some of the Group’s health and wellbeing
programmes have also been recognised
externally during the year, with:
− the UK coach and UK bus businesses
retaining their ISO 45001 certification in
occupational health and safety; and
− ALSA becoming the first national
passenger road transport company
to be awarded the International
Healthy Company Award (in the Large
Company category) for its For Your
Health programme by the ORH (Human
Resource Observatory) organisation.
96
National Express Group PLC Annual Report 2019 It has been pleasing for the Committee to
see the Group’s commitment to the health
and wellbeing of its workforce evidenced,
and recognised, in this way.
Evolution of approach to the
environment
As I noted in my introduction, the
Company has an essential role to play
in wider society by providing people
with mobility services in both a safe and
sustainable way.
The Group, overseen by the Committee,
has taken a number of progressive steps
over recent years to reduce or mitigate
its own impact on the environment, as
demonstrated by its broadly positive
performance against its five-year 2014-
2018 environmental KPIs (see page 201
of the Company’s 2018 Annual Report).
Building on these steps, the Group now
has an increased focus on providing
its mobility services to customers in a
way that can reduce both our and their
impact on the environment. As more of
our customers prioritise the sustainability
of the transport services they are using
or procuring, the more we wish to align
ourselves with these priorities and work
with our customers to achieve this
important mutual goal.
A key example of how the Group is
working to achieve this goal is through
its vehicle purchasing strategy. As can be
seen from the explanations (on pages 66
to 68) of how the Company’s Directors
have discharged their duties under Section
172(1) of the Companies Act 2006, some
of the Board’s principal decisions are
about allocating capital to the purchase
of new vehicles. In every such decision
taken during 2019, the Board has
had due regard to the environment by
considering the rationale for purchasing
either diesel, electric or alternative fuel
propelled vehicles.
Indeed, the Group set out a leadership
position on its approach to a cleaner
and greener future in its 2019 preliminary
results announcement by committing to
never buying another diesel vehicle in the
UK. As set out in the Strategic Report,
the Group’s ambition is to operate only
zero emission vehicles (ZEVs) in UK bus
by 2030 and in UK coach by 2035. The
Committee intends to review the Group’s
progress against this ambition each year
and will consider with management how
this ambition can be expanded into other
parts of the Group. Through realising this
ambition and taking other appropriate
steps, the Group intends to reduce its total
carbon emissions per million passenger
kilometre (tCO2e/million pass km) over the
coming years.
Environmental regulations
and reporting
For the year under review, I am pleased
to report that the Group has again
maintained full compliance with all relevant
environmental requirements, with no
reported violations, enforcement actions
or valid compliance or penalty notices.
As required by law, we set out, on page 47
of the Strategic Report, details of our total
GHG emissions, by division and by scope
(per the GHG Protocol Corporate Standard)
alongside intensity metrics for the year
ended 31 December 2019. The Committee
has reviewed these results and notes
that, while the Group has seen a relatively
small year-on-year increase in total GHG
emissions, this increase is lower than the
growth in passenger kilometres operated
by the Group during the year, reflecting the
Group’s continued investment in greener
vehicles. As a result, the Committee is
pleased to have seen a reduction in the
Group’s intensity metrics (-9.00% in total
tCO2e/£million revenue and -2.02% in total
tCO2e/million pass km).
The Committee is cognisant of the UK
Government’s Streamlined Energy and
Carbon Reporting requirements, which
will take effect for the Company in respect
of its next financial year ending on 31
December 2020, and will report against
those revised requirements next year. It
is also reviewing the recommendations of
the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures
(TCFD) and will make appropriate
proposals to the Board about reporting in
line with these going forwards. A current
status report against these is set out on
page 45 of the Strategic Report.
Environmental KPIs
We further explain, on page 46 of the
Strategic Report, how the Company,
following careful review by the Committee,
has in 2019 adopted six new environmental
KPIs, three of which are ‘climate science’
or ‘science based’ targets and the
other three more traditional targets. The
three ‘science based’ targets relate to:
total scope 1 & 2 emissions per million
passenger kilometre (tCO2e/m pass km);
scope 1 & 2 traction carbon emissions per
million passenger kilometre (tCO2e/m pass
km); and traction energy use per million
passenger kilometre (MWh/m pass km) and
are based on the Sectoral Decarbonisation
Approach (SDA) developed by the United
Nations established Intergovernmental
Panel on Climate Change (IPCC). The
three ‘non-science based’ targets relate to:
building emissions, water usage and
non-hazardous waste to landfill volumes.
As more of our
customers prioritise
the sustainability of the
transport services they
are using or procuring,
the more we wish to
align ourselves with
these priorities and
work with our customers
to achieve this important
mutual goal”
All the new environmental KPIs operate
as absolute targets to be assessed at
the end of a seven year measurement
period in 2025 but, to track the Group’s
progress towards these absolute targets,
the Committee has reviewed the Group’s
performance against them in 2019, which
is shown in the KPI table on page 46. It is
good to see that we have made a strong
start towards reaching the absolute targets
for each of the three ‘climate science’
KPIs and the building emissions KPI, with
year-on-year reductions in each measure.
We are also pleased to see the reduction
in waste to landfill volumes, reversing the
increasing trend since 2014.
The Committee intends to keep the new
environmental KPIs and the Group’s
performance against them under careful
review over the seven year measurement
period to ensure the KPIs remain both
achievable and stretching and the Group
continues to make progress against them.
Environmental LTIP measures
Aligned with the Group’s new leadership
position, in early 2020 the Committee
together with the Remuneration Committee
considered, and recommended to the
Board, the addition of new environmental
performance measures to the Long-
Term Incentive Plan (LTIP) awards
made to Executive Directors and senior
managers. These combined 25%
weighted measures – 15% apportioned
to a reduction in the Group’s total carbon
emissions (tCO2e/ m pass km) and 10%
to an increase in the number of ZEVs
operated by the Group’s UK division
– demonstrates our commitment to
achieving our environmental ambitions.
Further information about the new LTIP
environmental performance measures
can be found in the Directors’
Remuneration Report.
97
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit, risk and internal control
Safety & Environment Committee Report continued
Committee engagement
In April 2019, I, on behalf of the Committee,
undertook my now traditional annual safety
tour. In consultation with our Group Safety
Director, I decided to return to visit some
of our operations in North America as it is
our largest and fastest-growing division
yet is also faced with some of the most
challenging operational issues, particularly
due to the ongoing driver shortages in the
US labour market.
I chose to visit for the second time one
of our school bus operations in New York
(which the Group acquired in 2016 and
which I first visited in 2017) to assess its
progress in implementing the Group’s
Global Safety Policies since my prior visit.
I was very pleased with the progress the
new management team had made and that
action plans were in place to drive further
improvements. Although still a new team,
it was good to see how engaged they were
with the Group’s best practices.
I also visited a number of our businesses in
and around the Great Lakes region, including
the Group’s CDT paratransit business in
Chicago (which we acquired in 2017) and a
number of our customer service centres in
Illinois and Wisconsin (which vary in size and
complexity of their operations), to observe
their safety practices. I was particularly
impressed with the level of professionalism
at all sites, whether large or small, and
how seriously safety is taken, reflecting
the tone from the top. It was interesting to
observe how everyone I spoke to at each of
the different sites was speaking the same
language about the Group’s Global Safety
Policies and the benefits they were deriving
from them.
My annual safety tours have always
represented an excellent opportunity for
me to talk to members of our workforce,
including the drivers and technicians on the
‘front line’ and their line managers, and hear
and see, first-hand, how the Group’s Global
Safety Policies and other safety programmes
and technology are making a difference.
Committee composition
and effectiveness
The Committee’s membership is
comprised of all the Company’s Non-
Executive Directors and its meetings are
also attended by the Executive Directors,
underlining the importance which the Board
attaches to its activities. During 2019,
we welcomed Ana de Pro Gonzalo and
Karen Geary, our two new Non-Executive
Directors, to the Committee.
98
I trust that you, as the owners of
this Company, are as proud as this
Committee of the Company’s
achievements in relation to safety
and as interested as this Committee
in the Company’s continuing evolution
in relation to environmental matters.
For those of you who will attend this
year’s AGM, I look forward to seeing
you there and answering any questions
you may have on this report or the
Committee’s work.
Chris Muntwyler
Safety & Environment Committee Chair
27 February 2020
The performance of the Committee
during the year was evaluated as part of
the internal evaluation of the effectiveness
of the Board and its Committees. The
Committee scored very well on all
measures of effectiveness, including
in particular its high level of attention
to safety matters.
Looking ahead
I once again wish to congratulate Dean
Finch, his management team and everyone
else in the Group who has played a
role in the achievement of Target Zero.
Having reached this fantastic result,
the executive management team and
Committee have agreed that there is
no room for complacency as the Group
will need to work harder still to maintain
this achievement through the continued
application and further development of
its safety policies and processes. The
Committee will therefore continue to
monitor and review the Group’s work
in this regard.
In addition, with the spotlight being shone
on the impact that businesses have on the
environment and how the environment can
impact them, and the pivotal role that the
Group, as a mass transit provider, has to
play in advancing sustainable travel for its
customers and thereby sustaining its own
business, the Committee will also continue
to monitor the Group’s performance in this
important area.
National Express Group PLC Annual Report 2019 Directors’ Remuneration Report
Annual Statement by the Remuneration Committee Chair
The Committee is satisfied that the Directors’
Remuneration Policy has operated as intended to
appropriately reward and incentivise Executive Directors
having regard to the significant alignment between the
Executive Directors’ remuneration outcomes and the
superior financial returns delivered to shareholders”
Dr Ashley Steel
Committee Chair
Activity highlights
− Considered the alignment of
Executive remuneration with the
Group’s strategy
− Reviewed and confirmed the
outcome of the 2019 annual bonus
and the 2017 three-year Long-Term
Incentive Plan awards for Executive
Directors and senior management†
and ensured that the Directors’
Remuneration Policy is operating
as intended
− Undertook the 2020 salary review
for Executive Directors and senior
management†, having regard to
a wide array of internal and
external factors
− Set targets and performance
measures for the 2020 annual
bonus and LTIP awards to Executive
Directors and senior management†
− Reviewed and determined 2020 fees
for the Chairman
− Considered the relationship
between executive pay and
wider workforce pay
− Considered corporate governance
developments and market practice
relating to executive and wider
workforce pay
The Committee’s terms of reference,
which are reviewed and approved
annually and which explain the
Committee’s primary role and
key responsibilities, are available
on the Company’s website at
www.nationalexpressgroup.com
† The Company’s senior management
whose remuneration is determined by the
Committee is comprised of the divisional
managing directors and the Group
functional heads who are direct reports to
the CEO and who together form the Group
Executive Committee
Membership, meetings and attendance
Committee member1
Dr Ashley Steel (Chair)2 3
Jane Kingston2 4
Lee Sander2 5
Matthew Crummack2
Karen Geary2 6
Meetings
attended
Appointed
29.01.19
26.02.14
01.06.11
01.05.16
01.10.19
1 Committee membership is shown as at 31 December 2019. Since the end of the year,
Lee Sander has stepped down from the Committee
Independent Non-Executive Director
²
3 Appointed to the Committee on 29 January 2019 and as Chair on 9 May 2019
4 Chair of the Committee until 9 May 2019 and a member until 31 December 2019
5 Mr Sander was unable to attend the February 2019 Committee meeting due to his inbound flight
to the UK being delayed – please see page 78 for the Board’s process for ensuring Directors
involvement in meetings they cannot attend
6 Ms Geary was appointed on 1 October 2019 and attended the only Committee meeting in the
year held since her appointment
Other attendees: Company Secretary, Company Chairman*, Group Chief Executive*,
Human Resources Director and representatives of the independent remuneration
advisers, PwC. *Do not attend during discussions relating to their own remuneration.
Further information about the Committee members is set out on pages 60 to 64.
Dear fellow shareholder
On behalf of the Board I am pleased to
present the 2019 Directors’ Remuneration
Report. 2019 was an exceptional year for
the Group, in terms of both its financial and
safety performance. This performance has
demonstrated the continued success of
the Group’s strategy and its significant and
ongoing investment in safety.
This is my first report since becoming Chair
of the Remuneration Committee. To begin,
I would like to thank Jane Kingston, who
chaired the Committee for over five years,
for her excellent leadership and her support
to me during transition. I would also like
to welcome Karen Geary, who joined the
Committee on 1 October 2019 and brings
additional strength to its membership.
2019 was the second year under the
current three-year Directors’ Remuneration
Policy (the Policy). The Policy has continued
to provide an effective framework enabling
us to appropriately reward and incentivise
Executive Directors and senior management
to sustain the Group’s success.
2019 financial results
In 2019, the Group delivered another year of
record-breaking financial results. The results
are all the more remarkable as they have
been achieved in the context of continuing
headwinds, including the ongoing uncertainty
around Brexit in the UK and the continuing
pressures of wage inflation and price
competition in North America.
The Group’s significant outperformance as
regards total shareholder return relative to
both the FTSE 250 Index and its peer group
over each of the last three, five and ten-year
periods is shown in the chart at the top of the
next page.
Due to the strength of these results,
the Board is recommending its fourth
consecutive 10% increase in the
final dividend for the year ended
31 December 2019.
99
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Directors’ Remuneration Report
Annual Statement by the Remuneration Committee Chair
Total shareholder return
250%
200%
150%
100%
50%
0%
-50%
3 year
5 year
10 year
Index of peers
FTSE 250
National Express
2019 non-financial results
The leadership team has delivered an outstanding safety result. Notably there have been
no responsible fatalities in the year. In addition, there have been fewer major and lost-time
injuries. The Group’s Fatalities and Weighted Injuries (FWI) Index score is now the lowest since
the measure was adopted in 2011. Following consultation with the Safety & Environment
Committee, the Committee is therefore satisfied that the safety underpin to the Executive
Directors’ and senior management’s annual bonus and LTIP awards has been met.
The Executive Directors have also made excellent progress in the year against their non-
financial bonus objectives. These were based on strategic targets around continuing to
embed the Group’s safety programmes and delivering growth through driving excellence and
technological innovation while also appropriately managing risk.
2019 remuneration outcomes
The Committee approved the following remuneration outcomes for Executive Directors:
− for each of the Group Chief Executive and Group Finance Director, awards of 100% of their
respective 2019 maximum annual bonus opportunities;
− for the Group Business Development Director, an award of 55% of his 2019 maximum annual
bonus opportunity; and
− for all Executive Directors, 91.53% vesting of their 2017 LTIP awards as a result of the
Group’s performance against each of the TSR, EPS and ROCE performance measures
over the 2017-2019 performance period, as shown in the table below:
Performance measure
Proportion of
LTIP award
Diluted normalised earnings
per share
1/3rd
Relative total shareholder return
vs. FTSE 250
1/6th
Relative total shareholder return
vs bespoke group
1/6th
Average return on capital
employed
1/3rd
2017-2019 performance
outcome
Three-year growth rate of 26.5%
Outperformance over three years
of 11.3%
Outperformance over three years
of 28.8%
Average return over three years
of 12.2%
The remuneration outcomes are shown in the ‘Remuneration at a glance and in context’
section on page 103, together with, on pages 103-106, explanations of how executive
remuneration is linked to the Company’s strategy and its KPIs and how it achieves clarity,
simplicity, proportionality and predictability while ensuring mitigation of risk and alignment
to culture.
The Committee is satisfied that the Policy has operated as intended to appropriately reward
and incentivise Executive Directors having regard to:
− the significant alignment between the Executive Directors’ remuneration outcomes and
the superior financial returns delivered to shareholders;
− the linkage between Executive Directors’ non-financial bonus targets and the Group’s
strategic priorities of growth, technology and operational excellence which have been
advanced in the year; and
− the linkage between Executive Directors’ non-financial bonus targets and the Group’s
overriding priority of safety and achievement by the Group of Target Zero and its lowest
ever FWI score in the year.
Given the above, the Committee did not exercise discretion under the Policy.
2019 performance highlights
Group revenue
£2.74bn
up 10.2%1
Normalised profit before tax
£240.0m
up 7.8%1
Statutory profit after tax
£148.3m
up 6.9%2
Normalised basic earnings
per share
34.5p
up 4.9%3
Free cash flow
£178.7m
Target Zero
Zero
responsible fatalities
FWI Index
4.513
Total shareholder return
30%
during 2019
Reduction in CEO pay
£588,000
from 2018
1 On a constant currency basis
2 On a continuing basis
3 34.4p on a normalised diluted basis
100
National Express Group PLC Annual Report 2019 2020 base pay and fees
Having satisfied itself that the Policy remains fit for purpose for 2020, the Committee undertook a full review of Executive Directors’ and
senior management’s salary levels. This encompassed a review of various factors, including:
− the growing size and international status of the Group;
− economic factors, including general employment statistics, average earnings increases or decreases and inflation rates in each of the
labour markets in which the Group operates; and
− the Group’s workforce pay and related practices in 2019 and budgeted for 2020, as shown in the box below:
− The general pay increase awarded in 2019 to various
categories of UK employees of between 2.2% and 2.85%
− The average pay increase awarded in 2019 to the top decile
of UK employees with over 12 months service of 12.75%,
which included UK employees who received increases
relating to performance and promotion, including assumption
of wider responsibilities
− The overall budgeted 2020 average pay increase for UK
employees of 2.5%
− The Group’s commitment to paying its workforce the
Real Living Wage in the UK or its equivalent in other
countries, or, where no equivalent exists, at least the
national minimum wage in each of the labour markets
in which the Group operates
− The Group’s commitment to enhancing the diversity of its
workforce
− The Group’s UK gender pay gap median and mean data1
− The Company’s CEO pay ratios1
1 Further information about the UK gender pay gap and the CEO pay
ratios are set out on page 102
To assist further with the review of Executive
Directors’ salaries, PwC carried out a
benchmarking exercise of the Group
Chief Executive’s and the Group Finance
Director’s base salaries and total on-target
remuneration and those of their counterparts
in three comparator groups. This was the first
such exercise the Committee had carried out
for a number of years.
It confirmed that Mr Finch’s 2019 on-target
remuneration was below the upper quartile
of two out of three comparator groups and
markedly below the median of a bespoke
comparator group that included companies
in the FTSE 250 with a similar market
capitalisation to the Company and deriving at
least 25% of their revenues from international
operations. It also confirmed that Mr Davies’
2019 on-target remuneration was below the
median of all three comparator groups.
The Committee and Board believe that a
failure now to align the pay of the Group
Chief Executive and Group Finance Director,
who have over the last few years consistently
delivered top quartile performance, with the
market rate of pay for such performance
could present challenges around retention of
the current executive team and the ability to
recruit high quality executives in the future.
Given the above, the Committee
recommended to the Board, and the
Board approved, the following 2020 salary
increases for Executive Directors:
− for Dean Finch, Group Chief Executive,
an 8.5% increase. This reflects the
increased scope, scale and complexity
of Mr Finch’s role now relative to when
he was appointed 10 years ago. During
this time, the Group’s international
operations have expanded significantly
as a result of Mr Finch’s strategic
vision and focus on sustainable growth
and market penetration. The increase
also reflects Mr Finch’s outstanding
performance in role and the high levels
of growth in value demonstrated in
recent years. The resulting salary
is positioned below the median for
comparable organisations of similar
size and complexity;
− for Chris Davies, Group Finance Director,
an 8.5% increase. Mr Davies joined the
Group in 2017 at a below market rate base
salary as this was his first CFO role. The
increase in salary recognises he is now
established in role which, in view of the
Group’s expansion as noted above, has
become larger and more complex; and
− for Matt Ashley, Group Business
Development Director, a 2.5% increase
to reflect him being new in this role.
The salary increase for Matt Ashley of
2.5% is in line with the average increase
awarded to the UK workforce. The upper
decile increases awarded to members of
the UK workforce who have performed
very strongly and/or whose responsibilities
have materially grown was 12.75%. The
increases for Messrs Finch and Davies
of 8.5% are therefore consistent with the
Group’s wider workforce pay policies
and practices, which have an emphasis
on fairly rewarding performance and
recognising the level of responsibility
that each role has.
The Committee also approved a 2.5%
increase in the Chairman’s fees for 2020
following a benchmarking exercise which
confirmed that their increase in line with
the average UK workforce increase
was appropriate.
2020 pensions
2020 will be the second year in which
Mr Finch’s pension allowance will be
reduced in line with his voluntary offer
to reduce it from 35% to 30% of base
salary over three years in equal amounts
(such that, in 2020, his allowance will be
equal to 31.6% of base salary). The other
Executive Directors will continue to receive
pension allowances of 25% of base salary.
However, as part of the next Policy review
the Committee will be aligning the pension
contribution for all Executive Directors to
those available across the UK workforce
on 1 January 2023.
2020 bonus and LTIPs
The Committee considers that the structure,
performance conditions and award
opportunity for Executive Directors’ and
senior management’s annual bonuses and
LTIPs remain appropriate and will therefore
be the same in 2020 as in 2019, save in
respect of the following three adjustments:
− Executive Directors’ and senior
management’s FWI bonus target will be
reduced from 10% to 5% (but otherwise
will be calculated on the same basis). Their
other safety-related bonus targets will be
increased from 8% to 13% (keeping the
total weighting of safety targets at 18%).
This is because the Group’s FWI score as
an output measure is increasingly affected
by one-off events, meaning it is more
appropriate to move management’s
focus to input safety objectives;
− Casablanca safety incidents will be
excluded from the Group’s FWI score for
the next two years. This is due to it being
a significant new operation which will be
performed at the outset with the prior
operator’s fleet and where it is expected
to take time to embed fully the Group’s
Global Safety Policies. Executive Directors
101
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Committee engagement
In February this year, I wrote to principal
shareholders to explain the approach
the Committee has taken to Executive
Directors’ pay increases in 2020 and the
proposed addition of the new environmental
performance measures to the Executive
Directors’ and senior management’s LTIP
awards. The Committee also intends to
engage with its principal shareholders
during 2020 as it develops its new Policy
for 2021-2023.
The Committee notes that the 2018 Code
encourages engagement with the workforce
to explain how executive remuneration
aligns with wider company pay policy.
As noted on pages 71 to 73, during 2019
the Board supplemented its usual workforce
engagement programme by undertaking
additional workforce engagement events.
These presented useful opportunities for
discussions about the Board and this
Committee’s approach to executive and
wider workforce remuneration. To assist
further such discussions in future, this
Directors’ Remuneration Report seeks
to explain some of the areas of parity
in the approach between executive and
workforce pay.
Looking ahead
I am satisfied that the current Policy has
served the business well and trust you agree
that the Committee and Board have applied
it appropriately.
During 2020 we will be reviewing the Policy,
taking into account market factors and
the 2018 Code, to develop our new Policy
for 2021-2023. Meanwhile, I welcome any
comments you have.
Dr Ashley Steel
Remuneration Committee Chair
27 February 2020
Directors’ Remuneration Report
Annual Statement by the Remuneration Committee Chair continued
and local management will therefore be
set Casablanca-specific input safety
objectives instead to ensure continued
focus in this area; and
− two additional performance measures
will be added to Executive Directors’ and
senior management’s LTIP awards in
2020 to align their pay with the Group’s
environmental ambitions. These relate
to reductions in the Group’s total carbon
emissions per million passenger kilometre
(tCO2e/m pass km) and an increase in
the number of zero emissions vehicles
(ZEVs) operated in the UK. The three-
year threshold, on-target and stretch
targets for such measures are set out
on page 119 of the Annual Report on
Remuneration. These were determined
by the Committee, following advice from
specialist environmental consultants,
as appropriately challenging three-year
staging posts towards the Group’s
environmental ambitions to continue to
reduce total carbon emissions and to
operate only zero emission vehicles in
UK bus by 2030 and in UK coach by
2035. The two measures together will
have a weighting of 25% - split 15% for
the reduction in tCO2e/m pass km and
10% for the increase in ZEVs - reducing
the weighting of each of the existing
performance measures (TSR, EPS and
ROCE) from 33.3% to 25% each.
For reasons of commercial sensitivity, further
details of the Executive Directors’ financial
and non-financial annual bonus performance
targets will be disclosed in the 2020 Annual
Report on Remuneration.
UK gender pay gap
During the year, the Committee reviewed
the Group’s latest UK gender pay gap data.
It shows that, as at 5 April 2018, the aggregate
median gender pay gap was 14.90%
(5 April 2017: 13.34%) and the aggregate
mean gender pay gap was 3.40%
(5 April 2017: 4.24%).
We remain of the view that the Group’s UK
gender pay gap is not a symptom of unequal
pay for equal work among men and women,
but rather there being more men than
women in senior roles across the relevant
UK businesses. The Company’s various
initiatives to encourage more women to
assume senior roles, which should assist in
closing the gender pay gap over time, are set
out in the Nominations Committee Report.
CEO pay ratios
2019 is the first year in which the Company is
publishing its CEO pay ratios, comparing the
Group Chief Executive’s total remuneration
with that of the Group’s UK employees
whose full time equivalent remuneration ranks
them at the 25th, 50th and 75th percentile
of UK employee pay. These ratios are,
respectively, 156:1, 136:1 and 110:1. They
demonstrate that the majority of the Group’s
UK employees are comprised of drivers and
technicians and that the Group operates a
lean management structure. Following careful
consideration, the Committee is satisfied
that the median pay ratio is consistent
with the Company’s pay, reward and
progression policies. When setting the
CEO’s pay, the Committee has regard
to the same fundamental considerations
as those taken into account by the UK
management team when setting pay for
all other UK employees. These include the
Company’s policy to pay market rates of
pay that reward employees fairly for work
done and have due regard to individual
performance and Company performance
where the individual has the ability to
influence wider Company performance.
The CEO has ultimate responsibility for,
and the greatest ability to influence,
the Company’s performance, returns to
shareholders and, importantly, the safety of
the workforce and passengers. To reflect
this, the CEO’s remuneration package
has a higher weighting on performance-
related pay (including the annual bonus
and LTIP) compared with the majority of
the workforce. This means the pay ratios
are likely to fluctuate depending on the
outcomes of incentive plans in each year.
Corporate governance
developments
In 2019, we considered the Principles and
Provisions of the 2018 Code and we kept
market practice in response to them and
other executive pay developments under
review. The Directors’ Remuneration Report
explains how the Principles and Provisions
of the 2018 Code relating to remuneration
have been applied and complied with,
respectively, save for those explained
on page 106. The Company has in 2019
remained wholly compliant with its current
Policy approved by shareholders at the
Company’s 2018 AGM.
Committee composition
and effectiveness
As noted on page 99, during the year I
assumed chairmanship of the Committee
and, as a result of the Board’s wider
succession plans, Karen Geary joined
the Committee. Details of our respective
experience can be found on pages 63 and
64. Since the end of year Lee Sander has
also stepped down from the Committee.
The Committee’s membership was and
remains fully compliant with the 2018 Code.
The outcome of the Committee’s
performance evaluation, undertaken as
part of the Company’s internal evaluation
of the effectiveness of the Board and
its Committees, was very positive and
highlighted as a particular strength the
Committee’s careful consideration and
application of the Directors’ Remuneration
Policy in a way intended to promote the
delivery of the Company’s strategy.
102
National Express Group PLC Annual Report 2019 Directors’ Remuneration Report
Remuneration at a glance and in context
Introduction
In this section we illustrate the total remuneration outcomes for the Executive Directors for the year under review and we explain:
− how the Company’s executive remuneration policy supports its strategy and sustainable success;
− how the Company’s executive remuneration policy and practices achieve the principles of clarity, simplicity, proportionality and
predictability as well as how they assist in mitigating risk and ensuring alignment to corporate culture; and
− where the Company has not fully complied with parts of three Provisions of the 2018 Code relating to remuneration.
Illustration of Executive Directors’ total remuneration for 2019
£648
£248
£1,296
£1,538
h
c
n
F
i
n
a
e
D
i
s
e
v
a
D
s
i
r
h
C
l
y
e
h
s
A
t
t
a
M
2019
2018
2019
2018
2019
2018
£630
£251
£1,135
£2,302
£3,730
£4,318
£369
£106
£553
£646
£1,674
£359
£108
£479
£268
£1,214
£369
£334
£306
£656
£359
£541
£314
£617
£1,665
£1,831
£’000
£0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
£3,500
£4,000
£4,500
Base salary
Pension and benefits
Annual bonus
LTIP
Supporting strategy and sustainable success
The Committee believes that the Company’s sustainable success is driven by a wide variety of factors. These include its strategy and the
environmental, social and governance (ESG) factors which are discussed in the Strategic Report and the Corporate Governance Report.
They also include the Company’s ability to achieve consistently strong financial results. Strong financial results, in terms of earnings, cash
flow and return on capital employed, enable the Company to continue to invest in each of its core strategic pillars of growth, technology
and operational excellence, and to achieve its number one priority of safety. It is these investments which help generate and sustain
strong results year on year and which in turn allow the Company to return value to shareholders year on year, earning their support for the
Company’s continued delivery of its strategy.
The table at the top of the next page describes how elements of the remuneration schemes operated under the current Directors’
Remuneration Policy support the Company’s strategy and long-term sustainable success.
103
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Directors’ Remuneration Report
Remuneration at a glance and in context continued
Strategic priority
Element of Policy
Linkage
Growth
Group profit before tax (PBT)/North American
earnings before interest and tax (EBIT) targets in
annual bonuses and EPS performance measure
in LTIPs
Profit and related earnings targets and performance measures drive
management’s efforts to achieve both organic growth, through new business
wins and cost efficiencies, and inorganic growth, through company and
business acquisitions, ensuring an appropriate focus on margin growth over
pure revenue growth
Group free cash flow target in annual bonuses
Availability of free cash flow facilitates the pursuit of an ambitious M&A
strategy and the continual investment in technology enhancement and
operational excellence
ROCE performance measure in LTIPs
Return on capital employed is a key measure to validate the quality of capital
allocation and ensure that investment is both appropriate and sustainable
Technology
enhancement
Personal bonus targets linked to both the
development of digital capabilities and building
stronger cyber security
Operational
excellence
Personal bonus targets linked to delivering
operational excellence programmes
Safety
Safety underpin in annual bonus and LTIPs
Maintenance of low FWI score
Personal bonus targets linked to the delivery
of safety initiatives
Enhanced digital capability, for example through improved customer ticketing
applications, improved ease of ticketing and payment system integration
with business partners and more accurate and timely customer billing control
systems, can improve profitability through both top-line revenue growth and
cost savings
Operational excellence, for example through creating and implementing
best in class operating procedures for managing driver risk and maintaining
vehicles and developing innovative programmes that deliver operational
efficiencies, can also improve profitability through achieving cost savings
and enhance reputation by mitigating risk
Our ability to get people where they need to go safely and our culture for
putting safety first is key to achieving the trust and loyalty of our customers
and so to making mass transit an increasingly attractive option and achieving
our Purpose
Supporting clarity, simplicity, proportionality and predictability and ensuring mitigation of risk and
alignment to culture
The table below explains how the current Directors’ Remuneration Policy and the practices of the Committee in applying it address the
factors set out in Provision 40 of the 2018 Code:
Provision 40 factor
Element of Directors’ Remuneration Policy and/or practice
Clarity – clarity and transparency is achieved
through a combination of explanations for
decisions taken and advance disclosure of the
nature and weighting of annual bonus targets
and LTIP performance measures
The Committee’s rationale for increasing Executive Directors’ salaries in 2020 has been explained in
detail on page 101 of the Annual Statement by the Remuneration Committee Chair
The key constituents of Executive Directors’ 2019 annual bonus targets and LTIP performance
measures were disclosed in advance on page 76 the 2018 Annual Report and those for 2020 are set
out on pages 118 and 119 of the Annual Report on Remuneration
Simplicity – the current Directors’
Remuneration Policy achieves simplicity via
being composed of an appropriately limited
range of remuneration components designed
to attract and retain executives and incentivise
their performance in the short and longer term
The Committee informed its principal shareholders about its decisions on Executive Directors’
salaries and the proposal to add environmental performance measures to Executive Directors’
LTIP performance measures, as referred to on page 102 of the Annual Statement by the
Remuneration Committee Chair
Executive Directors’ remuneration is currently composed of only four elements:
– base salary
– a range of typical other benefits, including payments in lieu of pension contributions
– annual bonus awards which are subject to a mixture of financial and non-financial (including
safety and other strategic) targets, a proportion of which awards are deferred into shares for
one year, and
– annual LTIP awards which are subject to three-year performance measures and two-year
holding periods post vesting
In the year under review, Executive Directors’ remuneration has also benefited from being simpler
than in prior years due to:
– the last of Mr Finch’s five-year LTIP awards having vested
– the last of Mr Davies’ two-year Recruitment Incentive Awards having vested, and
– Mr Ashley’s assignment to North America coming to an end, and his related relocation
assistance package ceasing going forward
104
National Express Group PLC Annual Report 2019 Provision 40 factor
Element of Directors’ Remuneration Policy and/or practice
Risk – a range of features of the current
Directors’ Remuneration Policy assist in
mitigating the risks of excessive rewards and
inappropriate behaviour
Executive Directors’ salary increases are capped at 10% over RPI in any year, other than for
increases given for internal promotion and market equalisation, and their maximum annual bonus
opportunities and LTIP awards are also both capped at a percentage of their base salaries
A proportion of Executive Directors’ bonus awards are deferred into shares for one year post award,
and they must retain their vested LTIP shares for two years post vesting, including post termination
of employment
Both malus and clawback provisions apply to the whole of Executive Directors’ bonus awards and
vested LTIP shares for a period of two years post award or vesting, including in both cases post-
termination of employment
The Committee may exercise discretion to defer or to reduce, including to nil, Executive Directors’
annual bonus and LTIP outturns if the safety underpin is triggered by a systematic failure by
management to put in place and operate effective safety processes
There is strong linkage between Executive Directors’ remuneration arrangements and the Company’s
strategy and KPIs, as explained on page 104
Predictability – some of the same features of
the current Directors’ Remuneration Policy
which mitigate risk also ensure that outcomes
are within a predictable range
Executive Directors’ salary increases are capped at 10% above RPI in any year, other than for
increases given for internal promotion and market equalisation, and their maximum annual bonus
opportunities and LTIP awards are both capped at a percentage of their base salaries
The Committee may exercise discretion to defer or reduce, including to nil, Executive Directors’
annual bonus and LTIP outturns if the safety underpin is triggered. The Committee may also use its
judgement to determine the level of achievement of Executive Directors’ non-financial bonus targets
Proportionality – this is achieved through
the strong links between executive pay and
performance
The linkage between Executive Directors’ remuneration arrangements and their performance in
delivering the Company’s strategy is explained on page 104
The outcomes of Executive Directors’ LTIP awards will be reflective of, and so proportionate
to, performance as they are linked to positive financial and, for 2020 LTIP awards, progressive
environmental performance measures. The same is true of those elements of Executive Directors’
annual bonus awards which are linked to financial targets and strategic objectives. The Committee is
also able to use its judgement to determine the outcome of Executive Directors’ annual bonus non-
financial targets in such a way as to ensure they appropriately reflect performance
Alignment to culture – this is achieved through
strong links between executive pay and the
Company’s Values, which Values in turn help
the Company to achieve its Purpose
The Company’s Values of: Safety, Excellence, Customers, People and Community & Environment
help the Company to achieve its Purpose, as explained and illustrated on page 69. These Values are
in turn promoted through different aspects of the Executive Directors’ remuneration:
– Safety, People and Community are supported by the FWI and other safety bonus targets
and the new LTIP environmental performance measures which focus management’s attention
on achieving a safer and more environmentally friendly transport network for the benefit of
its passengers, drivers and the wider community
– Customers, People and Excellence are supported by the financial bonus targets and
financial LTIP performance measures which focus management’s efforts on achieving profits
which facilitate growth, and the non-financial bonus targets which drive operational efficiencies
to reduce costs. Financial health allows the Company to expand its transport network into new
customer markets and invest in and improve the excellence of its customer service,
at the same time as creating new and improved opportunities for the workforce in terms
of their pay and prospects for variety and security of work and promotion within
a successful organisation
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Remuneration at a glance and in context continued
Comments on the 2018 Code
The table below explains those Provisions of the 2018 Code that the Company has either partially complied with during 2019 through
elements of the Company’s existing Directors’ Remuneration Policy or not yet complied with during 2019. These matters will be
considered as part of our review when determining our Directors’ Remuneration Policy for 2021-2023.
Code Provision
Remuneration schemes and policies should
enable the use of discretion to override
formulaic outcomes (part of Provision 37)
The remuneration committee should develop
a formal policy for post-employment
shareholding requirements encompassing
both unvested and vested shares (part of
Provision 36)
Element of Directors’ Remuneration
Policy
Additional Commentary
Setting targets and performance measures
that relate directly to the Company’s
financial, strategic and sustainable
performance substantially removes the
potential for formulaic outcomes that are
misaligned with the interests of shareholders
and wider stakeholders
The Committee has, through the safety
underpin, discretion to control the most
likely situation in which Executive Directors’
remuneration outcomes could be misaligned
with shareholders’, and wider stakeholders’
interests, being an incident affecting
the Company’s reputation and its share
price (that does not affect other financial
performance metrics or the achievement
of non-financial (non-safety-related) bonus
targets) as a result of a fundamental failure
by management to control safety risks that
they can influence through input measures
Through the operation of these elements of
the Company’s LTIP, Executive Directors will
retain interests in their vested and potentially
also unvested LTIP shares post their
employment with the Company
75% of Executive Directors’ annual bonus
maximum opportunities are subject to financial
targets and 25% are subject to non-financial
targets which are typically aligned with the
Company’s strategic and risk management
priorities, including safety. Executive Directors’
LTIPs are subject to financial performance
measures (TSR, EPS, ROCE) and, from 2020, new
environmental performance measures (Group
tCO2e/m pass km and UK ZEVs)
Executive Directors’ annual bonuses and LTIPs
are also subject to a safety underpin that enables
the Committee to use its discretion, acting
reasonably and proportionately, to defer or to
scale back bonus outcomes or levels of LTIP
vesting, including to nil, where, as a result of
the systematic failure of management to put in
place and operate effective safety processes,
a significant negative event occurs that has a
material adverse impact on both the reputation of
the Company and its share price
Executive Directors must retain their LTIP shares
for a period of two years post vesting, including
after termination of employment
Executive Directors’ LTIPs are also subject to
good and bad leaver provisions which enable
the Committee, where an Executive Director is a
good leaver, to exercise discretion to allow any
unvested awards to vest on their normal vesting,
retaining leaving Executive Directors’ interests
in shares for even longer post employment.
Where Executive Directors are bad leavers,
their unvested LTIPs will lapse but malus and
clawback may apply to LTIPs that vested in the
prior two years
In addition, the Company has not, in 2019, aligned Executive Directors’ pensions with those available to the workforce although, as
explained on page 101, Executive Directors pensions will be aligned with those available across the UK workforce on 1 January 2023.
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National Express Group PLC Annual Report 2019 Directors’ Remuneration Report
Annual Report on Remuneration
Background information about the Directors’ Remuneration Policy
The Directors’ Remuneration Policy (the Policy) was approved by shareholders at the AGM on 16 May 2018 and came into effect from that
date. It is intended to apply for three years until the AGM in 2021. The full Policy can be found on pages 74 to 84 of the Company’s 2017
Annual Report and on its website at www.nationalexpressgroup.com/about-us/corporate-governance/remuneration.
Annual Report on Remuneration
This Annual Report on Remuneration describes how the Policy was applied in the financial year to 31 December 2019, and how it will
be applied in the financial year commenced 1 January 2020. The single total figure of remuneration tables and information in this Report
about the vesting and award of LTIPs and the statement of Directors’ shareholdings and share interests have been audited, as required by
section 498(1)(c) of the Companies Act 2006.
1. Background remuneration information (as previously reported in 2018, and updated for developments in 2019)
(a) Chris Davies’ appointment as Group Finance Director
Chris Davies joined the Company on 2 May 2017, was appointed as an Executive Director on 10 May 2017 and became the Group Finance Director
on 1 June 2017. On appointment as an Executive Director, he was granted two Recruitment Incentive Awards (RIA) under the Company’s Long-
Term Incentive Plan (LTIP) in recognition of certain incentives he forfeited on leaving his previous employer. The first RIA, which had a one-year term
but was subject to the same performance conditions as applied to the three-year LTIP awards granted to executives in 2015, vested on the first
anniversary of grant (i.e. on 10 May 2018). The second RIA, which had a two-year term but was subject to the same performance conditions as
applied to the three-year LTIP awards granted to executives in 2016, vested on the second anniversary of grant (i.e. on 10 May 2019), so in the year
under review, and is referred to where appropriate in the remaining sections of this report.
(b) Matt Ashley’s appointment as President and CEO, North America
Matt Ashley relinquished his role as Group Finance Director, but retained his executive directorship, on 31 May 2017 to take up a two-year
assignment as President and CEO, North America, based in Chicago from 1 September 2017. In order to support him in this role, the
Company provided him (and his family) with a relocation assistance package (including tax equalisation and exchange rate protection) for
the duration of the assignment in line with normal practice for an international relocation at executive level. Mr Ashley’s assignment came
to an end during the year under review, on 31 August 2019, at which time he (and his family) returned to the UK and he assumed,
in addition to his continuing executive directorship, the role of Group Business Development Director.
In respect of the eight months of the year ended 31 December 2019 during which Mr Ashley was performing his role as President and CEO,
North America, he continued to receive certain elements of his relocation assistance package, including a compensation allowance equal to
10% of salary (to part recognise the loss of household income arising from his spouse’s loss of UK employment) and reimbursement of the
costs of rented unfurnished accommodation, rented company car, US medical and travel insurance and occasional return flights to the UK.
In addition, the Company reimbursed the costs of Mr Ashley’s (and his family’s) flights and shipping costs on their return to the UK following
the end of his assignment. As Mr Ashley is liable to tax on these deemed relocation benefits, the amount paid to him in the year, as set out in
this Report under ‘Relocation benefits’, is the total grossed-up of cost of tax amount (except in relation to the compensation allowance) paid
by the Company on his behalf. In 2019, this amounted to £227,828 (2018: £434,311).
2. Single total figure of remuneration for Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Executive Director who served during the financial
year ended 31 December 2019 (with comparative figures provided for 2018).
The subsequent information and tables give more detail on various elements of the Executive Directors’ remuneration, including how the Committee
measured the performance outcomes with respect to the annual bonus and LTIPs and if and how they exercised discretion in relation to such outcomes.
£’000
Dean Finch
Chris Davies
Matt Ashley
Base
salary
Taxable
benefits¹
Pension
allowance
Sub-total
2019
2018
2019
2018
2019
2018
648
630
369
359
369
359
32
30
14
18
14
17
216
221
92
90
92
90
896
881
475
467
475
466
Annual
bonus2
1,296
1,135
553
479
306
314
LTIPs
vested³ Sub-total
Relocation
benefits
1,538
2,3025
646
2685
656
6175
2,834
3,437
1,199
747
962
931
–
–
–
–
2284
4346
Total
3,730
4,318
1,674
1,214
1,665
1,831
1 Taxable benefits comprise the gross of tax value of car allowance, private medical insurance and death-in-service and life assurance cover. The increases and
decreases in value of such taxable benefits in 2019 (vs. 2018) are attributable to the different costs to the Company of private medical and life assurance cover
2 The annual bonus represents the gross bonus declared and to be paid in March 2020 in connection with the performance achieved in 2019. As explained
on page 109, a proportion of the bonus will be paid in cash immediately and a proportion will be deferred for one year in the form of forfeitable shares in the
Company and will vest thereafter, subject to continued employment or, if earlier, termination of employment if good leaver status is confirmed
3 The 2019 LTIP values shown represent the estimated value of shares that are scheduled to vest in April 2020 arising from three-year awards made to Messrs Finch,
Davies and Ashley in April and May 2017. All such awards were based on a three-year performance period ended on 31 December 2019 and their values have been
calculated using a share price of 450.135p (being the three-month average to 31 December 2019). The values also include the dividend equivalent of 41.94p per share
earned during the vesting period on the shares to vest. These translate to a total dividend equivalent entitlement, to be paid in cash on vesting (as determined on
grant), to Dean Finch of £131,089, to Chris Davies of £55,051 and to Matt Ashley of £55,953. The actual value of vested shares will be confirmed in next year’s report
4 As explained in paragraph 1(b), Matt Ashley continued to receive, for part of the year under review, a relocation assistance package to support him (and his
family) in his role as President and CEO, North America, in accordance with the terms of his two-year assignment which ended on 31 August 2019. As Mr Ashley
is liable to tax on these deemed relocation benefits, the amount shown as paid to him in the year is the estimated total grossed-up of cost of tax amount (except
in relation to the compensation allowance) paid by the Company on his behalf. Additionally, in respect of the relocation benefits paid to him in the USA during
the year, the total amount shown includes the converted value of such benefits based on an exchange rate of $1.276:£1, being the average rate for 2019
5 Since the 2018 LTIP values of vested shares (which included dividend equivalent payments to be made on vesting) were estimated in last year’s report, the
figures shown for 2018 in this year’s report have been adjusted to reflect the actual vesting date values on 12 April 2019 for Messrs Finch and Ashley for their
three-year LTIPs and for Mr Finch’s last legacy five-year LTIP (share price of 414.0p) (which vesting date was deferred from the respective scheduled vesting
dates of 8 April 2019 (for the three-year LTIPs) and 9 April 2019 (for the five-year legacy LTIP) due to the Company being in an ad hoc prohibited dealing period
from 5 April 2019 until the close of business on 11 April 2019), and 10 May 2019 for Mr Davies’ two-year LTIP (RIA) (share price of 410.8p). The difference in
value is an increase for each Director as follows: £115,310 for Dean Finch, £11,420 for Chris Davies and £30,268 for Matt Ashley
6 The actual total grossed-up of cost of tax amount paid by the Company in relation to Matt Ashley’s relocation assistance package in 2018 has been confirmed
as equal to the amount estimated in 2018
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
(a) Base salary
As explained in the 2018 Annual Report on Remuneration, the Committee determined that Executive Directors’ base salaries would be
increased by 2.8% with effect from 1 January 2019, which increase was broadly in line with that awarded to the Company Group’s wider
UK workforce. The Executive Directors’ salary increases reflected the strong financial performance of the Group and the solid individual
performances of each of the Executive Directors. Accordingly, the base salaries set by the Committee for 2019 were £648,000 for Dean
Finch and £368,800 for both Chris Davies and Matt Ashley.
(b) Pensions
In lieu of pension contributions, the Executive Directors receive a pension allowance (gross) which does not qualify as salary for the
purpose of any other benefit or entitlement. In the year to 31 December 2019, the Group Chief Executive received an annual allowance of
33.3% of salary and each of the other two Executive Directors received an allowance of 25% of salary. As volunteered by him, Mr Finch’s
pension allowance will reduce further in 2020 to 31.6% of salary and the other Executive Directors will continue to receive allowances
of 25% of salary. Benefits provided to Mr Finch under his previous unfunded pension arrangement ceased to accrue with effect from
5 June 2016.
(c) Annual bonus
(i) Summary of 2019 bonus structure
A summary of the structure of 2019 performance-related bonuses for Executive Directors is set out in the table below:
Group Chief Executive
Maximum opportunity
Target weighting
200% of salary
75% financial
25% non-financial (including 18% safety related)
Deferred element
25% of bonus earned up to 125% of salary
Other Executive Directors
Maximum opportunity
Target weighting
50% of bonus earned between 125% – 150% of salary
75% of bonus earned between 150% – 200% of salary
150% of salary
75% financial
25% non-financial (including 18% safety related)
Deferred element
25% of bonus earned up to 125% of salary
50% of bonus earned between 125% – 150% of salary
It is a pre-condition to the award:
− of any element of the bonus that the Committee has determined that a significant negative event has not occurred that has had a
material adverse impact on both the reputation of the Company and its share price as a result of the systematic failure of management
to put in place and operate effective safety processes (the safety underpin); and
− of all other elements of the bonus that the Group must have achieved at least the threshold level of normalised profit before tax for the
year (the financial underpin).
The Committee has reviewed the Group’s financial performance, safety performance and the Executive Directors’ personal performance
against the financial and non-financial targets to which the Executive Directors’ 2019 bonus opportunities were subject in determining the
outcome of such bonus opportunities.
(ii) 2019 bonus performance conditions
The following table sets out performance conditions attached to the Executive Directors’ 2019 bonus opportunities:
Structure
Maximum bonus opportunity
Bonus potential at 95% of budgeted normalised
PBT/EBIT
On-target bonus potential at 100% of budgeted
normalised PBT/EBIT
Stretch bonus potential at 105% of budgeted
normalised PBT/EBIT
Bonus potential at 90% of budgeted free cash flow
On-target bonus potential at 100% of budgeted free
cash flow
Stretch bonus potential at 110% of budgeted free
cash flow
Non-financial targets (underpinned by achievement
of 95% of budgeted normalised PBT/EBIT)
Chief Executive
Director
(% of base salary)
Other Executive
Directors
(% of base salary)
Performance conditions
200%
0%
50%
100%
0%
25%
50%
50%
150%
Proportion of bonus subject to compulsory deferral
into Company shares for one year from award
0%
Awarded on achieving threshold level
37.5%
Awarded on achieving budget
75%
0%
Awarded on achieving stretch target
Awarded on achieving threshold level
18.75%
Awarded on achieving budget
37.5%
Awarded on achieving stretch target
37.5%
Awarded on meeting key strategic objectives
tailored to each Executive Director’s responsibilities
Note
The financial and non-financial targets attached to Mr Finch’s and Mr Davies’ 2019 bonus opportunities all related to the Group’s performance, including Group
normalised PBT and Group free cash flow. As Mr Ashley performed two different roles during 2019, the first eight months as President and CEO, North America
and the last four months as Group Business Development Director, the profit-related target attached to his 2019 bonus opportunity was split as to 8/12ths North
America EBIT and 4/12ths Group PBT, the free cash flow target was Group based and the non-financial targets were a mixture related to both his roles. This is
reflected in the outcomes table on the next page
108
National Express Group PLC Annual Report 2019 (iii) 2019 bonus targets, outturns and awards
The following table sets out the targets, performance outturns and awards in respect of Executive Directors’ 2019 bonuses:
Measure
Weighting Threshold
Target Maximum
Actual
75%
Bonus value achievable
between Threshold and
Maximum (% of salary)
Actual bonus value
achieved (% of salary
and/or £’000)
Dean
Finch
Chris
Davies
Matt
Ashley
Dean
Finch
Chris
Davies
Matt
Ashley
Financial
targets
Group
normalised
PBT
North America
normalised
EBIT
Group free
cash flow
Non-financial
targets7
Total bonus
awarded
To be paid in
cash
To be deferred
in shares
£211.0m £222.1m¹
£233.2m
£240.0m 0%-100% 0%-75% 0%-25%5
100%
75%
0%
$133.0m $140.0m²
$147.0m $157.0m³
–
–
0%-50%5
–
–
25.5%
£117.9m
£131.0m4
£144.1m
£178.7m
0%-50% 0%-37.5% 0%-37.5%
50%
37.5%
37.5%
25%
0%-50% 0%-37.5% 0%-37.5%6
50%
37.5%
200%
£1,296
59%
£769
41%
£527
150%
£553
71%
£392
29%
£161
20%
83%
£306
75%
£230
25%
£76
1 The original Group normalised PBT target was set at £222.1m. This was adjusted to £219.0 million to reflect foreign exchange rate movements and underspend in relation
to growth capital profit
2 The original North America normalised EBIT target was set at $140.0 million. This was adjusted to $141.4 million to reflect growth capital profit
3 A number of internal adjustments to the reported North American result reduced normalised EBIT for these purposes to $141.5 million. These adjustments
included the reversal of the impact of IFRS 16 and the exclusion of the credit on revaluing the WeDriveU put liability
4 The original Group free cash flow target was set at £131.0 million. This was adjusted to £127.6 million to reflect foreign exchange rate movements and underspend in
relation to growth capital profit
5 As Mr Ashley’s two-year assignment as President and CEO, North America came to an end on 31 August 2019 and he assumed the new role of Group
Development Director, 8/12ths of his bonus opportunity in relation to profit measures was allocated to North American normalised EBIT and the remaining
4/12ths was allocated to Group normalised PBT. However, due to the short time in his Group Development Director role, there was no award of the 4/12ths
of bonus opportunity related to Group normalised PBT
6 Similarly, in view of Mr Ashley’s performance of two roles in the year, 8/12ths of his bonus opportunity in relation to non-financial targets was allocated to North
American strategic targets and the remaining 4/12ths was allocated to Group related strategic targets. However, due to the short time in his Group Development
Director role, there was no award of bonus opportunity for the Group-related strategic targets
7 Details of the non-financial targets, and the corresponding performance outturns for each of the Executive Directors, are set out on pages 110 to 112
No discretion was applied by the Committee in determining the Executive Directors’ bonus awards.
The cash element of the bonus award will be paid, and the deferred element of the bonus award will be granted in the form of forfeitable
shares in the Company under the rules of the Executive Deferred Bonus Plan (EDBP), to Executive Directors in March 2020. The forfeitable
shares:
− will be calculated based on the Company’s average share price for the five business days immediately preceding the date of grant;
− will be held in the Company’s Employee Benefit Trust which in turn holds the beneficial interest in them on trust for the Executive
Directors and accounts to the Executive Directors for dividends paid on such shares while held in trust;
− are not subject to any performance conditions and will vest on the first anniversary of grant subject to continued employment,
or on earlier termination of employment provided good leaver status is confirmed; and
− are subject to malus and clawback for a two-year period from the date of grant, including post termination of employment.
(iv) Summary of non-financial bonus targets and corresponding performance outturns for 2019
As noted above, Executive Directors’ non-financial bonus targets represent 25% of their respective annual bonus opportunities and the
Committee determined that both Dean Finch and Chris Davies merited the maximum payout of this opportunity and Mr Ashley merited a
payout equal to 20% of salary out of a maximum 37.5% of salary opportunity. Further details of the non-financial targets, their individual
weightings and the Executive Directors’ performance as assessed against them are set out on pages 110 to 112.
Dean Finch’s and Chris Davies’ non-financial bonus targets comprised a series of Group related objectives aimed at delivering the Group’s
overall strategy and/or managing its risk, relevant to their respective roles. Matt Ashley’s non-financial bonus targets comprised a mixture
of safety and strategic objectives relevant to the North America business in respect of the eight months of the year he served as President
and CEO, North America. He was treated as having the same Group related non-financial bonus objectives as Mr Finch in respect of the
four months of the year in which he served as Group Business Development Director.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
Objective
Performance assessment
Dean Finch, Chris Davies and Matt Ashley –
safety – deliver a year-on-year Fatalities and
Weighted Injuries (FWI) Index score for the
Group on a per million mile basis for 2019 at
least as good as the 2018 FWI Group score
(DF/CD: 10% of 25% /MA 4/12ths of 10% of
25%)
Matt Ashley – safety – deliver a year-on-year
Fatalities and Weighted Injuries (FWI) Index
score for North America on a per million mile
basis for 2019 at least as good as the 2018
FWI North America score (8/12ths of 10% of
25%)
Dean Finch, Chris Davies and Matt Ashley –
safety – improvement in Group systems and
processes (DF/CD: 8% of 25%/ MA 4/12ths of
8% of 25%)
DF/CD: Achieved in full (10% out of 10%) / MA: No award in view of short time in Group role
The Group’s FWI score – measured on a per million mile basis – improved significantly in 2019
reducing by more than half (-54%). The combination of there being zero responsible fatalities in the
year and fewer major and lost time injuries meant that the Group achieved its best ever FWI score.
MA: Achieved in full (8/12ths of 10% out of 10%)
North America’s FWI score – measured on a per million mile basis – also improved significantly in
2019, reducing by more than a quarter (-28.6%). North America also achieved its second consecutive
year of no responsible fatalities.
DF/CD: Achieved in full (8% out of 8%) / MA: No award in view of short time in Group role
Continue the development of driver oversight
and driver risk profiling
Throughout 2019, the Group has continued to improve its driver oversight and driver risk profiling via
the Global Safety Policies becoming further embedded throughout the Group’s divisions. This has
resulted in an overall reduction during the year in the number of drivers categorised as high risk.
Progress the implementation of the vehicle fire
action plan
Good progress has been made with the vehicle fire action plan in the year, with the number of vehicle
fires in 2019 reducing to more than half the number in 2018. The Group’s UK bus business achieved
12 months without a vehicle fire (having suffered an average of six a year in the previous five years).
Complete the DriveCam fitment programme
consistent with the 2020 rollout plan
DriveCam fitment in 2019 has continued in accordance with the 2020 roll-out plan, with the entire
UK fleet, the majority of the North American fleet and part of the ALSA fleet now fitted. In addition,
DriveCam risk scores have improved across the Group by 34%, including as a result of reductions
in seven out of eight of the most prevalent risky driving behaviours. Legal challenges with fitment of
DriveCam remain in Canada and one US State, which the Group continues to work through to seek to
find a solution.
Progress fatigue monitoring in UK coach and
evaluate whether there is a wider application
Having tested different systems during 2019, the Group’s UK coach division has selected ‘Seeing
Machines’ technology, which will now be rolled out across the UK coach fleet in 2020. The Group’s
US school bus and motor coach businesses are also in the process of testing alternative systems
which may present a better solution for wider application and a decision will be made in 2020.
Improve the management of speeding
Continuous speed monitoring, via various different technologies, is in place across each of the
Group’s divisions and local managers assess driver speeding as a matter of routine.
Matt Ashley - safety – improvement in NA
systems and processes (8/12ths of 8% of
25%)
Continue the development of driver oversight
and driver risk profiling
Progress the implementation of the vehicle fire
action plan
MA: Achieved in full (8/12ths of 8% out of 8%)
The North American business’ implementation of the Group’s driver oversight and driver risk Global
Safety Policies resulted, in 2019, in the creation of driver safety scorecards for all drivers, the holding
of over 20,000 driver coaching sessions and the coaching of over 94,000 DriveCam coaching events.
This intensive oversight has contributed to the North America business’, and the Group’s, excellent
safety performance.
During 2019, some vehicles in the North American fleet suffered thermal events which were
thoroughly investigated, and a number of steps have been taken by the North America business to
further embed the vehicle fire action plan, including training of maintenance technicians to detect
causes of fires, training of drivers on the role they can play in preventing fires and clarification of
supervisors’ responsibilities.
Complete the DriveCam fitment programme
consistent with the 2020 roll-out plan
In North America alone, DriveCam has now been fitted to over 21,000 vehicles in accordance with the
2020 roll-out plan, with the only exceptions being the fleet in Canada and in one US State where legal
challenges remain that the Group is working to overcome.
Improve the management of speeding
Continuous speed monitoring takes place in the North America business.
Integrate new businesses into our safety
programmes and apply our Standard Operating
Procedures
As part of due diligence on acquisitions, safety audits of acquisition targets are undertaken and gap
analyses are performed to identify any gaps between their processes and our safety systems. Post
acquisition, action plans have been developed and are being implemented to close those gaps and all
management teams of acquisition targets are given training in the Group’s safety systems.
Continue to monitor and improve DoT
compliance ratings
Daily monitoring of compliance takes place with interventions made wherever appropriate to ensure a
continued high level of compliance.
Reinforce driver accountability as the next step in
the Target Zero campaign
Drivers continue to be held to account for failures to comply with the Group’s safety policies and
procedures, including via termination of employment wherever appropriate.
110
National Express Group PLC Annual Report 2019 Objective
Performance assessment
Dean Finch and Matt Ashley – other strategic
or risk management objectives (DF: 7% of
25%/ MA 4/12ths of 7% of 25%)
Drive year-on-year passenger and revenue
growth in all business units
DF: Achieved in full (7% out of 7%) / MA: No award in view of short time in Group role
There has been passenger growth across the Group (5.1%) and in every business unit, including
ALSA (12.8%) and UK coach (5%). Passenger growth in the UK bus business has been the fastest
of any UK city region. Revenue has also grown across the Group (10.2%) and in every business unit,
with particularly strong growth in Germany (33.6%), ALSA (11.7%) and North America (11.1%), and
the UK seeing steady growth (3.9%).
Build and develop talent throughout the Group Multiple initiatives in 2019 have served to develop talent, including extending the NX Network,
Retain key customer contracts at
acceptable returns
Drive an effective M&A strategy
Deliver Standard Operating Procedures in North
America and improve on-time performance in
North America
Implement effective strategies to reduce
Group risk
facilitating more cross-divisional talent moves, strengthening partnerships with universities, focusing
on diversity and inclusion and continuing to build the strength of the Group’s management, including
by a programme of changing out underperforming managers, and to develop succession plans for
high potential individuals.
A number of key contracts were retained by the Group in 2019, including the North America transit
business’ two largest contracts (at improved margins and on larger shares of revenues), a number of
strategically important concessions in Spain and a key airport contract in the UK (each at acceptable
returns). Contracts retained in the North America school bus business achieved an average 5.9%
price increase. Contracts retained in Morocco, coupled with significant new contract wins, have
tripled the size of the Group’s business in the country and are expected to deliver healthy returns.
The Group completed nine acquisitions in 2019, strengthening its position in its chosen markets.
These included the acquisition of a majority stake in WeDriveU (facilitating the Group’s entry into
the fast-growing US corporate shuttle market), four other acquisitions in the USA, three in Spain,
including one in the Canary Islands (marking the Group’s entry into this new, attractive market) and
one in the UK (enabling the Group to establish its new accessible transport business – NEAT). The
Group’s disciplined approach to M&A has ensured that these, and previous, acquisitions deliver
returns in excess of the Group’s target rate.
Projects undertaken by the Group’s Delivering Excellence team and North America Operations
Improvement team in 2019 have resulted in the development, testing and roll-out of 33 new Standard
Operating Procedures across the North America school bus business. A suite of new KPIs, including
on-time performance, are being used to track their effectiveness and an improvement in on-time
performance can be seen. The SOPs have also created and are starting to deliver significant cost
saving opportunities.
A number of risk reduction strategies have been employed by the Group in 2019, including its safety
strategies (from embedding the Group’s new Global Safety Policies to the trial and further deployment
of new and existing safety technologies, resulting in the Group’s best ever safety performance and
ability to manage its insurance and claims costs in an increasingly hard environment), its new cyber
security strategy (designed to achieve enhanced protection through consistent application of new
policies and practices across the Group) and its general improved approach to risk management,
using the three lines of defence model.
Continuously implement and refine the
Group strategy to enhance our position in
chosen markets
For the purpose of refining both the three-year strategy and vision to 2030, a comprehensive analysis
was undertaken of our market positioning and market potential and 10 key strategic goals were
identified, against which good progress has been made, including through diversification, organic
growth and M&A.
Chris Davies – other strategic or risk
management objectives (7% of 25%)
CD: Achieved in full (7% out of 7%)
Complete thorough due diligence on 2019
acquisitions and carry out post integration
reviews of 2018 acquisitions to ensure returns
are being maximised
Full due diligence was undertaken on all 2019 acquisitions, and enhanced due diligence was
undertaken on the acquisition of WeDriveU, with best practices for due diligence, from financial
modelling to legal reviews, developed and implemented during the year. A full review was also
undertaken of 2018 acquisitions to verify target returns were being achieved.
Implement effective strategies to reduce
Group risk
Effectively manage bond and other debt
refinancing in 2019
Deliver effective tax and treasury strategies
Spearheaded the Group’s new cyber security strategy, leading the programme to implement the IBM
review recommendations relating to security leadership, security frameworks and policies and general
IT practices, and extended the Group’s cyber insurance. Designed and delivered the improved
approach to risk management, using the three lines of defence model, supporting the refocus of
the internal audit function and assisting the Audit Committee with clarification of the roles and
responsibilities of the Board and Audit Committee.
Delivered the most successful debut issuance by a UK issuer of a US private placement, raising
c.£414m at a favourable coupon and blended tenor, and achieved a significantly oversubscribed
UK bond issuance, raising a further c.£250m, under the Group’s EMTN programme at a favourable
coupon and long tenor. Successfully refinanced other debt facilities, including via the first UK debt
market SONIA (replacement of LIBOR) loan.
Carried out work to review and confirm the Group’s low risk tax strategy. In addition to securing
the successful debt refinancing in 2019 (noted above), ensured compliance with treasury
policy, secured new working capital facilities, resolved complex Moroccan funding and hedging
requirements, resolved historical hedging issues and actively managed the Group’s cash position
to optimise use of available cash.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
Objective
Performance assessment
Improve the commercial delivery of the
finance function
Reviewed and restructured the Group finance function, outsourced complex treasury accounting,
materially up-weighted investor relations activities, and advanced a global shared services strategy.
Complete an end-to-end global review of IT,
legal and risk costs and embed improved
governance processes
Outsourced a number of IT services to achieve more functionality and/or flexibility at lower cost, undertook
a benchmarking of internal and external legal costs driving savings in North America, managed steady
insurance costs and delivered better governance processes for cyber security and M&A.
Matt Ashley - other strategic or risk
management objectives (8/12ths of 7% of 25%)
MA: Achieved in part (8/12ths of 2% out of 7%)
Deliver cost control initiatives to support
improvements in the business
During 2019, a number of initiatives were identified and implemented which have delivered cost
savings and/or other operational efficiencies, including a review of drivers’ master schedules, a review
of fleet usage, outsourcing of certain back-office functions and a rationalisation of North America
head office space and staff.
Devise and deliver improvements in
asset utilisation
A major review of the North America fleet utilisation was undertaken during the year which has
resulted in a 14% improvement in fleet efficiency and a significant reduction in capital requirements
for new vehicles in the current year.
Build and develop talent throughout the business Various new and pre-existing programmes were used during the year to develop talent in the North
Deliver Standard Operating Procedures (SOPs)
and improve on-time performance
Improve the quality of service delivery
Develop and deliver effective bid strategies to
grow margin in the contract renewal process
Deliver an acquisition strategy that grows the
business and provides sustainable returns
America business. These included a new strategic hiring and promotion plan and a new general
manager onboarding process. 14 employees graduated from the existing ‘Building the Bench’
programme which targets high performing individuals and trains them to become general managers
and another 18 employees enrolled in the existing Advanced Leadership programme designed to
accelerate the development of high potential individuals.
Projects undertaken by the Group’s Delivering Excellence team and North America Operations
Improvement team in 2019 have resulted in the development, testing and roll-out of 33 new SOPs
across the North America school bus business. A suite of new KPIs, including on-time performance,
are being used to track their effectiveness and an improvement in on-time performance can be seen.
The SOPs have also created and are starting to deliver significant cost saving opportunities.
The review of drivers’ master schedules, supported by revised daily, weekly and monthly governance
procedures for managing and reviewing service delivery, has been key to improving the quality of
service delivery in the North America school bus business, resulting in a 2.6% improvement in on-time
performance across that business.
A new bid modelling and pricing process was devised for the North America school bus business,
resulting in 2019 in a 5.9% average price increase across the school bus contract portfolio. A new
approach to bidding for transit contracts, based on building trusted relationships and our safety and
technological leadership, was implemented in our North America transit business, resulting in the
renewal of our two largest contracts at improved margins on greater revenue.
Significant steps were taken during 2019 to strengthen three elements of the North America
acquisition strategy: acquisition sourcing (by refining our acquisition criteria and in-sourcing the
financial modelling performed to assess those criteria); due diligence (by refining existing strong
processes and documents); and integration (by ensuring earlier and then ongoing engagement
and more frequent reviews of acquisition target performance against business cases).
(d) Long-Term Incentive Plan (LTIP) vesting and awards
(i) LTIP awards vesting in 2020
The three-year LTIP awards granted to the Executive Directors in 2017 are scheduled to vest in April 2020 as the measurement period
relating to them ended on 31 December 2019. Details of the performance conditions attaching to the 2017 LTIP awards, and the extent to
which they have been met, are set out in the table below:
Performance condition
Weighting
Threshold
(30% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
TSR2 vs. FTSE 250 Index
TSR2 vs. Bespoke Index3
EPS4
ROCE4
Total vesting
1/6
1/6
1/3
1/3
Median
Equal to
Index
29.8p
9%
–
–
31.6p
10%
Upper
Quintile
≥ Index +
10% p.a.
34.4p
12%
Actual
restated to
remove IFRS
16 impact1
Total
percentage
vesting
–
–
34.4p5
12.5%7
52.0%
97.2%
100.0%
100.0%
91.53%
Actual
Median
to Upper
Quintile
(Rank 89
of 218)
Index +
9.6% p.a.
34.4p
12.2%6
1 As explained on page 76 of the 2018 Annual Report, the Committee determined to assess the EPS and ROCE performance measures on the LTIP awards
scheduled to vest in 2020 and 2021 after neutralising the impact of IFRS 16 on such measures. The EPS and ROCE performance measures attaching to the
LTIP awards granted from 2019 onwards have already factored in the impact of IFRS 16
2 For TSR performance measures, straight-line vesting occurs between threshold and maximum performance
3 Comprising three other UK-based passenger transport groups, namely: FirstGroup plc, Stagecoach Group plc and Go-Ahead Group plc
4 For EPS and ROCE performance measures, straight-line vesting occurs between threshold and target performance, and between target and maximum performance
5 Actual EPS restated is earnings per share after removing the impact of IFRS 16
6 Actual ROCE is the average over the three year performance period
7 Actual ROCE restated is the average over the three year performance period after removing the impact of IFRS 16
112
National Express Group PLC Annual Report 2019 It is a pre-condition to the LTIP awards vesting that the Committee has determined that a significant negative event has not occurred
that has had a material adverse impact on both the reputation of the Company and its share price as a result of the systematic failure of
management to put in place and operate effective safety processes (the safety underpin).
No discretion was applied by the Committee in determining the Executive Directors’ LTIP awards as their outturns were determined
according to the levels of vesting against each of the financial performance measures set and the ‘safety underpin’ was not triggered.
Furthermore, no discretion was exercised in relation to Executive Directors’ LTIP outturns as a result of or having regard to the
appreciation in the Company’s share price over the year under review.
(ii) Vesting details
The three-year LTIP awards granted to the Executive Directors in 2017 took the form of nil cost options which are scheduled to vest on 20
April 2020 (being the first working day after the third anniversary of grant). In relation to these awards:
− as shown in the table at the bottom of page 112, 91.53% of the performance conditions have been met;
− as committed to by the Remuneration Committee at the time of grant, each Executive Director will receive a cash payment (gross)
equivalent to the total dividend paid by the Company on the number of vested shares during the vesting period;
− the vested shares are subject to a compulsory two-year holding period, save that sufficient shares may be sold to cover tax liabilities
arising on exercise of the options, and each Executive Director is also entitled to receive cash dividend equivalent payments on the
vested shares during the holding period while the options remain unexercised; and
− malus and clawback provisions apply to the retained vested shares for two years from the date of vesting, including post termination
of employment.
The table below shows the number of shares over which the 2017 LTIP nil cost options were granted, the number of shares which are
expected to vest, the total amount of the awards to vest, the amount of the awards to vest attributable to share price appreciation and the
cash dividend payment due on vesting for each Executive Director:
Executive Director
Dean Finch
Chris Davies
Matt Ashley
Number of
shares over
which option
was awarded
341,476
143,4031
145,752
Number
of shares
scheduled
to vest
312,564
131,261
133,411
Amount
of awards
to vest2
£1,406,960
£590,852
£600,530
Amount of award
to vest attributable
to share price
appreciation2
£281,104
£118,050
£119,983
Cash dividend
payable on
vesting
£131,089
£55,051
£55,953
1 Chris Davies was also awarded a Company Share Option Plan (CSOP) over 8,194 shares which, on exercise, will effectively reduce the number of LTIP option
shares by the same number
2 The amount of the LTIP awards to vest, and the part of that amount attributable to share price appreciation, are estimated based on the Company’s average
share price over the three months to 31 December 2019 (of 450.135 pence per share). The actual amounts, which will be determined by reference to the
Company’s share price at the relevant vest date in 2020, will be set out in next year’s report
(iii) LTIP awards made in 2019
Details of LTIP awards granted to the Executive Directors in 2019 are set out in the table below:
Executive
Director
Grant
date
Dean Finch
15.04.19
Number
of shares
awarded
313,044
Award
type
Award
amount
Face value
of award1
£,000
Performance
period
Performance
conditions
Nil cost option
200% of salary
1,296
01.01.19–31.12.21 TSR, EPS and
ROCE – see below
Chris Davies
15.04.19
133,624
Nil cost option
150% of salary
553
01.01.19–31.12.21 TSR, EPS and
ROCE – see below
Matt Ashley
15.04.19
133,624
Nil cost option
150% of salary
553
01.01.19–31.12.21 TSR, EPS and
ROCE – see below
1 The face value has been calculated by multiplying the number of shares awarded by the share price at the time of grant. The relevant share price was 414.0p
on 12 April 2019, this being the closing share price on the last business day preceding the date of grant. For Dean Finch, the face value represented 200%
of his then annual salary and for Messrs Davies and Ashley it represented 150% of their then respective annual salaries
(iii) Performance conditions attaching to 3-year 2019 LTIP awards
Performance
level
EPS
(1/3 of award)
ROCE
(1/3 of award)
TSR vs. FTSE 250
Index (1/6 of award)
TSR vs. Bespoke
Index1 (1/6 of award)
Percentage
of award vesting2,3
Below Threshold
Less than 35.3p
Below 8%
Below Median
Below Index
0%
Threshold
Target
Maximum
35.3p
37.4p
8%
9%
Median
Equal to Index
–
–
EPS and TSR: 25%
ROCE: 0%
EPS and ROCE (only):
50%
39.0p or above
11% or above
Upper Quintile
≥ Index + 10% pa
100%
1 Comprising three other UK-based passenger transport groups, namely: FirstGroup plc, Stagecoach Group plc and Go-Ahead Group plc
2 For TSR performance measures, straight-line vesting occurs between threshold and maximum performance
3 For EPS and ROCE performance measures, straight-line vesting occurs between threshold and target performance, and between target and maximum performance
Vested shares will be subject to a compulsory two-year holding period and malus and clawback will apply for two years from the date of
vesting, including post termination of employment. Dividend equivalents are payable in cash on vested shares over the vesting period and
during the holding period while options remain unexercised.
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
(iv) Indicative vesting levels for other outstanding LTIP awards
The indicative vesting levels for other outstanding LTIP awards assuming their respective performance conditions had been tested
through to 31 December 2019 (without making any allowance for pro rata reduction for any period of time that is less than the length of
the performance period) are set out in the table below:
LTIP award
year/type
Performance
condition
2018 3-year LTIP
2019 3-year LTIP
EPS
ROCE
TSR vs.
FTSE 250 Index
TSR vs.
Bespoke Index1
Weighting
Vesting
Weighting
Vesting
Weighting
Vesting
Weighting
Vesting
1/3
1/3
68.3%
0%
1/3
1/3
100%
100%
1/6
1/6
100%
54%
1/6
1/6
66%
0%
Total (max
100%)
83.8%
42.3%
1 Comprising three other UK-based passenger transport groups, namely: FirstGroup plc, Stagecoach Group plc and Go-Ahead Group plc
(v) Executive Deferred Bonus Plan (EDBP)
The table below sets out the awards under the EDBP in the form of forfeitable shares in the Company:
− which vested on 8 March 2019 and relate to the one-year deferred element of Executive Directors’ bonuses for the financial year ended
31 December 2017 and in respect of which dividends have been paid to Executive Directors via the Employee Benefit Trust during the
one-year deferred period for which they will have been held; and
− which were granted to the Executive Directors on 8 March 2019 and relate to the deferred element of their bonuses for the financial year
ended 31 December 2018. These shares, which have a one-year deferred period, are scheduled to vest on 8 March 2020 and Executive
Directors are entitled to receive dividends on them during the one-year deferred period, provided they do not lapse.
Executive
Director
Dean Finch
Chris Davies
Matt Ashley
As at 1
January 2019
Vested 8
March 2019
Granted 8
March 2019
Lapsed
2018
2019
2018
2019
2018
2019
119,939
119,939
–
–
–
97,302
24,708
24,708
–
–
–
29,673
37,021
37,021
–
–
–
18,263
–
–
–
–
–
–
As at 31
December
2019
Market price
at date of
vesting Date of grant
–
431.4p
97,302
–
–
431.4p
29,673
–
–
431.4p
18,263
–
08.03.18
08.03.19
08.03.18
08.03.19
08.03.18
08.03.19
Date of
vesting
08.03.19
08.03.20
08.03.19
08.03.20
08.03.19
08.03.20
Forfeitable share awards in the Company relating to the one-year deferred element of the bonus declared for the financial year ended
31 December 2019 (see page 109) will be granted to the Executive Directors in March 2020, subject to the rules of the EDBP, and will ordinarily
vest on the first anniversary of grant. Dividends paid on these shares during the deferred period will be passed on to the Executives. These
shares are subject to malus and clawback for a two-year period from the date of grant, including post termination of employment.
3. Single total figure of remuneration for Non-Executive Directors
The table below sets out the single total figure of remuneration (fees) for the Non-Executive Directors who served during the financial year
ended 31 December 2019 (with comparative figures provided for 2018):
Non-Executive Director
Sir John Armitt CBE (Chairman and Nominations Committee Chair)
Jorge Cosmen (Deputy Chairman)
Lee Sander1 (Senior Independent Director)
Mike McKeon (Audit Committee Chair)
Jane Kingston2 (Remuneration Committee Chair until 9 May 2019)
Dr Ashley Steel3 (Remuneration Committee Chair from 9 May 2019)
Chris Muntwyler1 (Safety & Environment Committee Chair)
Joaquín Ayuso1
Matthew Crummack
Ana de Pro Gonzalo4
Karen Geary4
2019 Fees
£’000
2018 Fees
£’000
253
246
54
65
65
58
62
65
54
54
13
13
53
61
64
64
53
64
53
53
–
–
1 A travel allowance of £4,000 is payable to certain overseas based Directors for attendance at each Board meeting or other Board related matter held outside
their continent of residence. For 2019, the allowances paid were as follows: Joaquín Ayuso £4,000 (2018: £4,000), Chris Muntwyler £8,000 (2018: £8,000) and
Lee Sander £24,000 (2018: £20,000)
2 Stepped down as Chair of the Remuneration Committee on 9 May 2019 and therefore received a pro-rated proportion of the annual Committee Chair fee
3 Appointed as Chair of the Remuneration Committee on 9 May 2019 and therefore received a pro-rated proportion of the annual Committee Chair fee
4 Appointed to the Board on 1 October 2019 and therefore received a pro-rated proportion of the annual Non-Executive Director fee
With effect from 1 January 2019:
− the Committee determined that the Chairman’s fee would increase by 2.8% to £253,000, broadly in line with the general pay increase
awarded to the Group’s UK employees;
− the Board determined that the Non-Executive Directors’ base fee would also increase by 2.8% or £1,500 p.a. and the Senior
Independent Director’s fee would increase by £1,500 p.a., in each case also broadly in line with the general pay increase awarded to the
Group’s UK employees and to retain such fees at close to the median of non-executive director fees paid by the FTSE 250; and
− the Board Committee Chair fees would remain unchanged as they remained appropriate.
114
National Express Group PLC Annual Report 2019 4. Payments to past directors and payments for loss of office
(a) Payments to past Directors
There were no payments made to past Directors during or in respect of the financial year ended 31 December 2019.
(b) Payments for loss of office
There were no payments made for loss of office to any former Director during or in respect of the financial year ended 31 December 2019.
5. Statement of Directors’ shareholdings and share interests
(a) Directors’ share ownership guidelines
In accordance with the Directors’ Remuneration Policy and to align the interests of Executive Directors more closely with those of
shareholders, Executive Directors are encouraged to build up a shareholding in the Company over a five-year period from 2015 or their
respective date of appointment if later. The Committee takes into account whether Executive Directors have met their shareholding targets
when granting new LTIP awards.
The shareholding target for the Group Chief Executive is shares with a value equal to 200% of salary and for the other Executive Directors
is shares with a value equal to 150% of salary. As demonstrated by the table set out in paragraph 5(b) below, as at 31 December 2019
Mr Finch and Mr Ashley have met these targets and Mr Davies is on track to meet this target within five years of his appointment.
There is no shareholding requirement, nor shareholding guidelines, for Non-Executive Directors.
(b) Executive Directors’ interests in shares
Details of the Executive Directors’ and their connected persons’ beneficial interests in the Company’s shares, and of the Executive
Directors’ other share interests, in each case as at 31 December 2019, are shown in the table below:
Shares held directly
Other share interests
Shareholding
target
(% salary)
Shareholding value at
31 December 2019
(% salary)1
200%
150%5
150%
396%
100%
209%
Beneficially
owned
448,733²
48,5953
145,7944
Forfeitable shares
held under the
EDBP not subject
to performance
conditions
Outstanding LTIP
share option
awards subject
to performance
conditions
97,302
29,673
18,263
980,295
416,077
418,426
Executive Director
Dean Finch
Chris Davies
Matthew Ashley
1 The Company’s closing share price of 469.60p as at 31 December 2019 has been used for the purposes of this calculation and has been applied to the
beneficially owned and forfeitable shares held under the EDBP in arriving at the shareholding value as at 31 December 2019
2 The shares beneficially owned by Mr Finch include 91,600 shares that he owns free from restriction, 182,283 shares representing the net of tax LTIP vested
shares which remain subject to a compulsory holding period until 5 March 2020 and 174,850 shares representing the deemed net of tax LTIP vested shares
which remain subject to a holding period until 12 April 2021 (being the number of the vested but unexercised shares to which he is entitled under a LTIP option
which vested on 12 April 2019 as reduced by the number of such shares that would need to be sold to satisfy income tax at a rate of 45% and employees’ NICs
of 2% on the exercise of such option)
3 The shares beneficially owned by Mr Davies include 16,071 shares that he owns free from restriction and 32,524 shares representing the deemed net of tax LTIP
vested shares (being the number of the vested but unexercised shares to which he is entitled under a LTIP option which vested on 12 April 2019 as reduced by
the number of such shares that would need to be sold to satisfy income tax at a rate of 45% and employees’ NICs of 2% on the exercise of such option)
4 The shares beneficially owned by Mr Ashley include 75,877 and 69,917 shares representing the net of tax LTIP vested shares which remain subject
to compulsory holding periods until 5 March 2020 and 12 April 2021 respectively
5 Chris Davies’ shareholding level applies to the five-year period commencing from his date of appointment on 10 May 2017
The appendix on page 121 provides more information about all outstanding LTIP awards held by the Executive Directors. More
information about the EDBP is also set out in paragraph 2(d)(v) on page 114.
(c) Non-Executive Directors’ interests in shares
The details of the Non-Executive Directors’ and their connected persons’ interests in shares as at 31 December 2019, all of which are held
beneficially, are shown below:
Non-Executive Director
Sir John Armitt CBE
Jorge Cosmen1
Lee Sander
Mike McKeon
Dr Ashley Steel
Chris Muntwyler
Matthew Crummack
Jane Kingston2
Joaquín Ayuso2
Ana de Pro Gonzalo3
Karen Geary3
As at
31 December
2019
10,500
69,237,515
1,000
10,000
15,416
–
2,696
5,100
–
–
–
1 Jorge Cosmen’s holding includes shares held by European Express Enterprises Ltd which is shown on page 123 as a substantial shareholder in the Company
2 Stepped down from the Board on 31 December 2019
3 Appointed to the Board on 1 October 2019
115
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
(d) Other information
The Register of Directors’ interests maintained by the Company contains full details of the Directors’ holdings in shares and options over
shares in the Company.
The closing price of a Company’s ordinary share at 31 December 2019 was 469.6p (2018: 374.0p) and the range during the year ended 31
December 2019 was 371.0p to 476.0p per share.
(e) Changes since year end
There have been no changes in Directors’ shareholdings between 31 December 2019 and the date of this report.
6. Comparison of overall performance
The graph below shows a comparison of the Company’s cumulative total shareholder return (i.e. share price growth plus dividends paid)
and annual return against the FTSE 250 Index and a Bespoke Index over the last 10 years. The FTSE 250 Index has been selected as the
Company is a constituent of that Index and the Bespoke Index shows performance against a peer group of other UK-based passenger
transport companies. As can be seen from the graph, the Company has outperformed the FTSE 250 Index and significantly outperformed
the Bespoke Index over this period.
Shareholder returns – 10 year history
250
200
150
100
50
0
-50
31/12/2009 31/12/2010
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019
National Express Group – Annual return
FTSE 250 – Annual return
Peer Group – Annual return
National Express Group – Cumulative return
FTSE 250 – Cumulative return
Peer Group – Cumulative return
7. History of CEO pay
The table below sets out the total remuneration delivered to the Group Chief Executive over the last 10 years, valued using the
methodology applied to the single total figure of remuneration:
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Chief Executive Officer
D Finch
D Finch
D Finch
D Finch
D Finch
D Finch
D Finch
D Finch
D Finch D Finch
Single figure total remuneration (£’000)
1,356
1,454
1,701
1,553
1,562
3,661
3,887
4,225
4,318
3,730
Annual bonus payment
(as % of maximum opportunity)
LTIP vesting level achieved (as % of
maximum opportunity)
100%
100%
100%
95%
93%
96% 83.5%
95%
90%
100%
n/a1
n/a1
32.5%
0%
0% 73.4% 80.8% 86.9% 96% 91.53%
1
In 2010 and 2011, Mr Finch was not entitled to any LTIP awards subject to performance conditions whose final year of performance ended during those years
8. Context of CEO pay
The following table sets out the percentage change in certain elements of the remuneration paid to the Group Chief Executive from 2018 to
2019, compared with the average percentage change in those same elements of remuneration for the Group’s UK employee population.
The elements of the CEO’s remuneration included in the table below comprise base salary, taxable benefits and annual bonus (including
any amount deferred) and have been calculated in the same way as for the CEO’s single total figure of remuneration. The Group’s UK
employee population is used as an appropriate comparator group as it avoids complicated exchange rate adjustments that would have to
be used if employees of the Group’s overseas operations were included in the comparator group.
Comparator person or group
Chief Executive Officer
Group UK employees
Average percentage increase/decrease from 2018 to 2019
Base salary
Taxable benefits¹ Performance related bonus
2.8%
2.5%
6.7%2
9.9%2
14.2%3
31.0%3
1 Taxable benefits comprise the gross of tax value of allowances (such as for car and travel), private medical insurance, death-in-service and life assurance cover
2 The year-on-year increase in the CEO’s taxable benefits is attributable solely to a change in the cost to the Company of his private medical insurance and life
assurance cover. The year-on-year increase in UK employees’ taxable benefits is due both to the cost to the Company of certain benefits increasing and there
being a larger number of UK employees with taxable benefits comprised in the UK workforce in 2019 (vs 2018)
3 The year-on-year increase in the CEO’s bonus is primarily attributable to better performance achieved against his non-financial bonus targets, including the
Group’s FWI Index score. The year-on-year increase in UK employees’ bonuses is attributable to both a higher proportion of the UK employee population being
eligible for performance-related bonuses and the value of performance-related bonuses being higher in 2019 (vs. 2018) as a result of the Group’s and UK division’s
financial and safety performance in the year
116
National Express Group PLC Annual Report 2019 9. CEO pay ratios
The following table sets out the Group Chief Executive’s pay ratios as at 31 December 2019 comparing the CEO single total figure of
remuneration to that of the Group’s UK employees whose full time equivalent remuneration ranks them at the lower quartile, median and
upper quartile of pay for all UK employees.
Year
2019
Methodology
Option A
25th
percentile pay ratio
50% (median)
percentile pay ratio
75th
percentile pay ratio
156:1
136:1
110:1
Option A has been used to calculate the pay ratios as it is the most statistically accurate method and, for the year under review, the
Company was able to obtain pay data for all relevant UK employees and calculate the full time equivalent pay data for all such UK
employees, including those at the lower, median and upper quartiles. The UK employees at the lower quartile, median and upper quartiles
were identified as at 31 December 2019 and their salary and total remuneration were also calculated in respect of the 12 months ended
31 December 2019 on the basis explained further below.
The total remuneration of the UK employees (including those at the lower quartile, median and upper quartiles) has been calculated using
the same methodology as for the CEO’s single total figure of remuneration, noting that:
− a large number of the Group’s UK employees, such as bus and coach drivers and customer service centre staff, work full-time but are
paid by the hour (rather than having an annual fixed base salary). Their wages have been calculated as the actual number of hours
worked in the year multiplied by the relevant hourly rates of pay applicable during the year;
− a number of the Group’s UK employees work part time. Those who are paid on a salaried basis have had their salaries grossed up to
the full time equivalent salary for their role. Those who are paid by the hour have had their wages grossed-up to a full time equivalent
number of hours using the average number of hours performed by a full time employee performing the same or most similar role;
− some of the Group’s UK employees receive taxable benefits, such as car, travel and other allowances and private medical insurance,
the value of which has been included. Where the Company grosses-up an allowance for the cost of tax, the grossed-up of cost of tax
value has been included. In the case of part time employees, where any such benefits were pro-rated to reflect them working part time,
the grossed-up value of such benefits on a full time equivalent basis has been included;
− some of the Group’s UK employees are members of a pension scheme and employers’ pension contributions have been included;
− some of the Group’s UK employees receive performance-related annual bonus awards, and other Group UK employees receive ad hoc
bonuses or other one-off rewards, such as loyalty bonuses, Value awards and gratuities. The cash value of such bonus awards and
other one-off rewards earned in respect of the 2019 year (whether paid in 2019 or in 2020) has been included. Where the Company
grosses up one-off rewards for the cost of tax, the grossed-up of cost of tax value has been included;
− certain of the Group’s UK employees who are senior managers receive performance conditioned three-year LTIP awards in the
form of nil-cost options over Company shares. The estimated value of such awards which will vest in 2020 in respect of the three
year performance period ended on 31 December 2019 (estimated on the same basis as for the CEO in his single total figure of
remuneration), together with the cash value of dividend equivalents on vested shares under such awards, have been included; and
− while the Company does not operate a UK employee-wide share scheme, certain long-serving UK employees receive long-service
share option awards. The value of these awards has been excluded as it is difficult to attribute the value to a particular year and
the value of such awards and number of employees affected is relatively de minimis. No other elements of remuneration have been
excluded.
The table below sets out a comparison of the Chief Executive Officer’s total remuneration and salary component of that total remuneration
and that of each of the UK employees at the lower, median and upper quartiles of the Group’s UK employee population:
Pay Data
Salary
Total pay
Group Chief Executive
25th percentile
£648,000
£3,729,778
£22,708
£23,889
Median
£20,390
£23,942
75th percentile
£33,175
£33,804
The median pay ratio is consistent with the Company’s pay, reward and progression policies. When setting the CEO’s pay, the Committee
has regard to the same fundamental considerations as those taken into account by the UK management team when setting pay for all
other UK employees, including the Company’s policy to pay market rates of pay that reward employees fairly for work done and have due
regard to individual performance and Company performance where the individual has the ability to influence wider Company performance.
The CEO has ultimate responsibility for, and the greatest ability to influence, the Company’s performance, returns to shareholders and,
importantly, the safety of the workforce and passengers. To reflect this, the CEO’s remuneration package has a higher weighting on
performance-related pay (including the annual bonus and LTIP) compared to the majority of the workforce. This means the pay ratios are
likely to fluctuate depending on the outcomes of incentive plans in each year.
10. Relative importance of the spend on pay
The table below sets out the total spend on pay in 2019 and 2018 compared with distributions made to shareholders:
Measure
Overall Group spend on pay including Directors1
Profit distributed by way of dividend2
2019
£m
1,416.7
78.3
2018
£m
Increase from
2018 to 2019 %
1,260.9
70.8
12.4%
10.6%
1 Overall Group spend on pay was calculated by aggregating the Group’s costs of salaries and wages, social security costs, pension costs and share based
payments for all the Group’s employees whether employed in the UK or overseas in the relevant year
2 Profit distributed by way of dividend has been used as the comparator measure as it permits a comparison between the Group’s annual investment in its
employed workforce and its annual cost of returning value to shareholders
117
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
11. Statement of implementation of current Directors’ Remuneration Policy in 2020
(a) Executive Directors’ base salaries
In accordance with the Policy, the Committee determined that the base salaries of the Group Chief Executive and Group Finance Director
would increase by 8.5%, and that the base salary of the Group Business Development Director would increase by 2.5%, each with effect
from 1 January 2020.
In approving the increases in the Executive Directors’ base salary, the Committee:
− took into consideration a number of external and internal factors, including:
− an external review of general economic and employment conditions in each of the Group’s labour markets;
− an internal review of pay and related practices across the Group (including the general pay increase awarded to the UK workforce
(of 2.5%), the average pay increase awarded to the top decile of the UK workforce including those highest performers and those
assuming more responsibility (of 12.75%), the latest UK gender gap data and CEO pay ratios); and
− an external benchmarking exercise of CEO and CFO base salaries against those of three comparator groups;
− recognised the increased scope, scale and complexity of Mr Finch’s role now relative to when he was appointed 10 years ago, the
significant expansion of the Group’s international operations as a result of Mr Finch’s strategic vision and focus on sustainable growth
and market penetration and Mr Finch’s outstanding performance in role and the high levels of growth in value demonstrated in recent
years;
− recognised that Mr Davies joined the Group in 2017 at a below market rate base salary as it was his first CFO role and that he is now
established in role which, in view of the Group’s expansion as noted above, has become larger and more complex; and
− recognised that Mr Ashley was new in his role as Group Business Development Director.
Accordingly, the annual base salaries of the Executive Directors in 2020 are:
Executive Director
Dean Finch, Group Chief Executive
Chris Davies, Group Finance Director
Matt Ashley, Group Business Development Director
Base salary
(gross)
£703,000
£400,150
£378,000
(b) Executive Directors’ pensions
In accordance with the Policy, and as volunteered by Dean Finch, his pension allowance will be reduced from 35% to 30% of salary in
three equal tranches commencing in 2019. Therefore, he will receive a pension allowance of 31.6% of salary in 2020. Each of the other
Executive Directors will receive a pension allowance of 25% of salary.
(c) Executive Directors’ annual bonus
The annual bonus for the 2020 financial year will be structured and operate for the Executive Directors on the same basis as the
arrangements in place during 2019 (as confirmed on pages 101 and 102), save that (as also explained on pages 101 and 102):
− the weighting of the safety target relating to the Group’s FWI score will be reduced from 10% to 5% and the weighting of the other
safety-related non-financial bonus targets will be increased from 8% to 13%, such that the total weighting of all safety-related targets
remains the same; and
− safety incidents that occur in the performance of the Group’s new Casablanca contract will be taken out of account in the Group’s FWI
score but Casablanca specific safety-related objectives will be included in the non-financial bonus targets for the next two years until
the Group has had the opportunity to embed its Global Safety Policies and replace the incumbent fleet.
When setting the bonus targets for 2020, the Committee has taken into account:
− the Group’s approved budget and operating plan for 2020;
− the Board’s ambitious three-year and longer-term strategy, based on the three core strategic pillars of growth, technology enhancement
and operational excellence;
− the ongoing development of the Company’s risk management programme and actions being taken to mitigate major risks;
− the ongoing headwinds with the continued uncertainty in the UK around the Brexit ‘deal’ to be done, the recommencement of the Spanish
long haul coach concessions programme which may lead to constrained contract margins and the continued pressure on wages,
exacerbated by driver shortages, in North America and price competition on bidding for or renewing contracts which also constrains margin;
− stock market consensus for 2020;
− the non-recurring items included in the 2019 results which will need replacing in 2020; and
− the responsibilities of each of the Executive Directors in driving the strategy forward and managing risk.
The Committee will set calibrated targets for the bonus measures and intends to disclose actual performance against these in next
year’s Annual Report on Remuneration. As a matter of commercial sensitivity, the Committee has decided not to disclose the bonus
performance targets in advance, save that 75% of the maximum opportunity will be based on financial targets and 25% will be based
on non-financial targets and, in view of safety remaining the Group’s top priority, 18% of the 25% non-financial target driven bonus
opportunity will continue to be based on safety objectives: 5% on FWI and 13% on improving safety systems and processes. Targets will
be set on a basis consistent with accounting measures (i.e. without reference to exceptional items).
118
National Express Group PLC Annual Report 2019 (d) Executive Directors’ Long-Term Incentive Plan (LTIP) awards
LTIP awards in 2020 are proposed to be granted in line with the normal annual award levels contained in the Policy. Accordingly, awards
with attaching performance conditions will be made to the value of 200% of salary to the Group Chief Executive and 150% of salary to
the other Executive Directors. The performance conditions attaching to the LTIP awards will include the same conditions as the current
year, namely: total shareholder return (TSR) (as measured against both the FTSE 250 Index and a Bespoke Index); diluted normalised
earnings per share (EPS); and average return on capital employed (ROCE), plus two new environmental performance measures relating
to a reduction in the Group’s total carbon emissions per million passenger kilometre (tCO2e/m pass km) and an increase in the number of
zero emission vehicles (ZEVs) purchased or on order in the UK division to advance its ambition to operate only zero emission vehicles in
UK bus by 2030 and in UK coach by 2035. The weightings of the performance measures and vesting levels of the 2020 LTIP awards at
each of threshold, on-target and maximum levels are set out in the table below:
Performance condition
TSR1 vs. FTSE 250 Index
TSR1 vs. Bespoke Index3
EPS2
ROCE2
tCO2e / million passenger km
UK zero emission vehicles
Weighting
Threshold (25% vesting EPS
and TSR, 0% vesting ROCE)
Target
(50% vesting)
Median
Equal to Index
37.6
8%
–
–
39.8
9%
Maximum
(100% vesting)
Upper Quintile
≥ Index + 10% pa
43.3
11%
4.6% reduction in tCO2e /
million passenger km by 2022
relative to 2019 base year
5.4% reduction in tCO2e /
million passenger km by 2022
relative to 2019 base year
6.2% reduction in tCO2e / million
passenger km by 2022 relative
to 2019 base year
200 additional zero emission
vehicles in service or on order
by 31 December 2022
240 additional zero emission
vehicles in service or on order
by 31 December 2022
300 additional zero emission
vehicles in service or on order
by 31 December 2022
12.5%
12.5%
25%
25%
15%
10%
1 For TSR measures, straight-line vesting will occur between threshold and maximum levels of performance
2 For EPS and ROCE measures, straight-line vesting will occur between threshold and target, and target and maximum levels of performance
3 Comprising three other UK-based passenger transport groups, namely: FirstGroup plc, Stagecoach Group plc and Go-Ahead Group plc
The performance conditions will be measured over the three-year financial period ending 31 December 2022, awards will be subject to
a compulsory two-year holding period post vesting and malus and clawback will apply for two years from the date of vesting, including
post termination of employment. Dividend equivalent entitlements will attach to any vested shares over the vesting period and during the
holding period while options remain unexercised.
(e) Non-Executive Directors’ Fees for 2020
With effect from 1 January 2020, the Committee has determined for the Chairman, and the Board has determined for the other Non-
Executive Directors, that:
− the Chairman’s (all inclusive) fee will increase by 2.5% or £6,325;
− the Senior Independent Director’s fee will increase by £1,000 p.a.;
− the Non-Executive Directors’ base fee will increase by 3.1% or £1,700 p.a.;
− the Committee Chairs’ fee will increase by £1,000 p.a.
Accordingly, the annual fees of the Chairman and Non-Executive Directors in 2020 are:
Role
Chairman (including as Chair of the Nominations Committee)
Senior Independent Director (additional fee)
Non-Executive Director (base fee)
Committee Chair
Fees (gross)
£259,325
£11,000
£56,000
£12,000
In addition, a travel allowance of £4,000 will continue to be payable to certain overseas-based Directors for each Board meeting or other
Board-related matters they attend outside their continent of residence.
(f) Total remuneration opportunity at various levels of performance
Our aim is to ensure that superior remuneration outcomes are only given or awarded for exceptional performance, with a substantial
proportion of Executive Directors’ remuneration payable in the form of variable pay. The chart at the top of the next page illustrates the
remuneration opportunity provided to each Executive Director at different levels of performance for 2020.
119
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Remuneration Report
Annual Report on Remuneration continued
5,000
4,000
3,000
2,000
0
0
0
£
’
n
o
i
t
a
r
e
n
u
m
e
R
4,473
47%
3,770
37%
37%
32%
1,924
14%
36%
1,000
958
100%
50%
26%
21%
514
100%
0
m
u
m
n
M
i
i
t
e
g
r
a
t
-
n
O
m
u
m
x
a
M
i
m
u
m
x
a
M
i
%
0
5
h
t
i
w
(
e
c
i
r
p
e
r
a
h
s
)
n
o
i
i
t
a
c
e
r
p
p
a
m
u
m
n
M
i
i
1,715
35%
35%
30%
m
u
m
x
a
M
i
m
u
m
x
a
M
i
927
12%
32%
56%
t
e
g
r
a
t
-
n
O
2,015
44%
30%
26%
487
100%
%
0
5
h
t
i
w
(
e
c
i
r
p
e
r
a
h
s
)
n
o
i
i
t
a
c
e
r
p
p
a
m
u
m
n
M
i
i
1,621
35%
35%
30%
m
u
m
x
a
M
i
876
12%
32%
56%
t
e
g
r
a
t
-
n
O
Fixed
Annual
Variable
Long-term
Incentives
1,904
44%
30%
26%
m
u
m
x
a
M
i
%
0
5
h
t
i
w
(
e
c
i
r
p
e
r
a
h
s
)
n
o
i
i
t
a
c
e
r
p
p
a
Dean Finch
Chris Davies
Matt Ashley
The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Annual variable; and (iii) Long-term incentives,
as explained further below:
Element
Fixed
Annual variable
Long-term incentives
Descriptions
Latest base salary, pension allowance and taxable benefits
Performance-related annual bonus (including deferred element)
Long-Term Incentive Plan award
Assumptions used in determining the level of pay-out under the given scenarios are as follows:
− salaries are those set as at 1 January 2020
− taxable benefits are those paid in 2019 (but exclude the relocation assistance costs for Matt Ashley)
− LTIP awards are granted at the normal annual level under the Policy
− minimum performance level assumes fixed pay only and no variable payments
− on-target performance level assumes performance in line with the Company’s expectations, resulting in threshold LTIP vesting and 50%
of maximum annual bonus payout (while the bonus plan has targets for threshold, on-target and maximum, the LTIP only has targets for
threshold and maximum for some metrics. The value shown above for the on-target level includes the values for on-target bonus and
threshold LTIP performance)
− maximum performance level assumes an outstanding level of performance (i.e. maximum annual bonus payout and full LTIP vesting)
While share price appreciation is ignored in each of the minimum, on-target and maximum remuneration outcomes for the Executive
Directors, the fourth bar shows the maximum remuneration outcomes assuming 50% share price appreciation.
12. Historical results of shareholder voting on remuneration matters
The votes cast on the resolution seeking approval of the Annual Report on Remuneration at the 2019 AGM were as follows:
Resolution
% of votes
For
% of votes
Against
Number
of votes
withheld¹
To approve the Annual Report on Remuneration for the year ended 31 December 2018 (advisory vote only)
95.8
4.2
1,752,171
1 A vote withheld is not a vote at law and is not counted in the calculation of votes For or Against a resolution
The votes cast on the resolution seeking approval of the Directors’ Remuneration Policy at the 2018 AGM were as follows:
Resolution
To approve the Directors’ Remuneration Policy (binding vote)
1 A vote withheld is not a vote at law and is not counted in the calculation of votes For or Against a resolution
% of votes
For
% of votes
Against
Number
of votes
withheld¹
95.7
4.3
86,207
13. Retained advisers to the Committee
During the year, the Committee retained (following a formal and transparent tender process conducted in 2013) and received remuneration
and related corporate governance advice from PwC, its external remuneration consultants. Apart from advice received in relation to
accounting matters, cyber security and deal delivery, PwC has no other connection with the Company, any member of its Group or any
of its individual Directors. PwC has also voluntarily signed up to the Remuneration Consultants Group Code of Conduct. In view of these
factors, the Committee is satisfied that the advice it receives from PwC is objective and independent. For the year under review, PwC
received fees of £89,525 in connection with its work for the Committee, which were charged on a time cost basis.
120
National Express Group PLC Annual Report 2019
Appendix
The table below sets out the share awards granted to Executive Directors under the rules of the Company’s 2005 LTIP, as amended
(through to 2014) and the 2015 LTIP (since 2015) which either vested during 2019 or remain outstanding as at 31 December 2019:
Date of
grant
Awards
held at
01.01.19
Granted
LTIP award year/type
Dean Finch
LTIP 5-year
LTIP 3-year
LTIP 3-year
LTIP 3-year
LTIP 3-year (Approved CSOP)6,9
LTIP 3-year
Chris Davies
LTIP 2-year (RIA)
LTIP 3-year
09.04.14
204,520
06.04.16
342,641
18.04.17
341,476
03.04.18
325,775
03.04.18
15.04.19
7,75110
–
1,214,4129
10.05.17
63,735
10.05.17
143,403
LTIP 3-year (Approved CSOP)7,9
10.05.17
8,19410
03.04.18
139,050
15.04.19
–
133,624
During 2019
Exercised/
Eligible for
exercise
195,8272
329,9063
–
–
–
–
Awards
held at
31.12.19
Vesting/
Exercise
date
Latest
exercise
date1
–
12.04.192
–
329,9063
12.04.19
12.04.21
341,476
325,775
18.04.20
18.04.22
03.04.21
03.04.23
7,75110
03.04.21
03.04.23
313,044
15.04.22
15.04.24
Lapsed
8,693
12,735
–
–
–
–
195,8273
21,428
1,310,2019
61,3664
2,369
61,3664
10.05.19
10.05.21
–
–
–
–
–
–
–
–
143,403
10.05.20
10.05.22
8,19410
18.04.20
18.04.22
139,050
133,624
03.04.21
03.04.23
15.04.22
15.04.24
–
–
–
–
–
313,044
313,044
–
–
–
–
346,1889
133,624
61,3664
2,369
477,443
LTIP 3-year
LTIP 3-year
Matt Ashley
LTIP 3-year
LTIP 3-year
06.04.16
141,797
18.04.17
145,752
LTIP 3-year (Approved CSOP)8,9
18.04.17
8,32810
LTIP 3-year
LTIP 3-year
03.04.18
139,050
15.04.19
–
426,599
–
-
–
–
133,624
133,624
136,5265
5,271
–
12.04.195
06.04.21
–
–
–
–
–
–
–
–
145,752
18.04.20
18.04.22
8,32810
18.04.20
17.04.22
139,050
133,624
03.04.21
03.04.23
15.04.22
15.04.24
136,526
5,271
418,426
1 Awards vesting under the 2015 LTIP are subject to a two-year exercise period and holding period which run concurrently
2 Mr Finch’s 2014 5-year LTIP award vested on 12 April 2019 and on 16 April 2019 he exercised the options over, and immediately sold, all of the vested shares
(as awards vesting under the 2005 LTIP were not subject to a holding period). The share price on exercise was 413.59p
3 Mr Finch’s 2016 3-year LTIP award vested during 2019, but he has not yet exercised any of the vested options. As such: the total number of shares over which
options were exercised by Mr Finch during 2019 does not include such vested, but unexercised, shares; but the total number of awards held at 31 December
2019 does include such vested, but unexercised, shares
4 Mr Davies’ 2017 2-year LTIP (Recuitment Incentive) award vested on 10 May 2019, but he has not yet exercised any of the vested options. As such: the total
number of shares over which options were exercised by Mr Davies during 2019 does not include such vested, but unexercised, shares; but the total number of
awards held at 31 December 2019 does include such vested, but unexercised, shares
5 Mr Ashley’s 2016 3-year LTIP award vested on 12 April 2019 and on 16 April 2019 he exercised the options over all of the vested shares, sold sufficient shares to
cover his tax liabilities arising on such exercise. He retains the balance of shares in accordance with the two-year holding period. The share price on exercise was
413.59p per share
6 The exercise price is 387.0p per share
7 The exercise price is 366.1p per share
8 The exercise price is 360.2p per share
9 All LTIP awards are granted in the form of nil-cost options, save for LTIP approved CSOP awards which are granted as market value share options with an
exercise price per share as set out in notes 6, 7 and 8 above. LTIP approved CSOP awards comply with the requirements of Schedule 4 to the Income Tax
(Earnings and Pensions) Act 2003 and can be exercised by way of set-off against any shares vesting under the corresponding LTIP award
10 Due to the set-off arrangements explained in the note above, the number of shares subject to LTIP approved CSOP are not counted in the total number
of awards held as this would result in a double-count
By Order of the Board
Dr Ashley Steel
Remuneration Committee Chair
27 February 2020
121
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Report
Directors’ Report
The information set out herein, together with the information referred to below which is incorporated by reference, comprises the
Directors’ Report for the year ended 31 December 2019.
The Company has chosen, in accordance with Section 414(C)(11) of the Companies Act 2006 (as amended), to set out certain information
required to be included in this Directors’ Report in the Strategic Report. The Company has also set out certain other information required
to be included in this Directors’ Report in the Corporate Governance Report and the Consolidated Financial Statements. The destinations
for such information are shown in the table below:
Information
Business model and future business developments
Principal risks and uncertainties
Fostering relationships with suppliers, customers and others1
Engagement with and other matters relating to employees2
Viability and going concern
Financial instruments
Governance matters, including corporate governance statement3
Greenhouse gas emissions
Annual Report
section
Strategic Report
Strategic Report
Strategic Report
Corporate
Governance Report
Directors’ Report
Corporate
Governance Report
Annual Report
page no(s)
8 and 15
48 to 53
2 and 41
66 to 68 and
74 to 75
125 and 126
71 to 73
Strategic Report
26
Consolidated
Financial Statements 187
Corporate
Governance Report
55 to 121
Strategic Report
47
1 The Company is not obliged to provide this information in accordance with paragraph 11B of Part 4 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018) (the “Regulations”) as it is exempted in
accordance with paragraph 11C of Part 4 of the Regulations as the qualifying conditions are met as the Company, which is a holding company, does not have a
turnover nor does it have more than 250 employees. However, the Company has voluntarily supplied this information
2 The Company is obliged to provide certain of this information in accordance with paragraph 11 of Part 4 of the Regulations as the Company is the parent
company of the Group and the average number of persons employed by the Group within the United Kingdom during the year ended 31 December 2019 was
more than 250. It is not however obliged to provide the information in accordance with paragraph 10 of Part 4 of the Regulations as the average number of
persons employed by the Company itself does not exceed 250. The Company has therefore voluntarily provided this information
3 The Company is obliged to make a corporate governance statement pursuant to DTR 7.2. The Company is therefore exempted from the requirements of Part 8
of the Regulations in accordance with paragraph 22(a) of the Regulations
This Directors’ Report and the Strategic Report together form the Management Report for the purposes of Rule 4.1.8 of the Disclosure
and Transparency Rules (DTR).
The location of relevant information required to be disclosed under Rule 9.8.4 of the Listing Rules (LR) is as follows:
Section and page(s)
of Annual Report
Annual Report on Remuneration, pages 107
(paragraph 1(a)) and 121
Directors’ Report, page 123
Dividends
The Board has recommended a final
dividend for the year ended 31 December
2019 of 11.19 pence per ordinary share
(2018: 10.17p) which, together with the
interim dividend of 5.16 pence per ordinary
share (2018: 4.69p) paid on 20 September
2019, gives a total dividend for the year
of 16.35 pence per share (2018: 14.86p).
Subject to shareholder approval, the final
dividend will be paid on 12 May 2020 to
holders of ordinary shares on the register
of members at the close of business on
24 April 2020.
Results and dividends
The Company’s and the Group’s results
for the year ended 31 December 2019
are set out in the Consolidated Financial
Statements and the Company Financial
Statements on pages 136 to 224.
Important events since the financial
year end
There have been no important events
which have affected the Company or the
Group since 31 December 2019.
Listing Rule
Detail
LR 9.8.4(4)
Long-term incentive schemes
LR 9.8.4(12)
Dividend waiver by EBT
Company status and branches
National Express Group PLC (the
Company) is the holding company of
the National Express group of companies
(the Group).
The Company is a public limited liability
company incorporated under the laws
of England and Wales. It has a premium
listing on the London Stock Exchange
main market for listed securities (LON:NEX)
and is a constituent member of the FTSE
250 Index.
Following the closure of the Group’s Spanish
branch in 2019, neither the Company nor any
member of its Group has any branches.
122
National Express Group PLC Annual Report 2019 Share capital
The Company has a single class of shares
in issue in its capital comprising ordinary
shares of nominal value 5 pence each, all
ranking pari passu. As at 31 December
2019, there were 511,738,648 ordinary
shares in issue and fully paid. The rights
attached to the ordinary shares of the
Company are defined in the Company’s
Articles of Association (Articles). Further
details about the Company’s share
capital can be found in note 32 to the
Consolidated Financial Statements
on page 192.
Share rights, obligations and restrictions
on transfer of shares
Shareholders are entitled to participate
in dividends paid or declared by the
Company and any return of capital by the
Company in proportion to their holdings
of ordinary shares in the Company.
Shareholders are also entitled to attend
and vote at all general meetings of the
Company. Every shareholder has one
vote on a show of hands and one vote for
each ordinary share held on a poll on each
resolution put before a general meeting.
Electronic and paper proxy appointments,
and voting instructions, must be received
by the Company’s registrar not less
than 48 hours before a general meeting.
Shareholders are subject to the obligations
set out in the Articles, including the
principal obligation to pay up any unpaid
amount on their ordinary shares.
There are no limitations on the holding
of the Company’s shares. There are
also no restrictions on the transfer
of the Company’s shares other than
typical restrictions under the Articles (for
example, in respect of non-fully paid
shares), restrictions imposed by law (such
as insider trading laws) and restrictions
imposed on the Directors and certain other
employees of the Company and members
of its Group pursuant to the Company’s
share dealing code.
Full details of the rights, obligations and
restrictions attaching to the Company’s
ordinary shares, including in relation to
voting rights and restrictions on transfer,
are set out in the Articles, which are
available at www.nationalexpressgroup.
com/about-us/corporate-governance
The Company is not aware of any
agreements between existing shareholders
that may result in restrictions on the voting
rights attaching to, or the transfer of, the
Company’s ordinary shares.
Company’s Employee Benefit Trust
to release the shares that it holds in
the Company to satisfy the vesting of
outstanding awards under the Company’s
various share incentive plans. Further
details of the Employee Benefit Trust and
number of Company shares it holds are
set out below.
Authority to issue shares
The Directors were granted the authority
at the Company’s 2019 Annual General
Meeting (AGM) to allot new shares in
the Company up to a nominal value
of £8,528,977 representing one third
of its issued share capital or, in the case
of a rights issue only, new shares up
to a nominal value of £17,057,954
representing two thirds of its issued
share capital. The Directors were further
authorised to disapply pre-emption rights
on the issue of shares of up to a nominal
value £1,279,346, representing 5% of its
issued share capital. No new shares were
issued under these authorities during
the year ended 31 December 2019 or
up to 27 February 2020, being the date
this Directors’ Report was approved.
Such authorities remain valid until the
Company’s 2020 AGM or 30 June 2020,
whichever is earlier. The Directors propose
to renew these authorities at the Company’s
2020 AGM to give the Company flexibility
to respond to circumstances and
opportunities as they arise.
Authority to purchase own shares
The Company was granted authority at
its 2019 AGM to make market purchases
of up to 51,173,864 of its own shares,
representing 10% of its issued share
capital. No shares were purchased under
this authority during the year ended
31 December 2019 or up to 27 February
2020, being the date this Directors’ Report
Shareholder
European Express Enterprises Limited2
Newton Investment Management Limited
M&G plc
Standard Life Aberdeen PLC
J O Hambro Capital Management Limited
was approved. Such authority remains
valid until the Company’s 2020 AGM or
30 June 2020, whichever is earlier. The
Directors propose to renew this authority at
the 2020 AGM to give the Company ability
to return value to shareholders in this way
in appropriate circumstances.
Employee Benefit Trust
IQ EQ (Jersey) Limited (formerly known
as First Names (Jersey) Limited) is a
shareholder in the Company which acts
as the trustee (Trustee) of the National
Express Group Employee Benefit Trust
(EBT). It is used to purchase Company
shares in the market from time to time and
hold them for the benefit of employees,
including for satisfying awards that vest
under the Company’s various share
incentive plans. The EBT purchased a total
of 1,471,214 shares in the market during
the year ended 31 December 2019 for an
aggregate consideration of £6.4 million
(including dealing costs) and released
1,825,123 shares to satisfy vested share
plan awards.
As at 31 December 2019, the EBT held
1,404,751 Company shares in trust
(representing 0.27% of the Company’s
issued share capital). The Trustee may vote
the shares it holds in the Company at its
discretion. A dividend waiver is in place
from the Trustee in respect of dividends
payable by the Company on certain of the
shares in the Company held in the EBT.
Major shareholdings
As at 31 December 2019, the Company had
been notified under DTR 5 of the following
interests in its shares representing 3% or
more of the voting rights in its issued
share capital:
Number of
ordinary
shares
Percentage
of total
voting rights1
66,481,891
12.99%
51,043,618
42,091,624
41,017,767
25,165,433
9.97%
8.22%
8.02%
4.92%
1 The total number of voting rights attaching to the issued share capital of the Company on
31 December 2019 was 511,738,648
2 The holding of European Express Enterprises Ltd forms part of the holding in which Jorge Cosmen
(Deputy Chairman) is interested as shown in the Annual Report on Remuneration on page 115
It should be noted that these holdings may have changed since the Company was
notified however, as notification of any change is not required until the next notifiable
threshold is crossed.
Special control rights over shares
There are no special control rights
attaching to the Company’s shares,
save that the Company can direct the
The Company received no further notifications in accordance with DTR 5, by way of change
to the above information or otherwise, between 31 December 2019 and 27 February 2020,
being the period from the end of the Company’s last financial year to the date on which this
Directors’ Report was approved.
123
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Directors’ Report continued
Directors
The names and certain additional
information about the persons who were
at any time during the year ended 31
December 2019 Directors of the Company
are set out on pages 60 to 64.
Directors’ interests
Save as disclosed:
(a) in the Directors’ Remuneration Report,
none of the Directors, nor any person
closely associated with them, has any
interest in the Company’s shares, debt
instruments, derivatives or other linked
financial instruments and there has
been no change in the information in
the Directors’ Remuneration Report
regarding such interests between 31
December 2019 and 27 February 2020,
being the date this Directors’ Report
was approved (and also being a date
which is not more than one month
before the date of the Notice of the
Company’s 2020 AGM); and
(b) in note 37 to the Consolidated Financial
Statements, none of the Directors has or
had at any time during the year ended
31 December 2019 a material interest,
directly or indirectly, in any contract of
significance with the Company or any of
its subsidiary undertakings (other than
the Executive Directors in relation to their
Service Agreements).
Directors’ Service Agreements
and letters of appointment
The Executive Directors are party to
Service Agreements with the Company
which contain rolling terms subject to
the giving by the Company or Executive
Director of the relevant notice to terminate.
All the Non-Executive Directors are party to
a Letter of Appointment with the Company
which contain a term of between three, six
and nine years, extendable by agreement,
but subject to Non-Executive Directors’
annual election or re-election by the
shareholders, the powers of shareholders
to remove Directors and the giving by the
Company or the Non-Executive Director of
the relevant notice to terminate.
These Directors’ Service Agreements and
Letters of Appointment are available for
inspection at the Company’s registered
office. Further details of these agreements
and letters are included in the Directors’
Remuneration Policy, a copy of which is
available on the Company’s website at
www.nationalexpressgroup.com/about-us/
corporate-governance/remuneration.
Directors’ powers
Subject to the Companies Act 2006 (Act),
the Articles and any directions given by
special resolution of the shareholders, the
business of the Company is managed
by the Board who may exercise all the
powers of the Company. The Articles
may be amended by a special resolution
of the shareholders.
The Directors may pay interim dividends
where, in their opinion, the financial
position of the Company justifies
such payment and the Directors may
recommend that shareholders declare
dividends and, if so declared by ordinary
resolution of shareholders, arrange
for payment of such dividends. Where
authorised to do so by ordinary resolution
of the shareholders, the Directors may
also issue shares or rights to subscribe for
shares or securities convertible into shares
in the Company. Where the Company is
authorised to do so by special resolution
of the shareholders, the Directors may
also arrange for the Company to purchase
its own shares, up to any limits specified
in such resolution. The Directors may
also appoint other Directors in the
circumstances described below.
Appointment and replacement
of Directors
The rules for the appointment and
replacement of Directors are set out in the
Act and related legislation and the Articles.
The Board may appoint a Director either
to fill a casual vacancy or as an additional
Director provided that the total number of
Directors does not exceed any maximum
number of Directors prescribed in the
Articles. A Director so appointed by the
Board must retire and seek election to
office at the next AGM of the Company.
In addition to the powers of removal
conferred by the Act, the Company may by
ordinary resolution of which special notice
is given remove any Director before the
expiry of their period of office and may by
ordinary resolution appoint another person
who is willing to act in their place. The
Company may also by ordinary resolution
appoint a Director either to fill a casual
vacancy or as an additional Director.
The Articles include provision for the
retirement of Directors by rotation at each
AGM but, in accordance with the Board’s
policy and the provisions of the 2018
Code, all the current Directors will retire
at the forthcoming AGM and have offered
themselves for election or re-election. The
Board is satisfied that each of the Directors
standing for election or re-election at
the 2020 AGM is qualified for election or
re-election to office by their contribution
and commitment to the Board and their
strengths in supporting the Company’s
strategy (as explained in the Notice
of the Company’s 2020 AGM).
Directors’ indemnities and insurance
The Company has granted qualifying third
party indemnities to each Director and the
Company Secretary to the extent permitted
by law. Qualifying third party indemnities (as
defined by Section 234 of the Companies
Act 2006) in relation to losses or liabilities
incurred by the Company’s Directors and
Company Secretary to third parties in the
actual or purported execution or discharge
of their duties as officers of the Company
and of its associated companies were in
force during the year ended 31 December
2019 and remain in force as at 27 February
2020, being the date this Directors’
Report was approved. The Company also
maintains Directors’ and Officers’ liability
insurance which provides appropriate cover
in respect of legal action brought against its
Directors and Company Secretary.
Significant agreements affected
by a change of control
The Company is party to the following
significant agreements that could be
altered or terminate on a change of control
of the Company following a takeover bid.
Under the terms of the Company’s
revolving credit facilities, the Company
would upon a change of control have five
days to notify the lenders of such change
of control and if, following ten days of
negotiations to either confirm or alter the
terms of such facilities no agreement has
been reached, outstanding balances may
become repayable.
Under the terms of the Company’s £1.5
billion Euro Medium Term Note (EMTN)
programme (as updated on 11 October
2019), there is a change of control put option
such that, upon a change of control put
event, any holder of EMTNs issued under
the programme may require the Company to
redeem or purchase such EMTNs.
Under the terms of a Note Purchase
Agreement (entered into on 30 July 2012)
relating to the issue by the Company of
€78,500,000 4.55% Senior Notes due
16 August 2021 and a Note Purchase
Agreement (entered into on 29 October
2019) relating to the issue by the Company
of £134,000,000 2.38% Series A Senior
Notes due 10 June 2027, €43,000,000
1.11% Series B Senior Notes due 7 May
2027, €137,000,000 1.33% Series C Senior
Notes due 7 May 2030, €60,000,000
1.46% Series D Senior Notes due 7 May
2032 and $81,000,000 3.11% Series
E Senior Notes due 10 June 2027, the
Company is required to offer to repay the
holders of all such Notes the entire unpaid
principal and interest on such Notes on a
change of control of the Company.
124
National Express Group PLC Annual Report 2019 Under the terms of some of the Group’s
vehicle leasing facilities, where the
Company is a guarantor of such facilities,
a change of control of the Company may
amount to an event of default which could
result in outstanding balances under such
leasing facilities becoming repayable.
Under the rules of each of the Group’s
three active share schemes, following
a change of control of the Company,
the vesting of awards made under such
schemes will be accelerated and, where
performance targets are attached to the
awards, the number of awards to vest will
be determined according to the extent to
which performance targets have been met.
Each of the share schemes also allows,
under certain circumstances and where
the acquiring company has agreed, new
awards to be granted in the acquiring
company in place of the original awards,
which will be granted to give substantially
equivalent value to the awardees.
Due to the size of certain of these credit
facilities, note purchase agreements and
leasing facilities, absent consent from the
relevant lenders, noteholders and lessors
to a change of control following a takeover
bid or the bidder being able to refinance
such facilities and borrowings upon its
takeover bid being accepted and taking
effect, their repayment, termination or
default upon such change of control could
create significant liquidity issues for the
Company and could also trigger cross-
defaults into other of the Company’s and
the Group’s credit and leasing facilities.
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of office
or employment that occurs because of a
takeover bid, save that the provisions of
the Group’s three active share incentive
schemes may cause awards made under
them to Directors and employees in the
form of share options to vest on a takeover
bid being accepted and taking effect, or,
under certain circumstances and where the
acquiring company agrees, new awards to
be made in the acquiring company in place
of the original awards to give substantially
equivalent value to the awardees.
Employee matters
Engaging with our workforce and taking
their views into account
The Group places considerable value on
engagement with its workforce and various
mechanisms are used to communicate and
engage, from the top down to local level.
The Group Chief Executive personally
issues a number of communications
to the workforce during the year giving
updates on the Group’s safety, operational
and financial performance. Following
the publication of the Company’s annual
financial results, the CEO and CFO also
host a global conference call to discuss
those results as well as the Group’s annual
safety and operational performance
and to answer questions members of
the workforce may have about such
performance. The Company’s Non-
Executive Directors also engage directly
with the Group’s workforce in the ways
described in the Corporate Governance
Report on pages 71 to 73.
This personal Board-level engagement
is supplemented by regular corporate
communications (which are circulated
either in hard copy on noticeboards for
those workers who do not work at a
computer or have a work email address,
or on the Group’s intranet sites and by
email for those workers who do) which
give updates about the Group’s key
successes and challenges, such as new
business acquisitions, contract wins,
major accidents or incidents, changes
in management, new policies and
procedures, the nominations and
winners of the Group’s Values Awards
and other newsworthy events.
Recognising that the Company is the
parent of an international group of
companies which employs fewer than 250
employees itself but whose Group employs
and engages many thousands of workers,
further communication and engagement
with the wider Group workforce occurs via
the Company’s subsidiaries which make
up its divisions and which are the direct
employers or hirers of such workers. The
divisions communicate and engage with
their respective workforces through a
variety of means, including:
− the regular issue of newsletters,
providing information about the
division’s performance and other
matters of interest to workers, including
operational successes and challenges,
patronage trends, new ticketing
prices or arrangements, new business
partnerships, recent accidents or
incidents, and top tips for staying safe;
− one-to-team communications between
team leaders and their teams and
one-to-one communications between
line managers and their direct reports
raising awareness of matters covered
by corporate communications and
newsletters, dealing with team priorities
and objectives or dealing with matters
relevant to individual employees;
− consultation with trade unions where
appropriate on matters that affect our
employees who are their members,
including regarding pay and changes
in working practices, such as when we
introduced DriveCam or when we launch
new ticketing applications;
− formal consultation with employees
where required in accordance with
applicable law, for example where there
is a transfer of an undertaking or where
redundancies are proposed;
− in the case of some divisions, a monthly
‘ask the manager’ conference call which
employees of that division may join
to hear an update about the division’s
performance in the month and to ask,
anonymously if they wish, any questions
they have for management; and
− in the case of all divisions, participation in
employee engagement surveys, the results
of which are shared with the workforce
and, in the case of any areas identified for
improvement, action plans are developed,
supported in some divisions by local
engagement champions.
The views of employees and other
workers, obtained via these engagement
mechanisms, are often taken into account by
the Company’s and its subsidiaries’ boards
of directors when taking decisions. Examples
of the ways in which the Company’s Board
took employee interests into account in
some of its principal decisions during 2019
are set out in the Corporate Governance
Report on pages 66 to 68.
Some of the Group’s most successful
initiatives have also been born from
workforce engagement. For example, the
Master Driver programme was developed
after drivers gave feedback that there was
no clear programme for recognition and
career progression. The UK division’s award-
winning Health Bus was also developed in
response to a suggestion made in the UK
division’s employee engagement survey.
Across the Group we also run a variety of
programmes which actively seek employees’
ideas about how performance can be
improved. For example, in the UK we have
‘Idea Street’, which is a programme through
which employees can submit their ideas and
win prizes if those ideas are implemented.
It has been used to reduce fraudulent use
of OAP cards, reduce lost mileage due to
spillages, reduce the cost of tyre damage
and secure more prosecutions of members
of the public who spit at drivers.
Involving employees in Company
performance
As explained on page 69 of the Corporate
Governance Report, the Company’s Values
underpin its strategy and are key to the
fulfilment of its Purpose. As such, promotion
of the Values and encouragement of every
member of the Group’s workforce to live
by such Values is the most effective way
of involving them in the Company’s and its
Group’s performance.
125
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit information
Each of the persons who are Directors as
at 27 February 2020, being the date this
Directors’ Report was approved, confirms
that, so far as he/she is aware, there is
no relevant audit information of which
the Company’s auditor, Deloitte LLP, is
unaware and that he/she has taken all the
steps that he/she ought to have taken as
a Director to make himself/herself aware
of any relevant audit information and to
establish that the Company’s auditor is
aware of that information.
Annual General Meeting
This year’s AGM will be held at 2.30pm on
Thursday, 7 May 2020 in the Banqueting
Hall at Glaziers Hall, 9 Montague Cl,
London SE1 9DD. A separate circular,
comprising a letter from the Chairman,
Notice of Meeting and explanatory
notes on the resolutions proposed,
accompanies this Annual Report. Copies
of both documents can also be found
on the Company’s website at www.
nationalexpressgroup.com/investors/
agm/2020.
Approval
The Directors’ Report was approved by
the Board on 27 February 2020.
By Order of the Board
Jennifer Myram
Group Company Secretary
National Express Group PLC
Company number 2590560
Directors’ Report continued
Every year, divisional employees can
nominate their colleagues for demonstrating
behaviours which exemplify the Company’s
Values. The divisional winners in each
Value category are given a cash prize and
nominated for the Group awards. The overall
winners of the Group Values Awards are
chosen at an annual event in London which
brings employees from across the Group’s
global businesses together to honour and
congratulate their achievements.
The Company does not operate an all
employees’ share scheme due to the
size, nature and geography of the Group’s
workforce, for many of whose members
shares in a UK company would not act
as an appropriate reward or incentive.
Rather, the Company and its Group place
emphasis on fair pay structures across
the Group and local bonus schemes to
recognise and reward good performance.
Promoting common awareness among
employees of financial and economic
factors affecting Company performance
Various mechanisms ensure that the
management teams across the Group are
aware of the Company’s strategy and of the
financial, economic and other factors which
affect the Company’s performance and
ability to deliver its strategy. These include:
− annual divisional conferences at which the
Company’s Executive Directors, divisional
senior management and other managers
attend to discuss the Group’s strategy
and agree the division’s priorities to
deliver strategy; and
− monthly Group Executive Committee
meetings and divisional executive
committee meetings, all of which are
attended by the Company’s Executive
Directors, as well as monthly divisional
subsidiary board and committee meetings
at which strategic priorities are relayed
and performance against them is tracked.
Various of the Company and divisional
workforce mechanisms described above
are also used to relay Company strategy
and explain the key factors that affect
the Company’s performance to other
members of the workforce, including those
working ‘on the front line’. For example,
newsletters discuss patronage levels and
ticket prices which are the key financial and
economic factors affecting open network
services, and one-to-team and one-to-
one communications will cover costs and
performance levels of services which are the
key financial and economic factors affecting
services performed under contract.
Equal opportunities
The Company and all members of its Group
are equal opportunities employers and our
Group Equal Opportunities Policy is to treat
all employees equally, irrespective of race,
gender, disability, age, sexual preference,
marital status, employment status,
religious or political beliefs and social
background. The Company gives full and
fair consideration to disabled applicants for
employment having regard to their skills and
capabilities, as confirmed in its Recruitment
and Selection Policy, as well as recognising
its obligations in connection with the
continuing employment and training of
members of the workforce who have
become disabled whilst in the Company’s
employment. Where an employee becomes
disabled, the objective is to retain their
services wherever possible. The Company
also works to ensure the continued career
development of disabled persons including
through training and promotion wherever
their skills and capabilities permit.
The Company and all members of its
Group also promote an environment
free from discrimination, harassment
or victimisation and a culture in which
members of the workforce are able to raise
concerns without suffering detrimental
treatment. Our whistleblowing policy and
procedures are described on page 92.
Political donations
The Company did not make any political
donations, but did incur a small amount of
political expenditure (£7,000) in sponsoring
receptions at the regional Conservative
and Labour conferences during the year
ended 31 December 2019 (2018: nil). The
Company’s policy is that neither it nor its
subsidiaries make what are commonly
regarded as donations to any political
party. However, the Act’s definition of
political donations includes expenditure
on the sponsorship of the events noted
above. It could also include other business
activities which would not normally be
thought of as political donations, such as
subscriptions, payment of expenses and
support for bodies representing either
the transport industry specifically or the
business community in general in policy
review or reform. The resolution being
proposed at the 2020 AGM to authorise
political donations and expenditure is
to ensure that these normal business
activities are permitted and that neither the
Company nor its UK subsidiaries commit
any technical breach of the Act.
126
National Express Group PLC Annual Report 2019 Directors’ Responsibilities
Legal and regulatory framework
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, the Directors
are required to prepare the Group
Financial Statements in accordance with
International Financial Reporting Standards
(IFRS), as adopted by the European
Union and Article 4 of the International
Accounting Standards Regulation and have
elected to prepare the parent Company
Financial Statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (combining United
Kingdom Accounting Standards and
applicable law), including FRS 101
‘Reduced Disclosure Framework’. Under
company law, the Directors must not
approve the Financial Statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Company and of the profit or loss of
the Group and Company for that period.
In preparing the Group Financial
Statements, International Accounting
Standard 1 requires that Directors:
− properly select and apply accounting
policies;
− present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
− provide additional disclosures
when compliance with the specific
requirements in IFRS are insufficient to
enable users to understand the impact
of particular transactions, other events
and conditions on the entity’s financial
position and financial performance; and
− make an assessment of the Company’s
ability to continue as a going concern.
In preparing the Company Financial
Statements, the Directors are required to:
− select suitable accounting policies and
then apply them consistently;
− make judgements and accounting
estimates that are reasonable
and prudent;
− state whether applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed
and explained in the financial
statements; and
− prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the Financial
Statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that complies with applicable law
and regulations.
The Directors are also responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of Financial Statements may
differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of
our knowledge:
− the Financial Statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole;
− the Strategic Report includes a
fair review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face; and
− the Annual Report and Financial
Statements, taken as a whole, are fair,
balanced and understandable and
provide the information necessary for
shareholders to assess the Company’s
and the Group’s position and
performance, business model
and strategy.
This responsibility statement was approved
by the Board of Directors and is signed on
its behalf by:
Dean Finch
Group Chief
Executive
27 February 2020
Chris Davies
Group Finance
Director
127
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Independent Auditor’s Report
to the Members of National Express Group PLC
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
− the Financial Statements of National Express Group plc (the parent Company) and its subsidiaries (the Group) give a true and fair view
of the state of the Group’s and of the parent Company’s affairs as at 31 December 2019 and of the Group’s profit for the year then
ended;
− the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB);
− the parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
− the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group Financial Statements, Article 4 of the IAS Regulation.
We have audited the Financial Statements which comprise:
− the Consolidated Income Statement;
− the Consolidated Statement of Comprehensive Income;
− the Consolidated and parent Company Balance Sheets;
− the Consolidated and parent Company Statements of Changes in Equity;
− the Consolidated Cash Flow Statement;
− the related notes 1 to 40 for the Consolidated Financial Statements; and
− the related notes 1 to 18 for the parent Company Financial Statements.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and IFRSs
as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent Company
Financial Statements is applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure Framework.
(United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our audit of the
Financial Statements in the UK, including the Financial Reporting Council’s (the FRC’s) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit
services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
– Impairment of goodwill and other intangible and property, plant and equipment;
– North American insurance and other claims provisions; and
– Valuation of customer intangibles and put option liability arising from the WeDriveU acquisition.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the Group Financial Statements was £12 million, which was determined on the basis of
normalised profit before tax.
The Group is organised into four operating divisions, each of which has its own sub-consolidation, plus the head office function.
Audit work for these components was completed to levels of materiality between £4.4 million and £8.0 million. The components
account for 100% of Group revenue, operating profit and Group net assets.
Full scope audit work was completed on a divisional sub-consolidation basis for UK, North America, Germany and Spain
(including Morocco).
Full scope audit procedures have been performed on the parent Company Financial Statements.
All other parts of the Group have been subject to analytical review procedures.
Significant changes
in our approach
We included an additional key audit matter related to the acquisition of WeDriveU (see section 5.3), which was acquired
on 11 April 2019. There have been no other significant changes to our approach as compared to prior year.
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4. Conclusions relating to going concern, principal risks and viability statement
4.1. Going concern
We have reviewed the Directors’ statement in note 2 to the Financial Statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the
Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the
Financial Statements.
We considered as part of our risk assessment the nature of the Group, its business model and related risks including where
relevant the impact of Brexit, the requirements of the applicable financial reporting framework and the system of internal
control. We evaluated the Directors’ assessment of the Group’s ability to continue as a going concern, including challenging
the underlying data and key assumptions used to make the assessment, and evaluated the Directors’ plans for future actions
in relation to their going concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to that statement required
by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit.
Going concern is the
basis of preparation of
the Financial Statements
that assumes an entity will
remain in operation for a
period of at least 12 months
from the date of approval of
the Financial Statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
4.2. Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the knowledge we
obtained in the course of the audit, including the knowledge obtained in the evaluation of the Directors’ assessment of the
Group’s and Company’s ability to continue as a going concern, we are required to state whether we have anything material to
add or draw attention to in relation to:
– the disclosures on pages 48 to 53 that describe the principal risks, procedures to identify emerging risks, and an
explanation of how these are being managed or mitigated;
– the Directors’ confirmation on page 26 that they have carried out a robust assessment of the principal and emerging
risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or
– the Directors’ explanation on page 26 as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group required by Listing Rule
9.8.6R (3) is materially inconsistent with our knowledge obtained in the audit.
Viability means the ability
of the Group to continue
over the time horizon
considered appropriate by
the directors.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
5.1. Impairment of goodwill and other intangible and fixed assets
Key audit matter
description
Total goodwill, intangible assets and property, plant and equipment at 31 December 2019 were £3,250 million (2018: £2,852
million). The most significant balances relate to the Spanish and the North America divisions which are £1,341 million (2018:
£1,275 million) and £1,502 million (2018: £1,326 million), respectively.
There is a risk surrounding the recoverability of these balances, as assessed annually by management as part of their
impairment review, using discounted cash flows on a value in use basis.
Potential fraud risks are identified in relation to the key judgements in assessing goodwill and other fixed assets for impairment
due to the potential risk of inappropriate management bias. These key judgements include the post-tax discount rate and the
perpetual growth rate applied in the model.
The value in use models are sensitive to changes in these rates, both of which must reflect a long-term view of underlying
growth in each respective economy. Estimating a value in use is inherently judgemental, and a range of assumptions can
reasonably be applied in determining an appropriate discount rate and perpetual growth rate to use.
As a result of market changes, discount rates have generally fallen since the prior year which has provided more headroom in
management’s impairment assessments. This has reduced the risk of impairment in the current year.
The Audit Committee Report on page 87 refers to goodwill and fixed asset impairment as a key judgement considered by the
Audit Committee. Note 2 to the financial statements sets out the Group’s accounting policy for testing goodwill and other fixed
assets for impairment. The basis for the impairment reviews is outlined in note 14 to the Financial Statements, including details
of the pre-tax discount rate and terminal growth rate used. Note 14 to the Financial Statements also includes details of the
extent to which the goodwill and fixed asset impairment test is sensitive to changes in the key inputs.
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How the scope of our
audit responded to the
key audit matter
Our procedures for challenging management’s methodology and assumptions focussed on the Group’s interests in Spain and
North America and included:
– obtained an understanding of relevant controls;
– validating the integrity of the impairment models through testing of the mechanical accuracy and verifying the application
of the input assumptions;
– understanding the underlying process used to determine the risk-adjusted discount rates;
– assessing the appropriateness of any changes to assumptions since the prior period;
– challenging the cash flow forecasts with reference to historical forecasts, actual performance and independent evidence
to support any significant expected future changes to the business;
– working with our valuation specialists to benchmark the discount rates and perpetuity growth rates applied to external
macro-economic and market data. This involved consideration of the impact of territory-specific risk adjustments to the
discount rate and perpetuity growth rates versus the risk adjustments made to the underlying cash flows; and
– assessing the appropriateness of the disclosure included in the financial statements including the sensitivity analysis
provided.
Key observations
We determined that there is currently sufficient headroom for both the Spanish division and the North America division such that
we concur with management that no impairment is required.
In the interests of transparency and consistency, management has again provided detailed sensitivity disclosures, despite
concluding no reasonably possible movement in a key assumption would lead to impairment.
We concluded that the assumptions applied in the impairment models, when taken individually and in aggregate, are within our
acceptable range.
5.2. North American insurance and other claims provisions
Key audit matter
description
The Group operates two levels of insurance, a self-covering level and an outsourced level. Of the total Group claims provision
of £93.7 million at 31 December 2019 (2018: £95.6 million), £76.2 million (2018: £77.2 million) relates to the self-insured
provision in the North American division. This reflects historical claims being managed by the Group, as well as provision for
new claims identified in the year, including amounts arising through acquisitions in the year that have required separate fair
value consideration.
There are a number of key judgements in relation to the insurance and other claims provision: appropriateness of the Income
Statement charge; actuarial assessment of the high volume lower value claims, in conjunction with Willis Towers Watson
(WTW); assessment of the provision for historical acquisition provisions and larger individual claims; and determination
of the provisional fair value of provisions recorded in respect of new acquisitions.
Estimation of insurance and other claims provisions, including those arising on acquisition, is highly judgemental and is based
on assessment of the expected settlement of known claims together with an estimate of settlements that will be made in
respect of incidents incurred but not reported at the balance sheet date.
The measurement of the self-insured claims provision in North America uses a combination of actuarial assumptions around
loss development and management judgement to ensure that the Group is appropriately provided for.
Given the level of complexity and judgement involved in making these estimations, management utilises an independent
actuarial expert to calculate a range of potential outcomes for the liability relating to their large portfolio of low value claims.
There is a risk of material misstatement, whether due to error or inappropriate management bias, and therefore the eventual
outcome could be materially different from that estimated and provided for.
There have been no significant changes to the nature or basis of the provision in the current year so we have assessed the level
of risk as remaining stable.
The Audit Committee Report on page 87 refers to North American insurance and other claims provisions as a key judgement
considered by the Audit Committee. This area has also been highlighted as a key accounting estimate and judgement in note 2
to the Financial Statements. Details of the Group claims provision are given in note 26 to the Financial Statements.
Our procedures performed for challenging management’s methodology and assumptions included:
– obtained an understanding of relevant controls.
– working with our actuarial specialists, we challenged the assumptions inherent in the valuation produced by the Group’s
actuary in North America for the high-volume lower value claims, such as the loss development factors and ultimate
expected losses, and to re-perform the actuarial calculation to develop a valuation range. Additionally we have assessed
the management’s expert’s competence and considered their independence and objectivity.
– for the individually large claims not subject to actuarial review, we discussed the nature of each claim with the US general
counsel and those responsible for claims handling and tested a sample of items to independent third party reports to
assess the expected range of possible outcomes. This included testing the fair value of provisions recognised on
acquisitions during the year.
– we compared the overall level of provision recorded to the range determined by management and the Group’s actuary, to
assess whether the level of provision was appropriate. This involved consideration of the audit evidence supporting the
range as well as working with our actuarial specialists to perform the independent assessment of the range for higher-
volume lower value claims.
How the scope of our
audit responded to the
key audit matter
Key observations
As part of our detailed audit work testing the various aspects of the provision, including new amounts recognised at fair value
on acquisition and the Income Statement charge for the year, we did not identify any material exceptions.
As a result we concluded the overall Balance Sheet position is in line with our expectations, albeit towards the optimistic side.
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National Express Group PLC Annual Report 2019 5.3. Valuation of customer intangibles and put option liability arising from the WeDriveU acquisition
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
National Express LLC acquired 60% of the share capital of WeDriveU Inc. (WeDriveU) on 11 April 2019 for a cash consideration
of £66.2 million. WDU operated a significant number of contracts at acquisition and the fair value of these needed to be
considered under IFRS 3 ‘Business Combinations’. At the time of the acquisition the largest customer contract contributed
approximately 38% of total revenue. Using an independent third party valuation expert, management valued total customer
contract intangibles at £37.6m, of which the majority related to this customer. A number of judgements were required about
future revenues and margins for this contract, as well as expected retention levels beyond the current contractual period.
As part of the transaction, National Express and the WeDriveU management team retain call and put options, respectively, over
the remaining shares, exercisable annually over the next three years. The option price is determined by reference to WeDriveU’s
profitability during that timeframe.
Management has concluded that the fair value purchase mechanism for the remaining shares and the pre-determined exercise
timings means they do not have rights to returns associated with ownership until the options are exercised. As such, the
accounting for the put option has been treated separately from the acquisition accounting.
Due to the nature of the transaction, size and nature of management’s judgement around valuations, we have determined the
acquisition as a key audit matter. More specifically, we have pinpointed this to the risk associated with the valuation of the
largest customer intangible and the valuation of the put option liability (£97 million).
The Audit Committee Report on page 87 refers to the WeDriveU acquisition as a significant judgement and estimate considered
by the Audit Committee. This area has also been highlighted as a key accounting estimate in note 2 to the Financial Statements.
Details of the put liability are given in note 25 to the Financial Statements.
Our procedures performed for challenging management’s methodology and assumptions included:
Contract related customer intangible asset
– obtained an understanding of relevant controls;
– in conjunction with valuation specialists, tested the key assumptions used by management’s expert in its valuation. This
included challenging the appropriateness of a discount rate by deriving a weighted average cost of capital (WACC) for the
entity reflecting the weighted average return on debt and equity as required by a market participant and assessing the
competence, independence and objectivity of management’s experts;
– challenged management’s contract-specific margin assumptions by auditing historical revenues and costs, and tracing a
sample of items to supporting evidence;
– held discussions with operational contract managers and reviewed supporting information (such as customer KPI
reporting) to assessed the appropriateness of contract renewal assumptions; and
– considered the reasonableness of the forecast revenues for each contract with reference to actual performance and
contractual terms.
Put option liability
– assessed future revenue growth assumptions with reference to historical revenue and order capture performance, as well
as testing a sample of prospective contract estimates in the forward order book;
– held discussions with operational management and members of the salesforce to challenge contract renewal and future
order capture assumptions;
– assessed future EBITDA margin assumptions with reference to historical performance, challenging where future
improvements were expected from current levels as a result of acquisition synergies; and
– modelled alternative potential scenarios to assess the impact on the put option liability valuation, including challenging
the nature and basis for management’s disclosure of this as a key source of estimation uncertainty.
Key observations
Based on the work performed as outlined above, we are satisfied that the fair valuation of the acquired customer intangibles are
reasonable and materially accurate in accordance with IFRS 3 ‘Business Combinations’.
As a result of the work performed the cash flow forecasts used to value the put option liability we are satisfied that, when taken
together, management’s assumptions lie within a reasonable range, albeit at the prudent end of that range.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Materiality
£12m (2018: £11m)
£8m (2018: £7m)
Group Financial Statements
Parent Company Financial Statements
Basis for determining
materiality
5% (2018: 5%) of normalised profit before tax. This materiality
level equates to 1.1% (2018: 1.4%) of equity.
Normalised profit before tax is disclosed on the face of the
Group Income Statement where it is reconciled to statutory
profit before tax.
Parent Company materiality is set at approximately 67%
(2018: 64%) of Group materiality, which equates to 0.6%
(2018: 0.9%) of parent Company’s net assets.
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Independent Auditor’s Report
to the Members of National Express Group PLC continued
Rationale for the
benchmark applied
Materiality
Normalised
PBT £240m
Normalised PBT
Group materiality
Net assets is considered as an appropriate benchmark for the
parent Company given that it is mainly a holding company.
Normalised profit is a key performance measure for
management, investors and the analyst community,
which facilitates the users’ understanding of the underlying
trading performance.
Normalised results are defined as the statutory results
excluding intangible amortisation for acquired businesses,
net gain in relation to the disposal and Ecolane subsidiaries,
US restructuring costs, and in the prior year, result from
discontinued operations.
Group materiality £12m
Component materiality range
£4.4m to £8.0m
Audit Committee reporting
threshold £0.6m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the Financial Statements as a whole. Group performance materiality was set at 70% of Group
materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered the quality of the control environment
and the history of uncorrected misstatements in previous years.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £600,000 (2018: £385,000),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. Based on that assessment, as in the prior year, we focussed our Group
audit scope primarily on the audit work at the four operating divisions (UK, German Rail, Spain and North America) and the Group head
office function. Each operating division produces its own sub-consolidation and was subject to an audit that was scoped relevant to its
component materiality level, which was between £4.4 million and £8.0 million (2018: between £4.4 million and £7.0 million). This audit
work was performed by Deloitte Touche Tohmatsu Limited member firms. The Group head office work was performed to a component
materiality level of £8.0 million, (2018: £6.4m).
The four operating divisions and the Group head office function contributed 100% (2018: 100%) of Group revenue and 100%
(2018: 100%) of Group operating profit and 100% (2018: 100%) of Group net assets.
7.2. Working with other auditors
The Group audit team continued to follow a programme of planned visits designed so that the Senior Statutory Auditor and/or a senior
member of the audit team visits each of the three non-UK divisions where the Group audit scope was focussed at least once a year
in addition to the work performed at the Group head office. In relation to the current year audit the Senior Statutory Auditor and/or a
senior member of the audit team visited Spain, North America and Germany at least once this year. Likewise, the Group audit team has
maintained appropriate oversight over both UK divisions for component reporting and reviewing purposes.
An audit of specified account balances was performed by KPMG over the underlying Financial Statements of the Bahrain joint venture.
At the parent entity level we also tested the consolidation process.
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National Express Group PLC Annual Report 2019 Revenue
1%
Profit before tax
Net assets
1%
17%
99%
Full audit scope
Review at group level
83%
Full audit scope
Review at group level
99%
Full audit scope
Review at group level
8. Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report,
other than the Financial Statements and our auditor’s report thereon.
Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the Financial Statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information
include where we conclude that:
− Fair, balanced and understandable – the statement given by the directors that they consider the Annual Report and Financial Statements
taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
− Audit committee reporting – the section describing the work of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
− Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ Statement required
under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified
for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision
of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
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10. Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws
and regulations are set out below.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, and then design and
perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
− the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for directors’ remuneration, bonus levels and performance targets;
− results of our enquiries of management internal audit and the audit committee about their own identification and assessment of the
risks of irregularities;
− any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
− identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
− detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
− the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.
− the matters discussed among the audit engagement team including significant component audit teams and involving relevant internal
specialists, including tax, valuations, pensions, actuary and IT regarding how and where fraud might occur in the Financial Statements
and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas:
− the estimation of North American insurance and other claims given the level of judgement involved;
− management assumptions on the perpetual growth rate and discount rate applied to the goodwill impairment model;
− management assumptions on the valuation in relation to the WeDriveU acquisition, more specifically the aforementioned put option
liabilities and intangible asset identified is customer relationships; and
− the completeness and accuracy of deferred revenue in relation to pre-booked tickets and pre-paid travelcards in the UK components
and the cut off of contractual revenue in Spain division.
− In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key
laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation, tax legislation and
Regulations from the Traffic Commissioners.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial Statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s
operating licence, regulatory solvency requirements and environmental regulations.
11.2. Audit response to risks identified
As a result of performing the above, we identified impairment of Goodwill and other fixed assets, valuation of WeDriveU and North
America insurance liability as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains
the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
− reviewing the Financial Statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the Financial Statements;
− enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;
− performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
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National Express Group PLC Annual Report 2019 − reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
HMRC and overseas tax authorities in the jurisdictions in which the Group operates;
− completed focussed testing on the deferred revenue balance at 31 December 2019 in UK Bus and UK Coach by recalculating the
deferred income held by each of the divisions based on journeys paid for vs. travelled by the year end and formed an expectation
of revenues in Spain through examining a sample of key contracts; and
− in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
− the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are
prepared is consistent with the Financial Statements; and
− the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
− we have not received all the information and explanations we require for our audit; or
− adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
− the parent Company Financial Statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not
been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14. Other matters
14.1. Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Board on 14 June 2011 to audit the Financial Statements
for the year ending 31 December 2011 and subsequent financial periods. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is 9 years, covering the years ending 31 December 2011 to 31 December 2019.
14.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Stephen Griggs, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
26 February 2020
135
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Financial Statements
Group Income Statement
For the year ended 31 December 2019
124
Financial Statements
Group Income Statement
For the year ended 31 December 2019
Continuing operations
Revenue
Operating costs
Group operating profit
Share of results from associates and
joint ventures
Finance income
Finance costs
Profit before tax
Tax charge
Profit after tax for the year
from continuing operations
Profit for the year from discontinued
operations
Profit for the year
Profit attributable to equity shareholders
Profit attributable to non-controlling interests
Earnings per share:
– basic earnings per share
– diluted earnings per share
Normalised earnings per share:
– basic earnings per share
– diluted earnings per share
Earnings per share from
continuing operations:
– basic earnings per share
– diluted earnings per share
Normalised
result
2019
£m
Note
Separately
disclosed
items
2019
£m
Total
2019
£m
Normalised
result
2018
£m
Separately
disclosed
items
2018
£m
–
(42.3)
(42.3)
–
–
–
(42.3)
10.0
(32.3)
–
(32.3)
(32.3)
–
(32.3)
4
5
18
9
9
10
11
13
2,744.4
(2,449.1)
295.3
–
2,744.4
(53.0)
(53.0)
(2,502.1)
242.3
2,450.7
(2,193.0)
257.7
0.4
8.6
(64.3)
240.0
(55.2)
184.8
–
184.8
176.2
8.6
184.8
34.5p
34.4p
0.9
9.8
(48.4)
220.0
(49.0)
171.0
–
171.0
168.0
3.0
171.0
32.9p
32.8p
–
–
–
(53.0)
16.5
0.4
8.6
(64.3)
187.0
(38.7)
(36.5)
148.3
–
(36.5)
(35.1)
(1.4)
(36.5)
–
148.3
141.1
7.2
148.3
27.6p
27.5p
27.6p
27.5p
Total
2018
£m
2,450.7
(2,235.3)
215.4
0.9
9.8
(48.4)
177.7
(39.0)
138.7
–
138.7
135.7
3.0
138.7
26.6p
26.5p
26.6p
26.5p
Separately disclosed items includes intangible amortisation for acquired businesses, net gain in relation to the disposal of Ecolane
subsidiaries, US restructuring costs and, in the prior year, result from discontinued operations. The Board believes that this gives a more
comparable year-on-year indication of the operating performance of the Group and allows the users of the Financial Statements to
understand management’s key performance measures. Further details relating to separately disclosed items are provided in note 4.
136
National Express Group PLC Annual Report 2019
124
Financial Statements
Group Income Statement
For the year ended 31 December 2019
Normalised
result
2019
£m
Note
Separately
disclosed
items
2019
£m
Total
2019
£m
Normalised
result
2018
£m
Separately
disclosed
2,744.4
(2,449.1)
295.3
–
2,744.4
(53.0)
(53.0)
(2,502.1)
242.3
2,450.7
(2,193.0)
257.7
Share of results from associates and
Continuing operations
Revenue
Operating costs
Group operating profit
joint ventures
Finance income
Finance costs
Profit before tax
Tax charge
Profit after tax for the year
from continuing operations
Profit for the year from discontinued
operations
Profit for the year
Profit attributable to equity shareholders
Profit attributable to non-controlling interests
Earnings per share:
– basic earnings per share
– diluted earnings per share
Normalised earnings per share:
– basic earnings per share
– diluted earnings per share
Earnings per share from
continuing operations:
– basic earnings per share
– diluted earnings per share
4
5
18
9
9
10
11
13
0.4
8.6
(64.3)
240.0
(55.2)
184.8
–
184.8
176.2
8.6
184.8
34.5p
34.4p
0.9
9.8
(48.4)
220.0
(49.0)
171.0
–
171.0
168.0
3.0
171.0
32.9p
32.8p
(36.5)
148.3
–
–
–
(53.0)
16.5
–
(36.5)
(35.1)
(1.4)
(36.5)
0.4
8.6
(64.3)
187.0
(38.7)
–
148.3
141.1
7.2
148.3
27.6p
27.5p
27.6p
27.5p
items
2018
£m
–
(42.3)
(42.3)
–
–
–
(42.3)
10.0
(32.3)
(32.3)
(32.3)
–
–
(32.3)
Total
2018
£m
2,450.7
(2,235.3)
215.4
0.9
9.8
(48.4)
177.7
(39.0)
138.7
–
138.7
135.7
3.0
138.7
26.6p
26.5p
26.6p
26.5p
Separately disclosed items includes intangible amortisation for acquired businesses, net gain in relation to the disposal of Ecolane
subsidiaries, US restructuring costs and, in the prior year, result from discontinued operations. The Board believes that this gives a more
comparable year-on-year indication of the operating performance of the Group and allows the users of the Financial Statements to
understand management’s key performance measures. Further details relating to separately disclosed items are provided in note 4.
Financial Statements
Group Statement of Comprehensive Income
Financial Statements
For the year ended 31 December 2019
Group Statement of Comprehensive Income
For the year ended 31 December 2019
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on defined benefit pension plans
Deferred tax on actuarial gains/(losses)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on retranslation of foreign operations (net of hedging)
Exchange gains reclassified to Income Statement on disposal of subsidiaries
Cost of hedging
Exchange differences on retranslation of non-controlling interests
Gains/(losses) on cash flow hedges
Hedging gains reclassified to Income Statement
Tax on exchange differences
Deferred tax on cash flow hedges
Comprehensive expenditure for the year
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
Note
34
10
19
10
10
2019
£m
148.3
23.8
(4.3)
19.5
(71.0)
(1.0)
1.0
(1.9)
10.8
(3.2)
(1.7)
(2.5)
(69.5)
2018
£m
138.7
(24.9)
4.0
(20.9)
30.1
–
1.4
0.4
(6.3)
(11.5)
(2.2)
3.1
15.0
(50.0)
(5.9)
98.3
132.8
93.0
5.3
98.3
129.4
3.4
132.8
125
137
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Group Balance Sheet
At 31 December 2019
126
Financial Statements
Group Balance Sheet
At 31 December 2019
Non-current assets
Intangible assets
Property, plant and equipment
Non-current financial assets
Investments accounted for using the equity method
Trade and other receivables
Finance lease receivable
Deferred tax assets
Defined benefit pension assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Finance lease receivable
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total current assets
Assets classified as held for sale
Total assets
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liability
Other non-current liabilities
Defined benefit pension liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Total current liabilities
Liabilities classified as held for sale
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Capital redemption reserve
Own shares
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests in equity
Total equity
D Finch
Group Chief Executive
27 February 2020
C Davies
Group Finance Director
138
Note
14
15
17
18
20
35
27
34
21
22
35
17
23
19
28
28
27
25
34
26
24
28
28
26
19
32
33
2019
£m
1,901.8
1,348.2
24.9
17.9
9.6
3.6
31.8
14.2
3,352.0
29.4
496.8
1.4
44.5
1.6
478.3
1,052.0
4.3
4,408.3
2018
£m
1,797.5
1,054.8
14.9
12.9
3.0
–
42.7
14.9
2,940.7
27.4
408.6
–
7.9
0.8
117.5
562.2
22.8
3,525.7
(1,104.9)
(1,029.3)
(9.6)
(56.4)
(164.3)
(104.2)
(43.1)
(12.6)
(63.0)
(25.2)
(131.7)
(49.2)
(1,482.5)
(1,311.0)
(1,052.9)
(652.8)
(37.8)
(8.8)
(61.0)
(1,813.3)
–
(3,295.8)
1,112.5
25.6
532.7
0.2
(6.0)
130.5
391.4
1,074.4
38.1
1,112.5
(870.5)
(59.3)
(16.9)
(8.4)
(58.7)
(1,013.8)
(3.7)
(2,328.5)
1,197.2
25.6
532.7
0.2
(7.0)
196.2
426.6
1,174.3
22.9
1,197.2
National Express Group PLC Annual Report 2019
126
Financial Statements
Group Balance Sheet
At 31 December 2019
Financial Statements
Group Statement of Changes in Equity
For the year ended 31 December 2019
Financial Statements
Group Statement of Changes in Equity
For the year ended 31 December 2019
127
Total
equity
£m
1,197.2
(9.5)
1,187.7
148.3
(50.0)
98.3
(6.2)
–
5.6
0.5
–
(78.3)
At 1 January 2019
Change in accounting policies1
At 1 January 2019 (restated)
Profit for the year
Comprehensive expense for the year
Total comprehensive income
Shares purchased
Own shares released to satisfy
employee share schemes
Share-based payments
Tax on share-based payments
Reclassification in reserves
Dividends
Dividends paid to non-controlling
interests
Recognition of liabilities with
non-controlling interests
Acquisitions and disposals of
non-controlling interests
Other movements with
non-controlling interests
At 31 December 2019
At 1 January 2018
Change in accounting policies1
At 1 January 2018 (restated)
Profit for the year
Comprehensive expense for the year
Total comprehensive income
Shares purchased
Own shares released to satisfy
employee share schemes
Share-based payments
Tax on share-based payments
Dividends
Dividends paid to non-controlling
interests
Acquisition of
non-controlling interests
At 31 December 2018
Share
capital
£m
25.6
–
25.6
–
–
–
–
–
–
–
–
–
–
–
–
Share
capital
£m
25.6
–
25.6
–
–
–
–
–
–
–
–
–
–
Share
premium
account
£m
Capital
redemption
reserve
£m
Own
shares
(note 32)
£m
Other
reserves
(note 33)
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
196.2
426.6
1,174.3
532.7
–
532.7
0.2
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.0)
–
(7.0)
–
–
–
(6.2)
7.2
–
–
–
–
–
–
–
–
196.2
–
(67.6)
(67.6)
–
–
–
–
1.9
–
–
–
–
(9.5)
(9.5)
417.1
141.1
19.5
160.6
–
(7.2)
5.6
0.5
(1.9)
(78.3)
1,164.8
141.1
(48.1)
93.0
(6.2)
–
5.6
0.5
–
(78.3)
22.9
–
22.9
7.2
(1.9)
5.3
–
–
–
–
–
–
–
–
(1.5)
(1.5)
(100.0)
(100.0)
–
(100.0)
–
–
9.6
9.6
Share
premium
account
£m
Capital
redemption
reserve
£m
Own
shares
(note 32)
£m
Other
reserves
(note 33)
£m
Retained
earnings
£m
532.7
–
532.7
–
–
–
–
–
–
–
–
–
–
0.2
–
0.2
–
–
–
–
–
–
–
–
–
–
(6.0)
–
(6.0)
–
–
–
(9.7)
8.7
–
–
–
–
–
181.6
–
181.6
–
14.6
14.6
–
–
–
–
–
–
–
Total
£m
1,145.0
(27.8)
1,117.2
135.7
(6.3)
129.4
(9.7)
–
7.0
1.2
410.9
(27.8)
383.1
135.7
(20.9)
114.8
–
(8.7)
7.0
1.2
(70.8)
(70.8)
–
–
–
–
Non-
controlling
interests
£m
21.4
(3.4)
18.0
3.0
0.4
3.4
–
–
–
–
–
Total
equity
£m
1,166.4
(31.2)
1,135.2
138.7
(5.9)
132.8
(9.7)
–
7.0
1.2
(70.8)
(0.6)
(0.6)
2.1
22.9
2.1
1,197.2
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’ (see note 2)
25.6
532.7
0.2
(6.0)
130.5
391.4
1,074.4
(5.0)
(5.0)
1.8
38.1
(3.2)
1,112.5
25.6
532.7
0.2
(7.0)
196.2
426.6
1,174.3
1 Opening balances in the prior year were restated for the adoption of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’
139
Investments accounted for using the equity method
Non-current assets
Intangible assets
Property, plant and equipment
Non-current financial assets
Trade and other receivables
Finance lease receivable
Deferred tax assets
Defined benefit pension assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Finance lease receivable
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total current assets
Assets classified as held for sale
Total assets
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liability
Other non-current liabilities
Defined benefit pension liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Total current liabilities
Liabilities classified as held for sale
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Capital redemption reserve
Own shares
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests in equity
Total equity
D Finch
C Davies
Group Chief Executive
Group Finance Director
27 February 2020
Note
14
15
17
18
20
35
27
34
21
22
35
17
23
19
28
28
27
25
34
26
24
28
28
26
19
32
33
3,352.0
2,940.7
(1,104.9)
(1,029.3)
(1,482.5)
(1,311.0)
(1,813.3)
(1,013.8)
2019
£m
1,901.8
1,348.2
24.9
17.9
9.6
3.6
31.8
14.2
29.4
496.8
1.4
44.5
1.6
478.3
1,052.0
4.3
4,408.3
(9.6)
(56.4)
(164.3)
(104.2)
(43.1)
(1,052.9)
(652.8)
(37.8)
(8.8)
(61.0)
–
(3,295.8)
1,112.5
25.6
532.7
0.2
(6.0)
130.5
391.4
1,074.4
38.1
1,112.5
2018
£m
1,797.5
1,054.8
14.9
12.9
3.0
–
42.7
14.9
27.4
408.6
–
7.9
0.8
117.5
562.2
22.8
3,525.7
(12.6)
(63.0)
(25.2)
(131.7)
(49.2)
(870.5)
(59.3)
(16.9)
(8.4)
(58.7)
(3.7)
(2,328.5)
1,197.2
25.6
532.7
0.2
(7.0)
196.2
426.6
1,174.3
22.9
1,197.2
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Group Statement of Cash Flows
For the year ended 31 December 2019
128
Financial statements
Group Statement of Cash Flows
For the year ended 31 December 2019
Cash generated from operations
Tax paid
Interest paid
Interest received
Net cash flow from operating activities
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired
Deferred consideration for businesses acquired
Proceeds from the disposal of business, net of cash disposed
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments to acquire intangible assets
Proceeds from disposal of intangible assets
Settlement of net investment hedge derivative contracts
(Payments)/receipts relating to associates and investments
Net cash flow from investing activities
Cash flows from financing activities
Lease principal payments
Increase in borrowings
Repayment of borrowings
Settlement of foreign exchange forward contracts
Purchase of own shares
Contribution from non-controlling interests
Acquisition of non-controlling interests
Dividends paid to non-controlling interests
Dividends paid to shareholders of the Company
Net cash flow from financing activities
Increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Foreign exchange
Closing cash and cash equivalents
Cash and cash equivalents in continuing operations
Cash and cash equivalents classified in assets held for sale
Closing cash and cash equivalents
140
Note
39
19
19
19
12
23
23
2019
£m
438.2
(25.0)
(65.7)
8.7
356.2
(108.3)
(14.8)
21.7
(116.5)
9.7
(28.0)
1.5
(11.0)
(5.3)
2018
£m
361.2
(21.1)
(43.0)
9.7
306.8
(107.4)
(38.5)
–
(160.6)
48.9
(5.8)
10.0
–
1.1
(251.0)
(252.3)
(91.1)
414.1
–
20.8
(6.2)
3.1
(1.8)
(0.7)
(78.3)
259.9
365.1
117.7
365.1
(4.5)
478.3
478.3
–
478.3
(49.9)
–
(94.4)
(27.6)
(9.7)
–
–
(0.6)
(70.8)
(253.0)
(198.5)
314.3
(198.5)
1.9
117.7
117.5
0.2
117.7
National Express Group PLC Annual Report 2019
128
Financial statements
Group Statement of Cash Flows
For the year ended 31 December 2019
Cash generated from operations
Tax paid
Interest paid
Interest received
Net cash flow from operating activities
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired
Deferred consideration for businesses acquired
Proceeds from the disposal of business, net of cash disposed
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments to acquire intangible assets
Proceeds from disposal of intangible assets
Settlement of net investment hedge derivative contracts
(Payments)/receipts relating to associates and investments
Net cash flow from investing activities
Cash flows from financing activities
Lease principal payments
Increase in borrowings
Repayment of borrowings
Settlement of foreign exchange forward contracts
Purchase of own shares
Contribution from non-controlling interests
Acquisition of non-controlling interests
Dividends paid to non-controlling interests
Dividends paid to shareholders of the Company
Net cash flow from financing activities
Increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Foreign exchange
Closing cash and cash equivalents
Cash and cash equivalents in continuing operations
Cash and cash equivalents classified in assets held for sale
Closing cash and cash equivalents
Financial Statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019
Financial Statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019
Note
39
19
19
19
12
23
23
2019
£m
438.2
(25.0)
(65.7)
8.7
356.2
(108.3)
(14.8)
21.7
(116.5)
9.7
(28.0)
1.5
(11.0)
(5.3)
(91.1)
414.1
–
20.8
(6.2)
3.1
(1.8)
(0.7)
(78.3)
259.9
365.1
117.7
365.1
(4.5)
478.3
478.3
–
478.3
2018
£m
361.2
(21.1)
(43.0)
9.7
306.8
(107.4)
(38.5)
–
(160.6)
48.9
(5.8)
10.0
–
1.1
(49.9)
–
(94.4)
(27.6)
(9.7)
–
–
(0.6)
(70.8)
(253.0)
(198.5)
314.3
(198.5)
1.9
117.7
117.5
0.2
117.7
1 Corporate information
The Consolidated Financial Statements of National Express Group PLC and its subsidiaries (the Group) for the year ended 31 December
2019 were authorised for issue in accordance with a resolution of the Directors on 27 February 2020. National Express Group PLC is a
public limited company incorporated in England and Wales whose shares are publicly traded on the London Stock Exchange.
The principal activities of the Group are described in the Strategic Report that accompanies these Financial Statements.
2 Accounting policies
Accounting convention and basis of preparation
These Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations
of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union (EU),
and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
These Financial Statements have been prepared on the going concern basis (see Group Finance Director’s Review on page 26) under the
historical cost convention, except for the recognition of derivative financial instruments, financial assets at fair value through other
comprehensive income and contingent consideration.
(251.0)
(252.3)
These Financial Statements are presented in pounds Sterling and all values are rounded to the nearest one hundred thousand pounds
(£0.1m) except where otherwise indicated.
Changes in accounting policies and the adoption of new and revised standards
The accounting policies adopted are consistent with those of the previous financial year except for changes arising from new standards
and amendments to existing standards that have been adopted in the current year.
IFRS 16 came into effect on 1 January 2019 and has been applied by the Group for the first time. The nature and effect of the changes
from adopting this new accounting standard are described below.
The following other amendments and interpretations have been applied for the first time with effect from 1 January 2019:
─
─
─
─
─
IFRIC 23 uncertainty over tax treatments
Prepayment features with negative compensation (amendments to IFRS 9)
Long-term interests in associates and joint ventures (amendments to IAS 28)
Plan amendment, curtailment or settlement (amendments to IAS 19)
Annual improvements to IFRS standards 2015–2017 cycle – various standards
These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the
current or future periods.
IFRS 16 ‘Leases’
IFRS 16 supersedes IAS 17 ‘Leases’ and IFRIC 4 ‘Determining Whether an Arrangement Contains a Lease’. IFRS 16 introduces a single,
on-balance sheet accounting model for leases. As a result, the Group, as a lessee, has recognised right-of-use assets representing its
right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Lessor accounting under
IFRS 16 is substantially unchanged from IAS 17.
The Group has applied IFRS 16 using the modified retrospective approach. Therefore the cumulative effect of adopting IFRS 16 has been
recognised as an adjustment to opening retained earnings.
The Group has lease contracts for various items of property, vehicles, plant and other equipment. Before the adoption of IFRS 16, leases
were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the
lessor) were charged to profit or loss on a straight-line basis over the period of the lease. Upon adoption of IFRS 16, the Group applied a
single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The standard
provides specific transition requirements and practical expedients, which have been applied by the Group.
Leases previously classified as finance leases
The Group did not change the initial carrying amounts of assets and liabilities at the date of initial application for leases previously
classified as finance leases.
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130
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
2 Accounting policies continued
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-
term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if
the standard had always been applied. For practical reasons, in some cases the right-of-use asset value was set equal to the lease
liability, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
The Group applied the available practical expedients wherein it:
─
─
─
used a single discount rate for a portfolio of leases with reasonably similar characteristics;
applied the short-term lease exemption to leases with a lease term that ends within 12 months at the date of initial application; and
used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The weighted average incremental borrowing rate used to measure lease liabilities at the date of initial application was 3.4%.
The effect of IFRS 16 adoption as at 1 January 2019 is as follows:
Property, plant and equipment
Trade and other receivables (current)
Total assets
Borrowings
Trade and other payables (current)
Deferred tax liability (non-current)
Total liabilities
Net assets
Shareholders’ equity
Retained earnings
Total equity
31 December
2018
Re-
measurements
£m
1 January
2019
1,054.8
408.6
3,525.7
(1,088.6)
(870.5)
(63.0)
(2,328.5)
1,197.2
426.6
1,197.2
201.1
(1.6)
199.5
(213.7)
1.8
2.9
(209.0)
(9.5)
1,255.9
407.0
3,725.2
(1,302.3)
(868.7)
(60.1)
(2,537.5)
1,187.7
(9.5)
(9.5)
417.1
1,187.7
The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:
Operating lease commitments at 31 December 2018
Discounted using incremental borrowing rates
Recognition exemption for:
Short-term leases
Leases of low value items
Rolling stock leases1
Other2
Existing finance lease obligations at 31 December 2018
Lease liabilities recognised at 1 January 2019
£m
690.2
(35.4)
(0.1)
(14.7)
(436.0)
9.7
213.7
142.6
356.3
1 Exempt from IFRS 16 due to the lessor directing how and for what purpose the assets are used, and in the case of one contract, the lessor has the right to substitute
the assets, consistent with the application of IFRIC 12
2 Other includes extension and termination options reasonably certain to be exercised
For additional information about the Group’s accounting policies relating to leases, see page 151.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results
may ultimately differ from those estimates.
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130
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
2 Accounting policies continued
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-
term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if
the standard had always been applied. For practical reasons, in some cases the right-of-use asset value was set equal to the lease
liability, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
The Group applied the available practical expedients wherein it:
used a single discount rate for a portfolio of leases with reasonably similar characteristics;
applied the short-term lease exemption to leases with a lease term that ends within 12 months at the date of initial application; and
used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
─
─
─
The weighted average incremental borrowing rate used to measure lease liabilities at the date of initial application was 3.4%.
The effect of IFRS 16 adoption as at 1 January 2019 is as follows:
31 December
measurements
1 January
Property, plant and equipment
Trade and other receivables (current)
Trade and other payables (current)
Deferred tax liability (non-current)
Total assets
Borrowings
Total liabilities
Net assets
Shareholders’ equity
Retained earnings
Total equity
Operating lease commitments at 31 December 2018
Discounted using incremental borrowing rates
Recognition exemption for:
Short-term leases
Leases of low value items
Rolling stock leases1
Other2
Existing finance lease obligations at 31 December 2018
Lease liabilities recognised at 1 January 2019
2018
1,054.8
408.6
3,525.7
(1,088.6)
(870.5)
(63.0)
(2,328.5)
1,197.2
426.6
1,197.2
Re-
£m
201.1
(1.6)
199.5
(213.7)
1.8
2.9
(209.0)
(9.5)
(9.5)
(9.5)
417.1
1,187.7
2019
1,255.9
407.0
3,725.2
(1,302.3)
(868.7)
(60.1)
(2,537.5)
1,187.7
£m
690.2
(35.4)
(0.1)
(14.7)
(436.0)
9.7
213.7
142.6
356.3
The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:
1 Exempt from IFRS 16 due to the lessor directing how and for what purpose the assets are used, and in the case of one contract, the lessor has the right to substitute
the assets, consistent with the application of IFRIC 12
2 Other includes extension and termination options reasonably certain to be exercised
For additional information about the Group’s accounting policies relating to leases, see page 151.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results
may ultimately differ from those estimates.
2 Accounting policies continued
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision
affects both current and future periods. No areas of critical accounting judgements or key sources of estimation uncertainty have been
identified in relation to Brexit.
(i) Critical accounting judgements
Pensions – defined benefit assets
Judgement is required regarding the application of IFRIC 14 and the extent to which the Group can recognise defined benefit assets.
Changes in this judgement could significantly impact the value of defined benefit pension balances recognised.
National Express Group PLC operates a defined benefit scheme, which at year end was in a net surplus position as disclosed in note 34.
Based on the terms and conditions of the scheme, and from consultation with independent advisers, the Group determined that an
ultimate future economic benefit exists in the form of a refund or a reduction in future contributions. The surplus has therefore been
recognised in full.
(ii) Key sources of estimation uncertainty
Insurance and other claims
The claims provision arises from estimated exposures at the year end for auto and general liability, workers’ compensation and
environmental claims, the majority of which will be utilised in the next five years. The estimation of the claims provision is based on an
assessment of the expected settlement of known claims together with an estimate of settlements that will be made in respect of incidents
occurring prior to the Balance Sheet date but for which claims have not been reported to the Group. The Group makes assumptions
concerning these judgemental matters with the assistance of advice from independent qualified actuaries.
In certain rare cases, additional disclosure regarding these claims may seriously prejudice the Group’s position and consequently this
disclosure is not provided. Given the differing types of claims, their size, the range of possible outcomes and the time involved in settling
these claims, there is a reasonably possible chance that a material adjustment would be required to the carrying value of the claims
provision in the next financial year. These different factors also make it impracticable to provide sensitivity analysis on one single measure
and its potential impact on the overall claims provision. For further information see note 26.
Valuation of put liability
During the year, the Group acquired a controlling stake in WeDriveU, Inc. and issued put options to the seller to sell the remaining shares.
The put option is exercisable in three tranches from 2020 to 2022. The put liability valuation is sensitive to EBITDA forecasts, discount
rates and the expected timing of exercise. Changes in these estimates could significantly impact the liability and details of the
assumptions are set out in note 25, to these Financial Statements, along with their sensitivities.
Basis of consolidation
These Consolidated Financial Statements comprise the Financial Statements of National Express Group PLC and all its subsidiaries
drawn up to 31 December each year. Adjustments are made to bring any dissimilar accounting policies that may exist into line with the
Group’s accounting policies.
The Consolidated Income Statement includes the results of subsidiaries and businesses purchased from the date control is assumed
and excludes the results of disposed operations and businesses sold from the date of disposal.
Intra-group transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
Non-controlling interests represent the portion of comprehensive income and equity in subsidiaries that is not attributable to the
parent Company shareholders and is presented separately from parent shareholders’ equity in the Consolidated Balance Sheet.
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132
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
2 Accounting policies continued
Summary of significant accounting policies
Subsidiaries
Subsidiaries are entities over which the Company has control. Control exists when the Company has power over an entity, exposure to
variable returns from its involvement with an entity and the ability to use its power over the entity to affect its returns. The existence and
effect of potential voting rights that are currently exercisable or convertible are also considered when assessing control.
Interests in joint ventures
The Group has a contractual arrangement to share control of an entity. The Group recognises its interest in the assets and liabilities of the
entity using the equity method of accounting. The Group Balance Sheet includes the appropriate share of the joint ventures net assets or
liabilities and the Income Statement includes the appropriate share of their results after tax.
Financial statements of joint ventures are prepared for the same reporting period as the Group. Adjustments are made in the Group’s
Financial Statements to eliminate the Group’s share of unrealised gains and losses on transactions between the Group and its joint
venture. The Group ceases to use the equity method from the date it no longer has joint control over the entity.
Interests in associates
Companies, other than subsidiaries and joint ventures, 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 associates. The Consolidated Financial Statements include
the appropriate share of these associates’ results and net assets based on their latest financial statements under the equity method
of accounting.
Foreign currencies
The trading results of foreign currency denominated subsidiaries, joint ventures and associates are translated into Sterling, the
presentation currency of the Group and functional currency of the parent, using average rates of exchange for the year as a reasonable
approximation to actual exchange rates at the dates of transactions.
The balance sheets of foreign currency denominated subsidiaries, joint ventures and associates are translated into Sterling at the rates
of exchange prevailing at the year end and exchange differences arising are taken directly to the translation reserve in equity. On disposal
of a foreign currency denominated subsidiary, the deferred cumulative amount recognised in the translation reserve (since 1 January 2004
under the transitional rules of IFRS 1) relating to that entity is recognised in the Income Statement. All other translation differences are taken
to the Income Statement, with the exception of differences on foreign currency borrowings and forward foreign currency contracts which are
used to provide a hedge against the Group net investments in foreign enterprises. These are taken directly to equity until the disposal of the
net investment, at which time they are recognised in the Income Statement.
Presentation of Income Statement and separately disclosed items
The Group Income Statement has been presented in a columnar format to enable users of the Financial Statements to view the
normalised results of the Group. Normalised results are defined as the statutory results excluding intangible amortisation for acquired
businesses, net gain in relation to the disposal of Ecolane subsidiaries, US restructuring costs and, in the prior year, result from
discontinued operations. The Board believes that this gives a more comparable year-on-year indication of the operating performance of
the Group and allows the users of the Financial Statements to understand management’s key performance measures. Further details
relating to separately disclosed items are provided in note 4.
Revenue recognition
Revenue is measured based on the consideration specified in the contract with a customer and is recognised when the performance
obligations of the contract have been fulfilled.
Contract revenues
For the purposes of disclosures, the Group has applied the term ‘contract revenues’ to describe documented contracts that typically
cover periods of at least one year, excluding concessions and subsidies. The contracts primarily relate to home to school and transit
contracts in North America, urban bus contracts in Spain and coach contracts in the UK.
Revenues relating to the provision of transport services are recognised as the services are provided and in accordance with the terms of
the contract. Revenue relating to any additional performance measures in the contract are recognised when the performance has been
met and in accordance with the terms of the contract.
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132
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
2 Accounting policies continued
Summary of significant accounting policies
Subsidiaries
Subsidiaries are entities over which the Company has control. Control exists when the Company has power over an entity, exposure to
variable returns from its involvement with an entity and the ability to use its power over the entity to affect its returns. The existence and
effect of potential voting rights that are currently exercisable or convertible are also considered when assessing control.
Interests in joint ventures
The Group has a contractual arrangement to share control of an entity. The Group recognises its interest in the assets and liabilities of the
entity using the equity method of accounting. The Group Balance Sheet includes the appropriate share of the joint ventures net assets or
liabilities and the Income Statement includes the appropriate share of their results after tax.
Financial statements of joint ventures are prepared for the same reporting period as the Group. Adjustments are made in the Group’s
Financial Statements to eliminate the Group’s share of unrealised gains and losses on transactions between the Group and its joint
venture. The Group ceases to use the equity method from the date it no longer has joint control over the entity.
Companies, other than subsidiaries and joint ventures, 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 associates. The Consolidated Financial Statements include
the appropriate share of these associates’ results and net assets based on their latest financial statements under the equity method
Interests in associates
of accounting.
Foreign currencies
The trading results of foreign currency denominated subsidiaries, joint ventures and associates are translated into Sterling, the
presentation currency of the Group and functional currency of the parent, using average rates of exchange for the year as a reasonable
approximation to actual exchange rates at the dates of transactions.
The balance sheets of foreign currency denominated subsidiaries, joint ventures and associates are translated into Sterling at the rates
of exchange prevailing at the year end and exchange differences arising are taken directly to the translation reserve in equity. On disposal
of a foreign currency denominated subsidiary, the deferred cumulative amount recognised in the translation reserve (since 1 January 2004
under the transitional rules of IFRS 1) relating to that entity is recognised in the Income Statement. All other translation differences are taken
to the Income Statement, with the exception of differences on foreign currency borrowings and forward foreign currency contracts which are
used to provide a hedge against the Group net investments in foreign enterprises. These are taken directly to equity until the disposal of the
net investment, at which time they are recognised in the Income Statement.
Presentation of Income Statement and separately disclosed items
The Group Income Statement has been presented in a columnar format to enable users of the Financial Statements to view the
normalised results of the Group. Normalised results are defined as the statutory results excluding intangible amortisation for acquired
businesses, net gain in relation to the disposal of Ecolane subsidiaries, US restructuring costs and, in the prior year, result from
discontinued operations. The Board believes that this gives a more comparable year-on-year indication of the operating performance of
the Group and allows the users of the Financial Statements to understand management’s key performance measures. Further details
relating to separately disclosed items are provided in note 4.
Revenue is measured based on the consideration specified in the contract with a customer and is recognised when the performance
Revenue recognition
obligations of the contract have been fulfilled.
Contract revenues
For the purposes of disclosures, the Group has applied the term ‘contract revenues’ to describe documented contracts that typically
cover periods of at least one year, excluding concessions and subsidies. The contracts primarily relate to home to school and transit
contracts in North America, urban bus contracts in Spain and coach contracts in the UK.
Revenues relating to the provision of transport services are recognised as the services are provided and in accordance with the terms of
the contract. Revenue relating to any additional performance measures in the contract are recognised when the performance has been
met and in accordance with the terms of the contract.
2 Accounting policies continued
If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled
in exchange for transferring services to the customer. The variable consideration is estimated at contract inception and constrained until
the associated uncertainty is resolved and when it becomes highly probable that a significant revenue reversal will not occur.
Passenger revenues
Passenger revenues primarily relate to ticket sales in the UK, German Rail, intercity coach services in Spain and urban bus services
in Morocco.
Revenue is recognised by reference to the date of customer travel. Revenue from tickets that cover more than one day, for example
monthly travel cards and season tickets, is initially deferred as a liability and released to the Income Statement over the period of
the ticket.
Deferred income liability is reduced when an eligible cancellation arises. Also, where applicable, deferred income is reduced for ticket
breakage, being the portion of future travel that is not expected to be exercised.
Booking fees are non-refundable and recognised at the point of sale, reflecting fulfilment of the performance obligation. Other ancillary
revenues relating to ticket sales are recognised at point of sale or, if material and related to a future performance period, recognised by
reference to that period.
Loyalty points issued to customers are recorded and valued by management. Where material, the cumulative redeemable value of the
points is deducted from the related revenue and deferred as a liability until the points are redeemed.
Passenger revenue in German Rail is allocated between the various transport providers in each region by the tariff authority responsible
for that region, and is recognised based on passenger counts, tariff authority estimates and historical trends.
Grants and subsidies
Grants and subsidies relating to the provision of transport services are recognised as the services are provided and in accordance with
the terms of the contract.
Private hire
Private hire operations are contracts provided in the UK, ALSA and North America divisions and are typically of a short duration.
Revenue is recognised over the period in which the private hire is provided to the customer.
Other revenues
Other revenues primarily comprise non-passenger services in Spain, transit software income in North America and advertising revenues.
Revenues for non-passenger services are recognised when the performance of the service has been fulfilled and in accordance with the
terms of the contract. Transit software income is recognised when the benefit of the software or service has been passed to the
customer. Advertising revenue is recognised over the period of the advertising contract.
Contract costs
Costs to obtain a contract
The incremental costs to obtain a contract with a customer are recognised within ‘contract costs’ if it is expected that those costs will be
recoverable. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognised as
an expense in the period.
Costs to fulfil a contract
Costs that relate directly to a contract, generate resources that will be used in satisfying the contract and are expected to be recovered
are recognised within ‘contract costs’ on the Balance Sheet. Contract fulfilment costs covered within the scope of another accounting
standard, such as property, plant and equipment and intangible assets, are not capitalised as contract fulfilment assets but are treated
according to those standards.
Contract costs are amortised on a straight-line basis over the term of the specific contract they relate to, consistent with the pattern of
recognition of the associated revenue.
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134
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
2 Accounting policies continued
Service concession arrangements
In Germany, Spain and Morocco, the Group provides services through public-private partnerships with public authorities responsible for
the provision of public transport services.
Concession arrangements involve the transfer of operating rights for a limited period, under the control of the local authority, using
dedicated facilities supplied by the Group, or made available to it for or without consideration.
The characteristics of these contracts vary depending on the country and activities concerned.
Financial asset model
The Group applies the financial asset model when the concession grantor contractually guarantees the payment of amounts specified in
the contract or the shortfall, if any, between amounts received from users of the public service and amounts specified.
Financial assets resulting from the application of IFRIC 12 ‘Service Concession Arrangements’ are recorded in the Group Balance Sheet
as financial assets or liabilities within working capital. These financial assets are assessed for impairment in line with the provisions of
IFRS 9.
Income received from the public authorities is recognised in line with the requirements of IFRS 15. In Germany, subsidy income from the
Public Transport Authority (PTA) is recognised over the life of the franchise and by using the input method to measure progress against
the performance obligation. The amount recognised in each period is based on a percentage of completion, applying net costs incurred
as a proportion of total expected net costs, which is what the subsidy is intended to compensate. In accordance with IFRS 15, costs
payable to the PTA are netted against subsidy income. In ALSA, subsidy income from the local authority is recognised as the services are
provided and in accordance with the terms of the contract.
Intangible asset model
The Group applies the intangible asset model when income is directly received from the passengers and there is no contractual guarantee
from the concession grantor. The intangible asset corresponds to the right granted by the public authority to the Group to charge
passengers of the public service.
Intangible assets resulting from the application of IFRIC 12 are recorded in the Group Balance Sheet and are amortised on the basis of
the expected pattern of consumption applicable over the term of the concession.
Income received from passengers is recognised in line with the requirements of IFRS 15. Passenger revenue is recognised in line with the
policy on page 145.
Taxes
Current tax
Current tax is provided on taxable profits earned according to the local tax rates applicable where the profits are earned. Income taxes
are recognised in the Income Statement unless they relate to an item accounted for in Other Comprehensive Income or Equity, in which
case the tax is recognised directly in Other Comprehensive Income or Equity. The tax rates and tax laws used to compute the current
tax are those that are enacted or substantively enacted at the Balance Sheet date.
Deferred tax
Deferred tax is provided in full in respect of all material temporary differences at the balance sheet date between the tax base and their
carrying amounts for financial reporting purposes, apart from the following exceptions:
─ where the temporary difference arises from the initial recognition of goodwill;
─ where an asset or liability is recognised in a transaction that is not a business combination and that at the time of the transaction
─
affects neither accounting nor taxable profit or loss; and
in respect of investment in subsidiaries, associates and joint ventures where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on a non-discounted basis at tax rates that are expected to apply in the periods in which the temporary
differences reverse based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that it is considered more likely than not that future taxable profits will be available
against which the underlying temporary differences can be deducted. For this purpose, forecasts of future taxable profits are
considered by assessing the Group’s forecast revenue and profit models, taking into account future growth predictions and
operating cost assumptions.
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134
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
2 Accounting policies continued
Service concession arrangements
the provision of public transport services.
In Germany, Spain and Morocco, the Group provides services through public-private partnerships with public authorities responsible for
Concession arrangements involve the transfer of operating rights for a limited period, under the control of the local authority, using
dedicated facilities supplied by the Group, or made available to it for or without consideration.
The characteristics of these contracts vary depending on the country and activities concerned.
Financial asset model
The Group applies the financial asset model when the concession grantor contractually guarantees the payment of amounts specified in
the contract or the shortfall, if any, between amounts received from users of the public service and amounts specified.
Financial assets resulting from the application of IFRIC 12 ‘Service Concession Arrangements’ are recorded in the Group Balance Sheet
as financial assets or liabilities within working capital. These financial assets are assessed for impairment in line with the provisions of
IFRS 9.
Income received from the public authorities is recognised in line with the requirements of IFRS 15. In Germany, subsidy income from the
Public Transport Authority (PTA) is recognised over the life of the franchise and by using the input method to measure progress against
the performance obligation. The amount recognised in each period is based on a percentage of completion, applying net costs incurred
as a proportion of total expected net costs, which is what the subsidy is intended to compensate. In accordance with IFRS 15, costs
payable to the PTA are netted against subsidy income. In ALSA, subsidy income from the local authority is recognised as the services are
provided and in accordance with the terms of the contract.
The Group applies the intangible asset model when income is directly received from the passengers and there is no contractual guarantee
from the concession grantor. The intangible asset corresponds to the right granted by the public authority to the Group to charge
Intangible asset model
passengers of the public service.
Intangible assets resulting from the application of IFRIC 12 are recorded in the Group Balance Sheet and are amortised on the basis of
the expected pattern of consumption applicable over the term of the concession.
Income received from passengers is recognised in line with the requirements of IFRS 15. Passenger revenue is recognised in line with the
policy on page 145.
Taxes
Current tax
Deferred tax
Current tax is provided on taxable profits earned according to the local tax rates applicable where the profits are earned. Income taxes
are recognised in the Income Statement unless they relate to an item accounted for in Other Comprehensive Income or Equity, in which
case the tax is recognised directly in Other Comprehensive Income or Equity. The tax rates and tax laws used to compute the current
tax are those that are enacted or substantively enacted at the Balance Sheet date.
Deferred tax is provided in full in respect of all material temporary differences at the balance sheet date between the tax base and their
carrying amounts for financial reporting purposes, apart from the following exceptions:
─ where the temporary difference arises from the initial recognition of goodwill;
─ where an asset or liability is recognised in a transaction that is not a business combination and that at the time of the transaction
affects neither accounting nor taxable profit or loss; and
─
in respect of investment in subsidiaries, associates and joint ventures where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on a non-discounted basis at tax rates that are expected to apply in the periods in which the temporary
differences reverse based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that it is considered more likely than not that future taxable profits will be available
against which the underlying temporary differences can be deducted. For this purpose, forecasts of future taxable profits are
considered by assessing the Group’s forecast revenue and profit models, taking into account future growth predictions and
operating cost assumptions.
2 Accounting policies continued
Accordingly, changes in assumptions to the Group’s forecasts may have an impact on the amount of future taxable profits and therefore
the period over which any deferred tax assets might be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and when the Group
intends to settle its current tax assets and liabilities on a net basis.
Business combinations
On the acquisition of a business, identifiable assets and liabilities acquired are measured at their fair value. Contingent liabilities assumed
are measured at fair value unless this cannot be measured reliably, in which case they are not recognised but are disclosed in the same
manner as other contingent liabilities.
The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred
or assumed, and equity instruments issued. Any contingent consideration is recognised at fair value at the acquisition date and
subsequently until it is settled.
The cost of the acquisition in excess of the Group’s interest in the net fair value of the identifiable net assets acquired is recorded as
goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised
directly in the Income Statement.
Non-current assets held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally
through a sale transaction rather than continuing use. This condition is regarded as met only when the sale is highly probable, the asset
(or disposal group) is available for immediate sale in its present condition, management is committed to the sale and when the sale is
expected to complete within one year from the date of classification. Assets held for sale are stated at the lower of carrying amount and
fair value less costs to sell.
A discontinued operation is a component of the Group that has been disposed of, or is classified as held for sale and either represents a
separate major line of business or geographical area; is part of a plan to dispose of a separate major line of business or geographical
area; or is a subsidiary acquired exclusively for resale.
Discontinued operations are excluded from the results of continuing operations and presented as a single amount after tax. Comparatives
are also re-presented to reclassify the operation as discontinued.
Intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the fair value of the Group’s share of the
identifiable assets and liabilities of the acquired subsidiary, associate or joint arrangement at the date of acquisition.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses and is not amortised.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. A cash-generating unit is identified at the lowest
aggregation of assets that generate largely independent cash inflows, and which is reviewed by management for monitoring and
managing the Group’s business operations.
On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Other intangible assets
Customer contracts
Customer contracts acquired as part of a business combination are initially recorded at the fair value attributed to those contracts
on acquisition.
Service concessions
Service concession intangible assets represent a right to charge passengers for the use of the public service. See page 146 for
further details.
Contract costs
Contract costs include costs to obtain and costs to fulfil a contract. See page 145 for further details.
Software
Acquired and internally developed software is capitalised on the basis of the costs incurred to acquire and bring to use the specific
software or fair value if acquired as part of a business combination. Computer software that is integral to a tangible fixed asset is
recognised within property, plant and equipment.
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136
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
2 Accounting policies continued
Amortisation is charged on a straight-line basis over the expected useful lives of the assets as follows:
Customer contracts
Contract costs
Software
– over the life of the contract (1 to 33 years)
– over the term of the specific contract (1 to 15 years)
– over the estimated useful life (3 to 7 years)
The useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Intangible assets
are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
Repairs and maintenance costs are expensed as incurred.
Freehold land is not depreciated. All other property, plant and equipment is depreciated on a straight-line basis over their estimated useful
lives as follow:
Land and buildings
Public service vehicles
Plant and equipment, fixtures and fittings
– 15 to 50 years
– 8 to 20 years
– 3 to 15 years
Useful lives and residual values are reviewed annually and adjustments, where applicable, are made on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset, with any gain or loss arising included in the Income Statement in the period of derecognition.
Government grants relating to property, plant and equipment are included in liabilities as deferred income and are credited to the Income
Statement over the expected useful economic life of the assets concerned.
Impairment
Intangible assets with definite useful lives, and property, plant and equipment are tested for impairment when events or circumstances
indicate that their carrying value may not be recoverable. Goodwill is subject to an impairment test on an annual basis or more frequently
if there are indicators of impairment. Assets that do not generate independent cash flows are combined into cash-generating units.
The impairment testing of individual assets or cash-generating units requires an assessment of the recoverable amount of the asset or
cash-generating unit. If the carrying value of the asset or cash-generating unit exceeds its estimated recoverable amount, the asset or
cash-generating unit is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs of disposal and
value in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount
rate that is based on the country-specific weighted average cost of capital (WACC). The outcome of such an assessment is subjective,
and the result sensitive to the assumed future cash flows to be generated by the cash-generating units or assets, the growth rate used to
extrapolate the cash flows beyond the three-year period and discount rates applied in calculating the value in use.
Impairment losses relating to goodwill cannot be subsequently reversed.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity. The Group determines the classification of its financial instruments at initial recognition.
Financial assets
Financial assets are classified at initial recognition as (i) subsequently measured at amortised cost, (ii) fair value through other
comprehensive income or (iii) fair value through profit and loss. The classification depends on the purpose for which the financial assets
were acquired.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are
classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are also classified
as held for trading unless they are designated as effective hedging instruments.
Financial assets at fair value through profit or loss are carried in the Group Balance Sheet at fair value with net changes in
fair value recognised in the Income Statement within finance costs. Transaction costs arising on initial recognition are expensed in the
Income Statement.
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136
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
2 Accounting policies continued
Amortisation is charged on a straight-line basis over the expected useful lives of the assets as follows:
Customer contracts
Contract costs
Software
– over the life of the contract (1 to 33 years)
– over the term of the specific contract (1 to 15 years)
– over the estimated useful life (3 to 7 years)
The useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Intangible assets
are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
Freehold land is not depreciated. All other property, plant and equipment is depreciated on a straight-line basis over their estimated useful
Repairs and maintenance costs are expensed as incurred.
lives as follow:
Land and buildings
Public service vehicles
Plant and equipment, fixtures and fittings
– 3 to 15 years
– 15 to 50 years
– 8 to 20 years
Useful lives and residual values are reviewed annually and adjustments, where applicable, are made on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset, with any gain or loss arising included in the Income Statement in the period of derecognition.
Government grants relating to property, plant and equipment are included in liabilities as deferred income and are credited to the Income
Statement over the expected useful economic life of the assets concerned.
Impairment
Intangible assets with definite useful lives, and property, plant and equipment are tested for impairment when events or circumstances
indicate that their carrying value may not be recoverable. Goodwill is subject to an impairment test on an annual basis or more frequently
if there are indicators of impairment. Assets that do not generate independent cash flows are combined into cash-generating units.
The impairment testing of individual assets or cash-generating units requires an assessment of the recoverable amount of the asset or
cash-generating unit. If the carrying value of the asset or cash-generating unit exceeds its estimated recoverable amount, the asset or
cash-generating unit is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs of disposal and
value in use. Value in use is assessed based on estimated future cash flows discounted to their present value using a pre-tax discount
rate that is based on the country-specific weighted average cost of capital (WACC). The outcome of such an assessment is subjective,
and the result sensitive to the assumed future cash flows to be generated by the cash-generating units or assets, the growth rate used to
extrapolate the cash flows beyond the three-year period and discount rates applied in calculating the value in use.
Impairment losses relating to goodwill cannot be subsequently reversed.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity. The Group determines the classification of its financial instruments at initial recognition.
Financial assets are classified at initial recognition as (i) subsequently measured at amortised cost, (ii) fair value through other
comprehensive income or (iii) fair value through profit and loss. The classification depends on the purpose for which the financial assets
Financial assets
were acquired.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are
classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are also classified
as held for trading unless they are designated as effective hedging instruments.
Financial assets at fair value through profit or loss are carried in the Group Balance Sheet at fair value with net changes in
fair value recognised in the Income Statement within finance costs. Transaction costs arising on initial recognition are expensed in the
Income Statement.
2 Accounting policies continued
Financial assets at fair value through other comprehensive income
The Group has elected to recognise its non-listed equity investments at fair value through other comprehensive income. Gains and losses
on these financial assets are never recycled to the Income Statement. Dividends are recognised as other income in the Income Statement
when the right of payment has been established. Where there is no active market for the Group’s investments, fair value is determined
using valuation techniques including recent commercial transactions and discounted cash flow analyses. Equity instruments designated
at fair value through other comprehensive income are not subject to impairment assessment.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold assets to collect contractual
cash flows, and its contractual terms give rise on specific dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest ‘EIR’ method and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include trade and other receivables and cash and cash equivalents in the Balance Sheet.
Financial liabilities
Financial liabilities are classified at initial recognition as (i) financial liabilities at fair value through profit or loss, (ii) loans and borrowings,
(iii) payables or (iv) derivatives designated as hedging instruments, as appropriate. All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities
include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments. Subsequent
measurement depends on its classification as follows:
Financial liabilities at fair value through profit and loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Gains and losses are recognised in the Income Statement when the liabilities are derecognised. Amortisation is included as
finance costs in the Income Statement. This category applies to interest-bearing loans and borrowings.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments such as fuel derivatives, interest rate derivatives, foreign exchange forward contracts and
cross currency interest rate swaps to hedge its risks associated with fuel price, interest rate fluctuations and foreign currency. Such
derivative financial instruments are initially recognised at fair value and subsequently re-measured to fair value for the reported Balance
Sheet. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The fair value of the derivatives is calculated by reference to market exchange rates, interest rates and fuel prices at the period end.
The Group designates certain derivatives as either:
─
─
─
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges); or
hedges of a net investment in a foreign operation (net investment hedges).
At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the
hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether
the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.
The Group’s interest rate derivatives are designated as either fair value hedges or cash flow hedges. For fair value hedges, the gain or
loss on the hedging instrument is recognised immediately in the Income Statement. The carrying amount of the hedged item is adjusted
through the Income Statement for the gain or loss on the hedged item attributable to the hedged risk, in this case movements in the risk-
free interest rate.
The Group’s fuel derivatives are designated as cash flow hedges. The gain or loss on the hedging instrument that is determined to be
an effective hedge is recognised in equity. The gains or losses deferred in equity in this way are recycled through the Income Statement
in the same period in which the hedged underlying transaction or firm commitment is recognised in the Income Statement.
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138
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
2 Accounting policies continued
Foreign exchange forward contracts and cross currency interest rate swaps are used to hedge the Group’s net investment in foreign
currency denominated operations, and to the extent they are designated and effective as net investment hedges are matched in equity
against foreign exchange exposure in the related assets and liabilities. Gains and losses accumulated in equity are included in the Income
Statement when the foreign operation is partially disposed of or sold.
The Group also uses foreign exchange forward contracts to hedge certain transactional exposures. These contracts are not hedge
accounted and all gains and losses are taken directly to the Income Statement.
For derivatives that do not qualify for hedge accounting, gains or losses are taken directly to the Income Statement in the period.
Similarly, any material ineffective portion of the Group’s cash flow and net investment hedges is recognised in the Income Statement.
Movements in the fair value of the hedging instrument arising from costs of hedging for cash flow and net investment hedges are
recognised in equity, disclosed separately and amortised to the Income Statement over the term of the hedge relationship on a rational
basis.
Any material ineffectiveness is recognised in the income statement within finance costs.
Hedge accounting is discontinued when the hedging instrument or hedged item expires, is sold, terminated, exercised, or no longer
qualifies for hedge accounting.
Inventories
Inventories are valued at the lower of cost and net realisable value on a first in-first out basis, after making due allowance for obsolete
or slow moving items.
Trade and other receivables
Trade and other receivables are recognised and carried at the transaction price determined under IFRS 15, less provision for impairment.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables. The Group uses provision matrices based on historical ageing of receivables and credit loss experience, adjusted as
necessary for any forward-looking factors specific to the debtors and economic environment.
Trade receivables are derecognised where the Group enters into factoring arrangements without recourse and the risks and rewards have
been fully transferred. The Group classifies the cash flows from receivable factoring arrangements within cash from operating activities in
the Statement of Cash Flows.
Cash and cash equivalents
Cash and cash equivalents as defined for the Statement of Cash Flows comprise cash in hand, cash held at bank with immediate access,
other short-term investments and bank deposits with maturities of three months or less from the date of inception, and bank overdrafts.
In the Consolidated Balance Sheet, cash and cash equivalents are presented net of bank overdrafts where there is a legal right of offset,
otherwise are included within borrowings in current liabilities.
Trade and other payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The
Group classifies the cash flows from factoring of divisional revenues within cash from operating activities in the Statement of Cash Flows.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are
measured at the Directors’ best estimate of the expenditure required to settle the obligation at the Balance Sheet date, and are
discounted to present value where the effect is material using a pre-tax discount rate. When discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are obligations that arise from past events that are dependent on future events. They are disclosed in the notes
to the Financial Statements where the expected future outflow is not probable.
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138
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
139
2 Accounting policies continued
Foreign exchange forward contracts and cross currency interest rate swaps are used to hedge the Group’s net investment in foreign
currency denominated operations, and to the extent they are designated and effective as net investment hedges are matched in equity
against foreign exchange exposure in the related assets and liabilities. Gains and losses accumulated in equity are included in the Income
Statement when the foreign operation is partially disposed of or sold.
The Group also uses foreign exchange forward contracts to hedge certain transactional exposures. These contracts are not hedge
accounted and all gains and losses are taken directly to the Income Statement.
For derivatives that do not qualify for hedge accounting, gains or losses are taken directly to the Income Statement in the period.
Similarly, any material ineffective portion of the Group’s cash flow and net investment hedges is recognised in the Income Statement.
Movements in the fair value of the hedging instrument arising from costs of hedging for cash flow and net investment hedges are
recognised in equity, disclosed separately and amortised to the Income Statement over the term of the hedge relationship on a rational
basis.
Any material ineffectiveness is recognised in the income statement within finance costs.
Hedge accounting is discontinued when the hedging instrument or hedged item expires, is sold, terminated, exercised, or no longer
Inventories are valued at the lower of cost and net realisable value on a first in-first out basis, after making due allowance for obsolete
Trade and other receivables are recognised and carried at the transaction price determined under IFRS 15, less provision for impairment.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables. The Group uses provision matrices based on historical ageing of receivables and credit loss experience, adjusted as
necessary for any forward-looking factors specific to the debtors and economic environment.
Trade receivables are derecognised where the Group enters into factoring arrangements without recourse and the risks and rewards have
been fully transferred. The Group classifies the cash flows from receivable factoring arrangements within cash from operating activities in
qualifies for hedge accounting.
Inventories
or slow moving items.
Trade and other receivables
the Statement of Cash Flows.
Cash and cash equivalents
Cash and cash equivalents as defined for the Statement of Cash Flows comprise cash in hand, cash held at bank with immediate access,
other short-term investments and bank deposits with maturities of three months or less from the date of inception, and bank overdrafts.
In the Consolidated Balance Sheet, cash and cash equivalents are presented net of bank overdrafts where there is a legal right of offset,
otherwise are included within borrowings in current liabilities.
Trade and other payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The
Group classifies the cash flows from factoring of divisional revenues within cash from operating activities in the Statement of Cash Flows.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are
measured at the Directors’ best estimate of the expenditure required to settle the obligation at the Balance Sheet date, and are
discounted to present value where the effect is material using a pre-tax discount rate. When discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
2 Accounting policies continued
Insurance
The Group’s policy is to not insure low value, high frequency claims within the businesses. To provide protection against these types of
losses, the Group purchases insurance cover from a selection of proven and financially strong insurers. Liabilities in respect of claims risk
include projected settlements for known and incurred but not reported claims. Projected settlements are estimated based on historical
trends and actuarial data and are discounted to take account of the expected timing of future cash settlements. To the extent insurance
liabilities are insured and awaiting settlement, a separate asset is recognised in other receivables.
Leases
Group as a lessee
Lease identification
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identifiable asset for a period of time in exchange for consideration.
Right-of-use asset
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset and the lease term. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.
Lease liability
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease,
if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are
recognised as an expense in the period on which the event or condition that triggers the payment occurs.
The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a
residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option. It also applies the low-value assets recognition exemption to leases of assets
below £5,000. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis
over the lease term.
Group as a lessor
As a lessor, the Group continues to classify leases as either finance leases or operating leases and account for those two types of leases
differently. Where the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset it is
classified as a finance lease and if not is an operating lease.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the
lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying
asset. Where the sub-lease is classified as a finance lease, the right-of-use asset with respect to the head lease is derecognised and a
finance lease receivable is recognised equal to the net investment in the sub-lease. The net investment in the lease is calculated as the
present value of the aggregate of lease payments receivable and any unguaranteed residual value. Where the interest rate implicit in the
sub-lease cannot be readily determined, the Group uses the discount rate used for the head lease.
Contingent liabilities are obligations that arise from past events that are dependent on future events. They are disclosed in the notes
to the Financial Statements where the expected future outflow is not probable.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of
‘other revenue’.
Retirement benefits
Defined contribution schemes
Payments to defined contribution schemes are charged to the Income Statement as they fall due. The Group has no legal or constructive
obligation to pay further contributions into a defined contribution scheme if the fund has insufficient assets to pay all employees benefits
relating to employee service in the current and prior periods.
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Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
140
2 Accounting policies continued
Defined benefit schemes
Plan assets, including qualifying insurance policies, are measured at fair value and plan liabilities are measured on an actuarial basis,
using the projected unit credit method and discounted at an interest rate equivalent to the current rate of return on a high quality
corporate bond of equivalent currency and term to the plan liabilities. The difference between the value of plan assets and liabilities at the
period-end date is the amount of surplus or deficit recorded in the Group Balance Sheet as an asset or liability. An asset is recognised
when the employer has an unconditional right to use the surplus at some point during the life of the plan or on its wind-up.
Current service costs are recognised within operating costs in the Income Statement. Past service costs and gains, which are the
change in the present value of the defined benefit obligation for employee service in prior periods resulting from plan amendments, are
recognised immediately the plan amendment occurs. Net interest is calculated by applying a discount rate to the net defined benefit
liability or asset and is recognised within finance costs.
Re-measurements comprise actuarial gains and losses and the return on plan assets (excluding amounts included in net interest). Actuarial gains
and losses may result from differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year or
changes in the actuarial assumptions used in the valuation of the plan liabilities. Re-measurement gains and losses, and taxation thereon, are
recognised in Other Comprehensive Income and are not reclassified to profit or loss in subsequent periods.
Full actuarial valuations are carried out triennially and are updated for material transactions and other material changes in circumstances
up to the end of the reporting period.
Share-based payments
The Group awards equity-settled share-based payments to certain employees, under which the Group receives services from employees
as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant
of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options
granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the Group over a specified time period). Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period,
which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Group revises its
estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the
revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
Share capital, share premium and dividends
Where either the Company or employee share trusts purchase the Company’s equity share capital, the consideration paid, including
any transaction costs, is deducted from total shareholders’ equity as own shares until they are cancelled or re-issued. Any consideration
subsequently received on sale or re-issue is included in shareholders’ equity.
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s Financial Statements on the date when
dividends are approved by the Company’s shareholders. Interim dividends are recognised in the period they are paid.
New standards and interpretations not applied
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting
periods and have not been early adopted by the Group:
─
─
─
─
─
IFRS 17 ‘Insurance Contracts’
Definition of Material – Amendments to IAS 1 and IAS 8
Definition of a Business – Amendments to IFRS 3
Revised Conceptual Framework for Financial Reporting
Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7
These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions. The Group does not expect the Interest Rate Benchmark Reform to significantly impact our hedge accounting
programme as all derivative financial instruments referencing to LIBOR and EURIBOR expire prior to the expected date of discontinuation
of these interest rate benchmarks.
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140
Financial statements
Notes to the Consolidated Accounts
For the year ended 31 December 2019 continued
141
3 Exchange rates
The most significant exchange rates to UK Sterling for the Group are as follows:
US Dollar
Canadian Dollar
Euro
2019
Closing rate
2019
Average rate
2018
Closing rate
2018
Average rate
1.33
1.72
1.18
1.28
1.69
1.14
1.28
1.74
1.11
1.34
1.73
1.13
If the results for the year to 31 December 2018 had been retranslated at the average exchange rates for the year to 31 December 2019,
North America would have achieved normalised operating profit of £101.3m on revenue of £1,107.2m, compared with normalised
operating profit of £96.9m on revenue of £1,060.8m as reported, and ALSA would have achieved a normalised operating profit of £104.4m
on revenue of £738.5m, compared with normalised operating profit of £105.3m on revenue of £745.1m as reported.
4 Revenue and segmental analysis
The Group’s reportable segments have been determined based on reports issued to and reviewed by the Group Executive Committee,
and are organised in accordance with the geographical regions in which they operate and nature of services that they provide.
Management considers the Group Executive Committee to be the chief decision-making body for deciding how to allocate resources
and for assessing operating performance.
Segmental performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the
Consolidated Financial Statements. Group financing activities and income taxes are managed on a group basis and are not allocated
to reportable segments.
The principal services from which each reportable segment derives its revenues are as follows:
UK – bus and coach operations
─
─ German Rail – rail operations
─
─
ALSA (predominantly Spain and Morocco) – bus and coach operations
North America (USA and Canada) – school bus, transit bus and shuttle operations
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting
Analysis by class and reportable segment:
Contract
revenues
£m
Passenger
revenues
£m
Grants and
subsidies
£m
Private hire
£m
Other
revenues
£m
2019
Further details on the activities of each segment are described in the Strategic Report.
Central functions is not a reportable segment but has been included in the segmental analysis for transparency and to enable
a reconciliation to the consolidated Group.
(a) Revenue
Revenue is disaggregated by reportable segment, class and type of service as follows:
UK
German Rail
ALSA
North America
Central functions
41.4
–
207.8
1,126.9
–
464.2
49.8
492.7
–
–
54.8
35.7
18.3
–
–
14.2
–
56.7
83.3
–
Total revenue from continuing operations
1,376.1
1,006.7
108.8
154.2
Analysis by major service type:
Passenger transport
Other products and services
Total revenue from continuing operations
1,376.1
1,006.7
–
–
1,376.1
1,006.7
108.8
–
108.8
154.2
–
154.2
25.1
4.4
49.2
19.9
–
98.6
52.5
46.1
98.6
Total
£m
599.7
89.9
824.7
1,230.1
–
2,744.4
2,698.3
46.1
2,744.4
There have been no material amounts of revenue recognised in the year that relate to performance obligations satisfied or partially
satisfied in previous years. Revenue received where the performance obligation will be fulfilled in the future is classified as deferred
income or contract liabilities and disclosed in note 24.
153
2 Accounting policies continued
Defined benefit schemes
Plan assets, including qualifying insurance policies, are measured at fair value and plan liabilities are measured on an actuarial basis,
using the projected unit credit method and discounted at an interest rate equivalent to the current rate of return on a high quality
corporate bond of equivalent currency and term to the plan liabilities. The difference between the value of plan assets and liabilities at the
period-end date is the amount of surplus or deficit recorded in the Group Balance Sheet as an asset or liability. An asset is recognised
when the employer has an unconditional right to use the surplus at some point during the life of the plan or on its wind-up.
Current service costs are recognised within operating costs in the Income Statement. Past service costs and gains, which are the
change in the present value of the defined benefit obligation for employee service in prior periods resulting from plan amendments, are
recognised immediately the plan amendment occurs. Net interest is calculated by applying a discount rate to the net defined benefit
liability or asset and is recognised within finance costs.
Re-measurements comprise actuarial gains and losses and the return on plan assets (excluding amounts included in net interest). Actuarial gains
and losses may result from differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year or
changes in the actuarial assumptions used in the valuation of the plan liabilities. Re-measurement gains and losses, and taxation thereon, are
recognised in Other Comprehensive Income and are not reclassified to profit or loss in subsequent periods.
Full actuarial valuations are carried out triennially and are updated for material transactions and other material changes in circumstances
up to the end of the reporting period.
Share-based payments
The Group awards equity-settled share-based payments to certain employees, under which the Group receives services from employees
as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant
of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options
granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the Group over a specified time period). Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period,
which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Group revises its
estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the
revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
Share capital, share premium and dividends
Where either the Company or employee share trusts purchase the Company’s equity share capital, the consideration paid, including
any transaction costs, is deducted from total shareholders’ equity as own shares until they are cancelled or re-issued. Any consideration
subsequently received on sale or re-issue is included in shareholders’ equity.
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s Financial Statements on the date when
dividends are approved by the Company’s shareholders. Interim dividends are recognised in the period they are paid.
New standards and interpretations not applied
periods and have not been early adopted by the Group:
IFRS 17 ‘Insurance Contracts’
Definition of Material – Amendments to IAS 1 and IAS 8
Definition of a Business – Amendments to IFRS 3
Revised Conceptual Framework for Financial Reporting
─
─
─
─
─
Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7
These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions. The Group does not expect the Interest Rate Benchmark Reform to significantly impact our hedge accounting
programme as all derivative financial instruments referencing to LIBOR and EURIBOR expire prior to the expected date of discontinuation
of these interest rate benchmarks.
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
142
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
4 Revenue and segmental analysis continued
Analysis by class and reportable segment:
UK
German Rail
ALSA
North America
Central functions
2018
Contract
revenues
£m
Passenger
Revenues1
£m
Grants and
subsidies
£m
Private hire1
£m
Other
revenues
£m
29.2
–
189.3
967.9
–
456.8
47.2
466.8
–
–
56.0
16.3
10.2
–
–
14.6
–
26.3
78.2
–
Total revenue from continuing operations
1,186.4
970.8
82.5
119.1
Analysis by major service type:
Passenger transport
Other products and services
Total revenue from continuing operations
1,186.4
–
1,186.4
970.8
–
970.8
82.5
–
82.5
119.1
–
119.1
Total
£m
577.0
67.8
745.1
1,060.8
–
2,450.7
2,372.5
78.2
2,450.7
20.4
4.3
52.5
14.7
–
91.9
13.7
78.2
91.9
1 Prior year balances were re-presented in ALSA, with revenue reclassified between private hire and passenger revenues to better reflect the nature of the services
There are no material inter-segment sales between reportable segments.
(b) Operating profit
Operating profit is analysed by reportable segment as follows:
Normalised
operating profit
2019
£m
Separately
disclosed items
2019
£m
Segment
result
2019
£m
Normalised
operating
profit
2018
£m
Separately
disclosed items
2018
£m
Segment
result
2018
£m
UK
German Rail
ALSA
North America
Central functions
Operating profit from
continuing operations
Share of results from associates and
joint ventures
Net finance costs
Profit before tax
Tax charge
Profit after tax for the year
from continuing operations
Profit for the year from discontinued operations
Profit for the year
85.0
5.0
109.5
123.0
(27.2)
(0.9)
(1.4)
(15.7)
(35.0)
–
84.1
3.6
93.8
88.0
(27.2)
295.3
(53.0)
242.3
0.4
(55.7)
240.0
–
–
(53.0)
0.4
(55.7)
187.0
(38.7)
148.3
–
148.3
79.9
3.0
105.3
96.9
(27.4)
257.7
0.9
(38.6)
220.0
(1.0)
(0.9)
(11.1)
(29.3)
–
(42.3)
–
–
(42.3)
78.9
2.1
94.2
67.6
(27.4)
215.4
0.9
(38.6)
177.7
(39.0)
138.7
–
138.7
154
National Express Group PLC Annual Report 2019
142
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
£m
20.4
4.3
52.5
14.7
–
91.9
13.7
78.2
91.9
2018
£m
(1.0)
(0.9)
(11.1)
(29.3)
–
(42.3)
–
–
(42.3)
Total
£m
577.0
67.8
745.1
1,060.8
–
2,450.7
2,372.5
78.2
2,450.7
result
2018
£m
78.9
2.1
94.2
67.6
(27.4)
215.4
0.9
(38.6)
177.7
(39.0)
138.7
–
138.7
UK
German Rail
ALSA
North America
Central functions
Operating profit from
continuing operations
Share of results from associates and
joint ventures
Net finance costs
Profit before tax
Tax charge
Profit after tax for the year
from continuing operations
Profit for the year from discontinued operations
Profit for the year
2019
£m
85.0
5.0
109.5
123.0
(27.2)
0.4
(55.7)
240.0
2019
£m
(0.9)
(1.4)
(15.7)
(35.0)
–
–
–
(53.0)
295.3
(53.0)
242.3
result
2019
£m
84.1
3.6
93.8
88.0
(27.2)
0.4
(55.7)
187.0
(38.7)
148.3
–
148.3
profit
2018
£m
79.9
3.0
105.3
96.9
(27.4)
257.7
0.9
(38.6)
220.0
4 Revenue and segmental analysis continued
Analysis by class and reportable segment:
UK
German Rail
ALSA
North America
Central functions
Analysis by major service type:
Passenger transport
Other products and services
Total revenue from continuing operations
Contract
revenues
Passenger
Revenues1
Grants and
subsidies
Private hire1
Other
revenues
£m
29.2
–
189.3
967.9
–
1,186.4
–
1,186.4
£m
456.8
47.2
466.8
–
–
970.8
–
970.8
2018
£m
56.0
16.3
10.2
–
–
82.5
–
82.5
£m
14.6
–
26.3
78.2
–
119.1
–
119.1
Total revenue from continuing operations
1,186.4
970.8
82.5
119.1
4 Revenue and segmental analysis continued
(c) Separately disclosed items
Separately disclosed items includes:
Intangible amortisation for acquired businesses
Net gain on disposal of Ecolane subsidiaries (note 19)
Restructuring costs1
2019
£m
(53.0)
8.8
(8.8)
(53.0)
2018
£m
(42.3)
–
–
(42.3)
1 Relates to the costs of restructuring and redundancy incurred in North America following changes in the management of school bus and transit businesses and other
operational and corporate projects
The Board believes that treating the above items as separately disclosable gives a more comparable year-on-year indication of the operating
performance of the Group and allows the users of the Financial Statements to understand management’s key performance measures.
(d) Depreciation
Depreciation is analysed by reportable segment as follows:
1 Prior year balances were re-presented in ALSA, with revenue reclassified between private hire and passenger revenues to better reflect the nature of the services
There are no material inter-segment sales between reportable segments.
(b) Operating profit
Operating profit is analysed by reportable segment as follows:
Normalised
Separately
Segment
operating profit
disclosed items
Separately
disclosed items
Segment
Normalised
operating
UK
German Rail
ALSA
North America
Central functions
2019
£m
36.6
2.0
62.3
100.9
1.3
203.1
2018
£m
19.7
0.6
44.0
68.8
0.7
133.8
(e) Non-current assets
Non-current assets and additions are analysed by reportable segment as follows:
Intangible
assets
2019
£m
Property,
plant and
equipment
2019
£m
Total
non-current
assets
2019
£m
Non-current
asset
additions
2019
£m
Intangible
assets
2018
£m
Property,
plant and
equipment
2018
£m
Total
non-current
assets
2018
£m
Non-current
asset
additions
2018
£m
34.3
9.3
43.6
23.6
946.0
888.6
329.5
2.5
332.0
8.4
394.8
613.0
1,858.2
1,016.2
363.8
11.8
375.6
32.0
1,340.8
1,501.6
2,874.4
77.2
2.6
79.8
15.3
164.5
162.2
342.0
30.6
8.0
38.6
18.0
921.7
819.2
1,758.9
190.2
2.4
192.6
2.0
353.2
507.0
862.2
220.8
10.4
231.2
20.0
1,274.9
1,326.2
2,621.1
38.2
1.4
39.6
5.3
64.9
116.5
186.7
UK
Central functions
Total UK
German Rail
ALSA
North America
Total overseas
Total
1,901.8
1,348.2
3,250.0
421.8
1,797.5
1,054.8
2,852.3
226.3
143
155
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
144
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
4 Revenue and segmental analysis continued
(f) Geographical information
UK
Germany
Spain
Morocco
Switzerland
USA
Canada
Revenue from external
customers
2019
£m
2018
£m
599.7
89.9
746.2
64.5
14.0
1,152.7
77.4
2,744.4
577.0
67.8
683.9
48.9
12.3
982.3
78.5
2,450.7
Non-current assets
2019
£m
375.6
32.0
1,203.4
124.1
13.3
1,362.1
139.5
3,250.0
2018
£m
231.2
20.0
1,245.4
19.8
9.7
1,195.2
131.0
2,852.3
Due to the nature of the Group’s businesses, the origin and destination of revenue is the same.
No single external customer amounts to 10% or more of the total revenue.
Information reported to the Group Executive Committee does not regularly include an analysis of assets and liabilities by segment.
5 Operating costs
Cost of inventories recognised in expense
Staff costs
Depreciation
– owned assets
– leased assets
Intangible asset amortisation
Gain on disposal of property, plant and equipment
Gain on disposal of intangible assets
Amortisation of fixed asset grants
Leases (note 35)
– variable lease payments
– expenses relating to short-term leases
– expenses relating to leases of low-value assets
Other charges
Total operating costs
2019
£m
82.8
1,416.7
132.4
70.7
59.7
(10.3)
(3.6)
(1.3)
–
10.3
7.6
2018
£m
86.1
1,260.9
112.5
21.3
47.0
(8.4)
(8.3)
(0.5)
–
–
–
737.1
2,502.1
724.7
2,235.3
156
National Express Group PLC Annual Report 2019
144
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Due to the nature of the Group’s businesses, the origin and destination of revenue is the same.
No single external customer amounts to 10% or more of the total revenue.
Information reported to the Group Executive Committee does not regularly include an analysis of assets and liabilities by segment.
UK
Germany
Spain
Morocco
Switzerland
USA
Canada
5 Operating costs
Cost of inventories recognised in expense
Staff costs
Depreciation
– owned assets
– leased assets
Intangible asset amortisation
Gain on disposal of property, plant and equipment
Gain on disposal of intangible assets
Amortisation of fixed asset grants
Leases (note 35)
– variable lease payments
– expenses relating to short-term leases
– expenses relating to leases of low-value assets
Other charges
Total operating costs
Revenue from external
customers
Non-current assets
2019
£m
599.7
89.9
746.2
64.5
14.0
1,152.7
77.4
2,744.4
2018
£m
577.0
67.8
683.9
48.9
12.3
982.3
78.5
2,450.7
2019
£m
375.6
32.0
1,203.4
124.1
13.3
1,362.1
139.5
3,250.0
2018
£m
231.2
20.0
1,245.4
19.8
9.7
1,195.2
131.0
2,852.3
2018
£m
86.1
1,260.9
112.5
21.3
47.0
(8.4)
(8.3)
(0.5)
–
–
–
2019
£m
82.8
1,416.7
132.4
70.7
59.7
(10.3)
(3.6)
(1.3)
–
10.3
7.6
737.1
2,502.1
724.7
2,235.3
4 Revenue and segmental analysis continued
(f) Geographical information
6 Auditor’s remuneration
An analysis of fees paid to the Group’s auditor is provided below:
Audit of the Financial Statements
Audit of subsidiaries
Audit-related assurance services
7 Employee benefit costs
(a) Staff costs
Wages and salaries
Social security costs
Pension costs (note 34)
Share-based payment (note 8)
The average number of employees, including Executive Directors, during the year was as follows:
Managerial and administrative
Operational
2019
£m
0.5
0.9
0.1
1.5
2019
£m
1,234.5
165.5
10.3
6.4
2018
£m
0.4
0.9
0.1
1.4
2018
£m
1,093.2
151.0
10.3
6.4
1,416.7
1,260.9
2019
4,934
44,644
49,578
2018
4,415
42,288
46,703
Included in the above are the following costs related to the Group’s key management personnel who comprise the Executive Directors of
the parent Company. Further details are disclosed in the Directors’ Remuneration Report:
Basic salaries
Benefits
Performance-related bonuses
Share-based payment
2019
£m
2018
£m
1.4
0.7
2.2
2.6
6.9
1.3
0.9
1.9
2.8
6.9
(b) Share schemes
Details of options or awards outstanding at the end of the year under the Group’s share schemes are as follows:
Long-Term Incentive Plan
West Midland Travel Long Service Option Scheme
Executive Deferred Bonus Plan
Number of
share options
2019
Number of
share options
2018
Exercise
price
Future
exercise
periods
6,391,119
5,909,026
nil
2020-2024
134,956
145,238
155,521
181,668
6,671,313
6,246,215
225p-412p
2020-2029
nil
2020
145
157
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
146
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
7 Employee benefit costs continued
(i) Long-Term Incentive Plan (LTIP)
The LTIP is open to Executive Directors and senior management with awards made at the discretion of the Remuneration Committee,
normally on an annual basis and in the form of a nil cost option over a certain number of shares in the Company. The vesting of shares
on the third anniversary of grant is subject to the Company’s achievement against specific performance conditions and growth targets
set at the date of grant which: (i) relate to earnings per share (EPS), return on capital employed (ROCE) and the relative total shareholder
return (TSR) of the Company against a comparator group of companies and the FTSE 250 Index; and (ii) are measured
over the three-year financial period commencing with the year of grant. Unvested shares automatically lapse.
An accrual entitlement in respect of dividends paid by the Company during the vesting period attaches to vested shares and is paid
to participants on vesting. Similarly, dividends are payable on unexercised vested shares held by Executive Directors during their
compulsory two-year holding period which runs from the date of vesting (in parallel with the two-year exercise period).
The LTIP allows for the grant to UK participants of an HMRC approved share option over shares with a market value of up to a maximum
of £30,000 outstanding at any time. These are awarded at the same time as, and with the same performance conditions as, the LTIP
awards and work by way of set-off versus the vested LTIP share value on exercise with the excess LTIP option award being forfeited.
In each of the years 2012 to 2014 inclusive, a supplementary nil cost option LTIP award was granted to the Group Chief Executive.
The vesting of these shares on the fifth anniversary of grant is subject to the Company’s achievement against specific performance
conditions and growth targets set at each date of grant which: (i) relate to EPS and the relative TSR of the Company against a comparator
group of companies and/or the FTSE 250 Index; and (ii) are measured over the five-year financial period commencing with the year of
grant. No dividend accrual entitlement existed on these schemes. The 2014 scheme vested during the year, and there are no shares
outstanding at the year end in relation to the any of these schemes.
Vested shares for all LTIP awards are normally delivered in the form of market purchased shares held in the Company’s Employee Benefit
Trust ‘the Trust’. No cash settlement alternative is available at present.
(ii) Executive Deferred Bonus Plan (EDBP)
The delivery of the annual bonus award for Executive Directors is structured in two distinct parts, an initial cash payment under the
annual bonus plan and a one-year deferred payment award in the form of forfeitable shares in the Company granted under the EDBP.
Release of the shares on the first anniversary of grant is not subject to any additional performance condition, save for continuing
employment. Participants are entitled to receive any dividends paid by the Company on the shares while they are held in the Trust
during the deferred period.
(iii) West Midlands Travel Long Service Option Scheme (WMT LSOS)
The WMT LSOS is used to reward WMT employees who attain 25 years’ service. The market-value option award over a certain number of
shares in the Company is exercisable between the third and tenth anniversary of grant. There are no performance conditions and shares
are delivered on exercise through the Trust. No cash settlement alternative is available.
(iv) Travel West Midland Share Incentive Plan (TWM SIP)
The TWM SIP exists for the benefit of WMT employees. However, the plan is closed to new entrants and no awards have been granted
under it since May 2008. At 31 December 2019, 1,079 (2018: 1,079) shares in the Company were held by the Trustee for the benefit of
existing participants. No cash settlement alternative is available.
158
National Express Group PLC Annual Report 2019
146
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
7 Employee benefit costs continued
(i) Long-Term Incentive Plan (LTIP)
The LTIP is open to Executive Directors and senior management with awards made at the discretion of the Remuneration Committee,
normally on an annual basis and in the form of a nil cost option over a certain number of shares in the Company. The vesting of shares
on the third anniversary of grant is subject to the Company’s achievement against specific performance conditions and growth targets
set at the date of grant which: (i) relate to earnings per share (EPS), return on capital employed (ROCE) and the relative total shareholder
return (TSR) of the Company against a comparator group of companies and the FTSE 250 Index; and (ii) are measured
over the three-year financial period commencing with the year of grant. Unvested shares automatically lapse.
An accrual entitlement in respect of dividends paid by the Company during the vesting period attaches to vested shares and is paid
to participants on vesting. Similarly, dividends are payable on unexercised vested shares held by Executive Directors during their
compulsory two-year holding period which runs from the date of vesting (in parallel with the two-year exercise period).
The LTIP allows for the grant to UK participants of an HMRC approved share option over shares with a market value of up to a maximum
of £30,000 outstanding at any time. These are awarded at the same time as, and with the same performance conditions as, the LTIP
awards and work by way of set-off versus the vested LTIP share value on exercise with the excess LTIP option award being forfeited.
In each of the years 2012 to 2014 inclusive, a supplementary nil cost option LTIP award was granted to the Group Chief Executive.
The vesting of these shares on the fifth anniversary of grant is subject to the Company’s achievement against specific performance
conditions and growth targets set at each date of grant which: (i) relate to EPS and the relative TSR of the Company against a comparator
group of companies and/or the FTSE 250 Index; and (ii) are measured over the five-year financial period commencing with the year of
grant. No dividend accrual entitlement existed on these schemes. The 2014 scheme vested during the year, and there are no shares
outstanding at the year end in relation to the any of these schemes.
Vested shares for all LTIP awards are normally delivered in the form of market purchased shares held in the Company’s Employee Benefit
Trust ‘the Trust’. No cash settlement alternative is available at present.
(ii) Executive Deferred Bonus Plan (EDBP)
The delivery of the annual bonus award for Executive Directors is structured in two distinct parts, an initial cash payment under the
annual bonus plan and a one-year deferred payment award in the form of forfeitable shares in the Company granted under the EDBP.
Release of the shares on the first anniversary of grant is not subject to any additional performance condition, save for continuing
employment. Participants are entitled to receive any dividends paid by the Company on the shares while they are held in the Trust
during the deferred period.
(iii) West Midlands Travel Long Service Option Scheme (WMT LSOS)
The WMT LSOS is used to reward WMT employees who attain 25 years’ service. The market-value option award over a certain number of
shares in the Company is exercisable between the third and tenth anniversary of grant. There are no performance conditions and shares
are delivered on exercise through the Trust. No cash settlement alternative is available.
(iv) Travel West Midland Share Incentive Plan (TWM SIP)
existing participants. No cash settlement alternative is available.
8 Share-based payments
The charge in respect of share-based payment transactions included in the Group’s Income Statement for the year is as follows:
Expense arising from share and share option plans – continuing operations
2019
£m
6.4
2018
£m
6.4
During the year ended 31 December 2019, the Group had four share-based payment arrangements, which are described in note 7(b).
For the following disclosure, share options with a nil exercise price have been disclosed separately to avoid distorting the weighted
average exercise prices. The number of share options in existence during the year was as follows:
Options without a nil exercise price:
At 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
Exercisable at 31 December
Options with a nil exercise price:
At 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
Exercisable at 31 December
Total outstanding at 31 December
Total exercisable at 31 December
2019
2018
Weighted
average
exercise
price
p
298
412
325
283
129
320
282
nil
nil
nil
nil
nil
nil
nil
Number
of share
options
183,883
27,000
(16,649)
(27,811)
(10,902)
155,521
97,077
6,285,981
2,159,093
–
(2,220,498)
(133,882)
6,090,694
51,955
6,246,215
149,032
Number
of share
options
155,521
15,000
(8,773)
(19,802)
(6,990)
134,956
87,156
6,090,694
2,327,084
–
(1,805,321)
(76,100)
6,536,357
391,272
6,671,313
478,428
Weighted
average
exercise
price
p
295
392
283
272
594
298
260
nil
nil
nil
nil
nil
nil
nil
The TWM SIP exists for the benefit of WMT employees. However, the plan is closed to new entrants and no awards have been granted
under it since May 2008. At 31 December 2019, 1,079 (2018: 1,079) shares in the Company were held by the Trustee for the benefit of
The options outstanding at 31 December 2019 had exercise prices that were between 225p and 412p (2018: between 129p and 392p)
excluding options with a nil exercise price. The range of exercise prices for options was as follows:
Exercise price (p)
100-300
301-350
351-450
2019
Number
52,818
34,338
47,800
2018
Number
74,196
44,625
36,700
134,956
155,521
The options have a weighted average contractual life of one year (2018: one year). Options were exercised regularly throughout the year
and the weighted average share price at exercise was 417p (2018: 387p).
147
159
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
148
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
8 Share-based payments continued
The weighted average fair value of the share options granted during the year was calculated using a stochastic model, with the following
assumptions and inputs:
Risk-free interest rate
Expected volatility
Peer group volatility
Expected option life in years
Expected dividend yield
Weighted average share price at grant date
Weighted average exercise price at grant date
Weighted average fair value of options at grant date
Share options without
nil exercise price
Share options with
nil exercise price
2019
2018
2019
0.72%
20%
–
5 years
3.65%
412p
412p
42p
1.04%
21%
–
5 years
3.50%
386p
392p
43p
0.78%
16%
25-31%
3 years
0.00%
414p
nil
337p
2018
0.85%
20%
27%-29%
3 years
0.00%
387p
nil
342p
Experience to date has shown that approximately 24% (2018: 24%) of options are exercised early, principally due to leavers. This has
been incorporated into the calculation of the expected option life for the share options without nil exercise price.
Expected volatility in the table above was determined from historical volatility over the last eight years, adjusted for one-off events that were not
considered to be reflective of the volatility of the share price going forward. The expected dividend yield represents the dividends declared in the
12 months preceding the date of the grant, divided by the average share price in the month preceding the date of the grant.
For share options granted during the year under the LTIP, the TSR targets have been reflected in the calculation of the fair value of the options above.
2019
£m
(40.9)
(12.8)
(4.7)
(1.2)
(1.5)
(3.2)
(64.3)
0.2
8.4
(55.7)
0.8
(57.1)
7.6
(1.3)
2018
£m
(36.8)
(4.4)
(3.8)
(1.2)
–
(2.2)
(48.4)
–
9.8
(38.6)
0.5
(40.6)
9.3
(1.5)
9 Net finance costs
Bond and bank interest payable
Lease interest payable
Other interest payable
Unwind of provision discounting
Unwind of put liability discounting
Net interest cost on defined benefit pension obligations
Finance costs
Lease interest income
Other financial income
Net finance costs
Of which, from financial instruments:
Financial assets measured at amortised cost
Financial liabilities measured at amortised cost
Derivatives
Loan fee amortisation
160
National Express Group PLC Annual Report 2019
148
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Risk-free interest rate
Expected volatility
Peer group volatility
Expected option life in years
Expected dividend yield
Weighted average share price at grant date
Weighted average exercise price at grant date
Weighted average fair value of options at grant date
Net interest cost on defined benefit pension obligations
9 Net finance costs
Bond and bank interest payable
Lease interest payable
Other interest payable
Unwind of provision discounting
Unwind of put liability discounting
Finance costs
Lease interest income
Other financial income
Net finance costs
Of which, from financial instruments:
Financial assets measured at amortised cost
Financial liabilities measured at amortised cost
Derivatives
Loan fee amortisation
8 Share-based payments continued
assumptions and inputs:
The weighted average fair value of the share options granted during the year was calculated using a stochastic model, with the following
10 Taxation
(a) Analysis of taxation charge in the year
Share options without
nil exercise price
Share options with
nil exercise price
2019
2018
2019
0.72%
20%
–
5 years
3.65%
412p
412p
42p
1.04%
21%
–
5 years
3.50%
386p
392p
43p
0.78%
16%
25-31%
3 years
0.00%
414p
nil
337p
2018
0.85%
20%
27%-29%
3 years
0.00%
387p
nil
342p
Current taxation:
UK corporation tax
Overseas taxation
Current income tax charge
Adjustments with respect to prior years – UK and overseas
Total current income tax charge
Deferred taxation (note 27):
Origination and reversal of temporary differences – continuing operations
Adjustments with respect to prior years – UK and overseas
Deferred tax charge
Total tax charge for the Group
Amounts relating to discontinued items
Total tax charge for the continuing Group
Experience to date has shown that approximately 24% (2018: 24%) of options are exercised early, principally due to leavers. This has
been incorporated into the calculation of the expected option life for the share options without nil exercise price.
Expected volatility in the table above was determined from historical volatility over the last eight years, adjusted for one-off events that were not
The tax charge for the continuing Group is disclosed as follows:
considered to be reflective of the volatility of the share price going forward. The expected dividend yield represents the dividends declared in the
12 months preceding the date of the grant, divided by the average share price in the month preceding the date of the grant.
Tax charge on profit before separately disclosed items
Tax credit on separately disclosed items
For share options granted during the year under the LTIP, the TSR targets have been reflected in the calculation of the fair value of the options above.
2019
£m
2018
£m
7.7
20.4
28.1
(7.0)
21.1
20.9
(3.3)
17.6
38.7
–
38.7
55.2
(16.5)
38.7
2.9
16.0
18.9
(0.1)
18.8
17.7
0.8
18.5
37.3
1.7
39.0
49.0
(10.0)
39.0
2019
£m
(40.9)
(12.8)
(4.7)
(1.2)
(1.5)
(3.2)
(64.3)
0.2
8.4
(55.7)
0.8
(57.1)
7.6
(1.3)
2018
£m
(36.8)
(4.4)
(3.8)
(1.2)
–
(2.2)
(48.4)
–
9.8
(38.6)
0.5
(40.6)
9.3
(1.5)
In the current year, the tax credit on separately disclosed items of £16.5m (2018: £10.0m) relates to tax relief on intangible amortisation,
the gain on the disposal of Ecolane and restructuring costs in North America and is determined by reference to the tax rates in the
jurisdiction to which the item relates. The disposal of Ecolane is treated as tax-free under UK legislation and a credit of £4.0m arises on
the disposal and restructuring costs. The effective tax rate relating to intangible amortisation is significantly higher than the UK tax rate of
19% due to the weighting of intangibles in jurisdictions with higher tax rates than the UK, specifically the US (26%) and Spain (25%).
(b) Tax on items recognised in Other Comprehensive Income or Equity
Current taxation:
(Charge)/Credit on exchange movements offset in reserves
Deferred taxation:
Deferred tax (charge)/credit on actuarial (gains)/losses
Deferred tax (charge)/credit on cash flow hedges
Deferred tax credit on foreign exchange differences
Deferred tax credit on share-based payments
2019
£m
2018
£m
(1.7)
(1.7)
(4.3)
(2.5)
–
0.5
(6.3)
0.5
0.5
4.0
3.1
(2.7)
1.2
5.6
149
161
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
150
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
10 Taxation continued
(c) Reconciliation of the total tax charge
Profit before income tax – continuing Group
Notional charge at UK corporation tax rate of 19% (2018: 19%)
Recurring items:
Non-deductible goodwill impairment
Non-deductible intangible amortisation
Effect of overseas tax rates
Tax incentives
State taxes
Non-recurring items:
Adjustments to prior years within current and deferred tax (excluding movements in tax provisions)
Increase/(release) of tax provisions
Effect of reduction in tax rates
Non-deductible expenditure
Indexation in relation to property disposals
Utilisation of a deferred tax asset for previously unrecognised tax losses
Total tax charge reported in the Income Statement (note 10(a))
2019
£m
187.0
35.5
1.2
–
7.7
(1.2)
–
(10.3)
2.9
–
2.9
–
–
38.7
2018
£m
177.7
33.8
1.6
0.6
9.1
(4.2)
0.6
0.7
(0.7)
(0.4)
1.0
(2.2)
(0.9)
39.0
The main item included within the tax reconciliation is the prior year adjustment to uplift the tax position in line with a revision of UK and
US tax returns.
(d) Tax provisions
At 31 December 2019, the Group held tax provisions of £10.8m (2018: £7.9m), representing a number of tax uncertainties such as the
deductibility of interest expense in the UK and Spain and the Moroccan and US tax audits. All UK corporation tax returns up to 2018 have
been submitted and agreed by HMRC. There has been a net increase of £2.9m in tax provisions, which is based on the experience of the
Group Tax department and after discussions of the various tax uncertainties with our tax advisers. The year end tax provision represents
management’s best estimate of the tax uncertainties of which we are aware and is included in current tax liabilities.
(e) Temporary differences associated with Group investments
No deferred tax (2018: £nil) is recognised on the unremitted earnings of subsidiaries, associates and joint ventures, as the Group has
determined that these undistributed profits will not be distributed in the near future. As a result of changes to tax legislation in 2009,
overseas dividends received on or after 1 July 2009 are generally exempt from UK corporation tax, but may be subject to withholding
tax. There are no temporary differences (2018: £nil) associated with investments in subsidiaries, associates and joint ventures, for which
a deferred tax liability has not been recognised but for which a tax liability may arise.
(f) Unrecognised tax losses
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit against
future taxable profits is probable. Based on current forecasts, it is estimated that the losses recognised for deferred tax purposes will be
utilised within three to four years. UK and overseas deferred tax assets that the Group has not recognised in the Financial Statements
relate to gross losses of £17.7m (2018: £17.6m), which arise in tax jurisdictions where the Group does not expect to generate sufficient
suitable future taxable profits. The majority of the unrecognised losses relates to UK entities where it is uncertain when, or if, the losses
will be utilised.
(g) Deferred tax included in the Income Statement
Accelerated capital allowances
Other short-term temporary differences
Recognition of losses
Deferred tax charge (note 10(a))
Details on the Balance Sheet position of deferred tax are included in note 27.
(h) Factors that may affect future tax charges
There are no known significant factors that may affect future tax charges.
162
2019
£m
29.8
6.6
(18.8)
17.6
2018
£m
10.5
10.3
(2.3)
18.5
National Express Group PLC Annual Report 2019
150
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
151
11 Discontinued operations
On 24 June 2018, the Group handed back the Midland Metro tram operations to the West Midlands Combined Authority. This operation
was recognised as discontinued in the 2018 Annual Report, along with the disposal of the Thameside ‘c2c’ franchise which was sold
to Trenitalia.
Details of the discontinued operations are as follows:
Revenue
Operating costs
Net loss from discontinued operations before tax
Attributable income tax credit
Net result from discontinued operations attributable to equity shareholders
2019
£m
–
–
–
–
–
2018
£m
5.1
(6.8)
(1.7)
1.7
–
The net cash flows incurred by the discontinued operations during the year are as follows. These cash flows are included within the Group
Statement of Cash Flows:
Group Tax department and after discussions of the various tax uncertainties with our tax advisers. The year end tax provision represents
Declared and paid during the year
Ordinary final dividend for 2018 paid of 10.17p per share (2017: 9.25p)
Ordinary interim dividend for 2019 of 5.16p per share (2018: 4.69p)
Proposed for approval (not recognised as a liability at 31 December)
Ordinary final dividend for 2019 of 11.19p per share (2018: 10.17p per share)
Cash (outflow)/inflow from operating activities
Net cash (outflow)/inflow
12 Dividends paid and proposed
2019
£m
(1.2)
(1.2)
2019
£m
51.9
26.4
78.3
57.1
2018
£m
0.4
0.4
2018
£m
47.3
23.5
70.8
51.9
163
10 Taxation continued
(c) Reconciliation of the total tax charge
Profit before income tax – continuing Group
Notional charge at UK corporation tax rate of 19% (2018: 19%)
Recurring items:
Non-deductible goodwill impairment
Non-deductible intangible amortisation
Effect of overseas tax rates
Tax incentives
State taxes
Non-recurring items:
Increase/(release) of tax provisions
Effect of reduction in tax rates
Non-deductible expenditure
Indexation in relation to property disposals
US tax returns.
(d) Tax provisions
Utilisation of a deferred tax asset for previously unrecognised tax losses
Total tax charge reported in the Income Statement (note 10(a))
Adjustments to prior years within current and deferred tax (excluding movements in tax provisions)
The main item included within the tax reconciliation is the prior year adjustment to uplift the tax position in line with a revision of UK and
At 31 December 2019, the Group held tax provisions of £10.8m (2018: £7.9m), representing a number of tax uncertainties such as the
deductibility of interest expense in the UK and Spain and the Moroccan and US tax audits. All UK corporation tax returns up to 2018 have
been submitted and agreed by HMRC. There has been a net increase of £2.9m in tax provisions, which is based on the experience of the
management’s best estimate of the tax uncertainties of which we are aware and is included in current tax liabilities.
(e) Temporary differences associated with Group investments
No deferred tax (2018: £nil) is recognised on the unremitted earnings of subsidiaries, associates and joint ventures, as the Group has
determined that these undistributed profits will not be distributed in the near future. As a result of changes to tax legislation in 2009,
overseas dividends received on or after 1 July 2009 are generally exempt from UK corporation tax, but may be subject to withholding
tax. There are no temporary differences (2018: £nil) associated with investments in subsidiaries, associates and joint ventures, for which
a deferred tax liability has not been recognised but for which a tax liability may arise.
(f) Unrecognised tax losses
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit against
future taxable profits is probable. Based on current forecasts, it is estimated that the losses recognised for deferred tax purposes will be
utilised within three to four years. UK and overseas deferred tax assets that the Group has not recognised in the Financial Statements
relate to gross losses of £17.7m (2018: £17.6m), which arise in tax jurisdictions where the Group does not expect to generate sufficient
suitable future taxable profits. The majority of the unrecognised losses relates to UK entities where it is uncertain when, or if, the losses
will be utilised.
(g) Deferred tax included in the Income Statement
Accelerated capital allowances
Other short-term temporary differences
Recognition of losses
Deferred tax charge (note 10(a))
Details on the Balance Sheet position of deferred tax are included in note 27.
(h) Factors that may affect future tax charges
There are no known significant factors that may affect future tax charges.
2019
£m
187.0
35.5
1.2
–
7.7
(1.2)
–
(10.3)
2.9
2.9
–
–
–
38.7
2018
£m
177.7
33.8
1.6
0.6
9.1
(4.2)
0.6
0.7
(0.7)
(0.4)
1.0
(2.2)
(0.9)
39.0
2019
£m
29.8
6.6
(18.8)
17.6
2018
£m
10.5
10.3
(2.3)
18.5
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
152
13 Earnings per share
Basic earnings per share
Normalised basic earnings per share
Basic earnings per share from continuing operations
Diluted earnings per share
Normalised diluted earnings per share
Diluted earnings per share from continuing operations
2019
27.6p
34.5p
27.6p
27.5p
34.4p
27.5p
2018
26.6p
32.9p
26.6p
26.5p
32.8p
26.5p
Basic EPS is calculated by dividing the earnings attributable to equity shareholders of £141.1m (2018: £135.7m) by the weighted average
number of ordinary shares in issue during the year, excluding those held by the Group’s Employee Benefit Trust (note 32) which are
treated as cancelled.
Basic EPS for continuing operations is calculated by dividing the earnings from the continuing Group attributable to equity shareholders
of £141.1m (2018: £135.7m). Basic and diluted EPS in the year for discontinued operations was nil (2018: nil) and nil (2018: nil)
respectively.
For diluted EPS, the weighted average number of ordinary shares in issue during the year is adjusted to include the weighted average number
of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The reconciliation of basic and diluted weighted average number of ordinary shares is as follows:
Basic weighted average shares
Adjustment for dilutive potential ordinary shares
Diluted weighted average shares
2019
2018
510,435,913
510,682,902
2,433,486
2,197,926
512,869,399
512,880,828
The normalised basic and normalised diluted earnings per share have been calculated in addition to the basic and diluted earnings per
share required by IAS 33 since, in the opinion of the Directors, they reflect the underlying performance of the business’ operations more
appropriately.
The reconciliation of the earnings and earnings per share to their normalised equivalent is as follows:
Profit attributable to equity shareholders
Separately disclosed items
Separately disclosed tax
Separately disclosed non-controlling interests
Profit for the year from discontinued operations
Normalised profit attributable to equity shareholders
2019
Basic EPS
p
Diluted EPS
p
27.6
10.4
(3.2)
(0.3)
–
34.5
27.5
10.3
(3.2)
(0.2)
–
34.4
£m
141.1
53.0
(16.5)
(1.4)
–
176.2
2018
Basic EPS
p
Diluted EPS
p
26.6
8.3
(2.0)
–
–
32.9
26.5
8.2
(1.9)
–
–
32.8
£m
135.7
42.3
(10.0)
–
–
168.0
164
National Express Group PLC Annual Report 2019
152
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
153
13 Earnings per share
Basic earnings per share
Normalised basic earnings per share
Basic earnings per share from continuing operations
Diluted earnings per share
Normalised diluted earnings per share
Diluted earnings per share from continuing operations
treated as cancelled.
respectively.
Basic weighted average shares
Adjustment for dilutive potential ordinary shares
Diluted weighted average shares
Basic EPS is calculated by dividing the earnings attributable to equity shareholders of £141.1m (2018: £135.7m) by the weighted average
number of ordinary shares in issue during the year, excluding those held by the Group’s Employee Benefit Trust (note 32) which are
of £141.1m (2018: £135.7m). Basic and diluted EPS in the year for discontinued operations was nil (2018: nil) and nil (2018: nil)
For diluted EPS, the weighted average number of ordinary shares in issue during the year is adjusted to include the weighted average number
of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The reconciliation of basic and diluted weighted average number of ordinary shares is as follows:
2019
27.6p
34.5p
27.6p
27.5p
34.4p
27.5p
2018
26.6p
32.9p
26.6p
26.5p
32.8p
26.5p
2019
2018
510,435,913
510,682,902
2,433,486
2,197,926
512,869,399
512,880,828
14 Intangible assets
Cost:
At 1 January 2019
Acquisitions
Additions
Disposals
Reclassifications
Foreign exchange
At 31 December 2019
Basic EPS for continuing operations is calculated by dividing the earnings from the continuing Group attributable to equity shareholders
Amortisation and impairment:
At 1 January 2019
Charge for year
Disposals
Reclassifications
Foreign exchange
At 31 December 2019
Net book value:
At 31 December 2019
At 1 January 2019
Customer
contracts
£m
Infrastructure
investment
intangible
£m
Software
£m
Contract
costs
£m
Total finite
life assets
£m
Goodwill
£m
Total
£m
836.4
49.8
6.6
–
(2.3)
(43.3)
847.2
547.6
47.8
–
–
(30.0)
565.4
281.8
288.8
–
–
77.3
–
–
(2.8)
74.5
–
0.9
–
–
–
0.9
73.6
–
96.8
–
18.5
(3.5)
0.3
(3.0)
109.1
67.2
9.5
(2.0)
0.2
(2.6)
72.3
36.8
29.6
21.5
–
7.9
–
–
(2.0)
27.4
3.0
1.5
–
–
(0.2)
4.3
23.1
18.5
954.7
49.8
110.3
(3.5)
(2.0)
(51.1)
1,502.7
101.7
–
(6.4)
2.3
2,457.4
151.5
110.3
(9.9)
0.3
(74.2)
(125.3)
1,058.2
1,526.1
2,584.3
617.8
59.7
(2.0)
0.2
(32.8)
642.9
415.3
336.9
42.1
–
–
–
(2.5)
39.6
659.9
59.7
(2.0)
0.2
(35.3)
682.5
1,486.5
1,460.6
1,901.8
1,797.5
The normalised basic and normalised diluted earnings per share have been calculated in addition to the basic and diluted earnings per
share required by IAS 33 since, in the opinion of the Directors, they reflect the underlying performance of the business’ operations more
appropriately.
The reconciliation of the earnings and earnings per share to their normalised equivalent is as follows:
Profit attributable to equity shareholders
Separately disclosed items
Separately disclosed tax
Separately disclosed non-controlling interests
Profit for the year from discontinued operations
Normalised profit attributable to equity shareholders
Basic EPS
Diluted EPS
Basic EPS
Diluted EPS
£m
141.1
53.0
(16.5)
(1.4)
–
176.2
p
27.6
10.4
(3.2)
(0.3)
–
34.5
2019
p
27.5
10.3
(3.2)
(0.2)
–
34.4
£m
135.7
42.3
(10.0)
–
–
168.0
p
26.6
8.3
(2.0)
–
–
32.9
2018
p
26.5
8.2
(1.9)
–
–
32.8
During the year, the Group recognised infrastructure investment intangibles of £77.3m for public service vehicles where the Group has the
right to charge passengers of the public service in accordance with IFRIC 12 ‘Service Concession Arrangements’. Note 38 includes
further details of the Group’s service concession arrangements.
Customer contracts includes the following individually material assets, all of which arose through past acquisitions.
Segment
North America
North America
North America
North America
ALSA
ALSA
Nature of contract
School bus and paratransit service contract in North America
Employee shuttle contract in North America
Paratransit bus service contract in North America
School bus and paratransit service contract in North America
Urban and charter bus service contract in Spain
Fuel transportation service contract in Spain
Remaining
useful
economic life
12 years
9 years
13 years
13 years
6 years
10 years
Net book
value at 31
December
2019
£m
25.1
22.0
17.0
13.5
14.0
13.5
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Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
154
14 Intangible assets continued
Cost:
At 1 January 2018
Acquisitions
Additions
Disposals
Reclassifications
Assets reclassified as held for sale (note 19)
Foreign exchange
At 31 December 2018
Amortisation and impairment:
At 1 January 2018
Charge for year
Disposals
Reclassifications
Assets reclassified as held for sale (note 19)
Foreign exchange
At 31 December 2018
Net book value:
At 31 December 2018
At 1 January 2018
Customer
contracts
£m
Software
£m
Contract
costs
£m
Total finite
life assets
£m
Goodwill
£m
Total
£m
767.1
55.8
0.9
(1.7)
0.2
(7.9)
22.0
836.4
501.1
37.5
–
–
(2.0)
11.0
547.6
288.8
266.0
98.3
–
11.9
(4.4)
(5.0)
(7.8)
3.8
96.8
64.4
8.5
(4.4)
(2.8)
(0.9)
2.4
67.2
29.6
33.9
17.8
–
3.4
–
–
–
0.3
21.5
1.9
1.0
–
–
–
0.1
3.0
18.5
15.9
883.2
55.8
16.2
(6.1)
(4.8)
(15.7)
26.1
954.7
567.4
47.0
(4.4)
(2.8)
(2.9)
13.5
617.8
336.9
315.8
1,358.0
105.5
–
–
–
–
39.2
1,502.7
40.4
–
–
–
–
1.7
42.1
2,241.2
161.3
16.2
(6.1)
(4.8)
(15.7)
65.3
2,457.4
607.8
47.0
(4.4)
(2.8)
(2.9)
15.2
659.9
1,460.6
1,317.6
1,797.5
1,633.4
Goodwill has been allocated to individual cash-generating units for annual impairment testing on the basis of the Group’s business
operations. The carrying value by cash-generating unit is as follows:
UK
North America
ALSA
2019
£m
29.0
679.4
778.1
2018
£m
27.6
620.7
812.3
1,486.5
1,460.6
The calculation of value in use for each group of cash-generating units is most sensitive to the assumptions over discount rates and the
growth rate used to extrapolate cash flows beyond the three-year period of the management plan.
The key assumptions used for the cash-generating units are as follows:
UK
North America
ALSA
Pre-tax discount
rate applied to
cash flow projections
Growth rate used to
extrapolate cash flows
beyond three-year period of
management plan
2019
6.4%
6.3%
7.3%
2018
7.7%
7.6%
8.6%
2019
2.5%
2.9%
2.5%
2018
2.6%
2.8%
2.8%
The forecast cash flows include management’s latest estimates on sales volumes and pricing. The key estimates applied in the
impairment review are the forecast level of revenue, operating margins and the proportion of operating profit converted to cash in each
year. A perpetual growth rate for each division has been consistently applied in the impairment review for all cash-generating units based
on current forecasts and long-term country-specific GDP growth rates. The cash flows are discounted using pre-tax rates that are
calculated from country-specific weighted average cost of capital (WACC), principally derived from external sources.
The value in use of the North America division exceeds its carrying amount by £1,371.6m (2018: £419.3m).
The value in use of the ALSA division exceeds its carrying amount by £424.9m (2018: £139.5m).
166
National Express Group PLC Annual Report 2019
154
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
155
14 Intangible assets continued
Customer
contracts
£m
Software
£m
Contract
costs
£m
Total finite
life assets
£m
Goodwill
£m
Total
£m
Assets reclassified as held for sale (note 19)
Foreign exchange
At 31 December 2018
Amortisation and impairment:
Assets reclassified as held for sale (note 19)
Cost:
At 1 January 2018
Acquisitions
Additions
Disposals
Reclassifications
At 1 January 2018
Charge for year
Disposals
Reclassifications
Foreign exchange
At 31 December 2018
Net book value:
At 31 December 2018
At 1 January 2018
UK
ALSA
North America
767.1
55.8
0.9
(1.7)
0.2
(7.9)
22.0
836.4
501.1
37.5
–
–
(2.0)
11.0
547.6
288.8
266.0
98.3
–
11.9
(4.4)
(5.0)
(7.8)
3.8
96.8
64.4
8.5
(4.4)
(2.8)
(0.9)
2.4
67.2
29.6
33.9
17.8
3.4
–
–
–
–
0.3
21.5
1.9
1.0
–
–
–
0.1
3.0
18.5
15.9
883.2
55.8
16.2
(6.1)
(4.8)
(15.7)
26.1
954.7
567.4
47.0
(4.4)
(2.8)
(2.9)
13.5
617.8
336.9
315.8
1,358.0
105.5
39.2
1,502.7
40.4
–
–
–
–
–
–
–
–
1.7
42.1
2,241.2
161.3
16.2
(6.1)
(4.8)
(15.7)
65.3
2,457.4
607.8
47.0
(4.4)
(2.8)
(2.9)
15.2
659.9
1,460.6
1,317.6
1,797.5
1,633.4
2019
£m
29.0
679.4
778.1
2018
£m
27.6
620.7
812.3
1,486.5
1,460.6
Goodwill has been allocated to individual cash-generating units for annual impairment testing on the basis of the Group’s business
operations. The carrying value by cash-generating unit is as follows:
The calculation of value in use for each group of cash-generating units is most sensitive to the assumptions over discount rates and the
growth rate used to extrapolate cash flows beyond the three-year period of the management plan.
The key assumptions used for the cash-generating units are as follows:
Pre-tax discount
Growth rate used to
extrapolate cash flows
rate applied to
beyond three-year period of
cash flow projections
management plan
2019
6.4%
6.3%
7.3%
2018
7.7%
7.6%
8.6%
2019
2.5%
2.9%
2.5%
2018
2.6%
2.8%
2.8%
UK
ALSA
North America
The forecast cash flows include management’s latest estimates on sales volumes and pricing. The key estimates applied in the
impairment review are the forecast level of revenue, operating margins and the proportion of operating profit converted to cash in each
year. A perpetual growth rate for each division has been consistently applied in the impairment review for all cash-generating units based
on current forecasts and long-term country-specific GDP growth rates. The cash flows are discounted using pre-tax rates that are
calculated from country-specific weighted average cost of capital (WACC), principally derived from external sources.
The value in use of the North America division exceeds its carrying amount by £1,371.6m (2018: £419.3m).
The value in use of the ALSA division exceeds its carrying amount by £424.9m (2018: £139.5m).
14 Intangible assets continued
Sensitivities to key and other assumptions
The sensitivity analysis below has been presented in the interests of transparency and consistency only. It is not believed that any
reasonably possible movement in key and other assumptions will lead to an impairment.
Sensitivity analysis has been completed on each key assumption in isolation. This indicates that the value in use of the North America
division will be equal to its carrying value with an increase in the pre-tax discount rate of 3.0% (2018: 1.5%) or a reduction in the growth
rates used to extrapolate cash flows into perpetuity of 3.2% (2018: 1.6%).
In addition, for North America, a reduction in operating profit margin of 3.9% (2018: 1.6%) will result in the value in use of the division
being equal to its carrying amount. North America’s operating profit margin for 2019 was 10.0% (2018: 9.1%).
For ALSA, sensitivity analysis on each key assumption indicates that the value in use will be equal to its carrying amount following an increase in
the pre-tax discount rate of 1.5% (2018: 1.1%) or a reduction in growth rates used to extrapolate cash flows into perpetuity of 1.5% (2018: 0.6%).
A reduction in ALSA’s operating profit margin of 1.9% (2018: 1.0%) will result in the value in use of the division being equal to its carrying
amount. ALSA’s operating profit margin for 2019 was 13.3% (2018: 14.1%).
The Directors consider the assumptions used to be consistent with the historical performance of each cash-generating unit and to be
realistically achievable in light of economic and industry measures and forecasts, and therefore that goodwill is not impaired.
15 Property, plant and equipment
Cost:
At 1 January 2019
Change in accounting policies1
At 1 January 2019 restated
Acquisitions
Additions
Disposals
Reclassifications
Foreign exchange
At 31 December 2019
Depreciation:
At 1 January 2019
Change in accounting policies1
At 1 January 2019 restated
Charge for the year
Disposals
Reclassifications
Foreign exchange
At 31 December 2019
Net book value:
At 31 December 2019
At 1 January 20191
Land
and
buildings
£m
118.8
181.4
300.2
5.1
39.8
(10.3)
–
(11.2)
323.6
31.6
66.3
97.9
32.3
(9.3)
–
(4.1)
Public
service
vehicles
£m
1,835.4
172.1
2,007.5
35.2
240.5
(126.2)
–
(71.5)
Plant and
equipment,
fixtures
and fittings
£m
163.1
3.8
166.9
0.7
31.2
(5.7)
(0.3)
(5.8)
Total
£m
2,117.3
357.3
2,474.6
41.0
311.5
(142.2)
(0.3)
(88.5)
2,085.5
187.0
2,596.1
912.2
87.7
999.9
156.1
(117.0)
–
(34.2)
118.7
2.2
120.9
14.7
(5.0)
(0.2)
(4.1)
1,062.5
156.2
1,218.7
203.1
(131.3)
(0.2)
(42.4)
116.8
1,004.8
126.3
1,247.9
206.8
202.3
1,080.7
1,007.6
60.7
46.0
1,348.2
1,255.9
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’ (see note 2)
During the year, the Group entered into an asset exchange transaction, in which it swapped an existing property for a new piece of land
and a funding arrangement to construct a new property. As the funding of the new property is contingent on planning permission being
granted, about which there is no certainty, consideration for the transaction has been restricted to the fair value of the new land
exchanged in accordance with IFRS 15. When it becomes highly probable that planning permission will be granted a reassessment of the
total consideration will be performed. The movement analysis above includes the disposal of the property and the fair value of the new
land acquired as a result of the exchange.
167
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
156
15 Property, plant and equipment continued
Cost:
At 1 January 2018
Acquisitions
Additions
Disposals
Reclassifications
Assets reclassified as held for sale (note 19)
Foreign exchange
At 31 December 2018
Depreciation:
At 1 January 2018
Charge for the year
Disposals
Reclassifications
Assets reclassified as held for sale (note 19)
Foreign exchange
At 31 December 2018
Net book value:
At 31 December 2018
At 1 January 2018
Land
and
buildings
£m
128.3
5.3
6.9
(18.8)
(0.2)
(4.5)
1.8
118.8
39.7
3.1
(11.7)
–
–
0.5
31.6
87.2
88.6
Public
service
vehicles
£m
1,667.8
21.2
188.7
(99.5)
–
–
57.2
1,835.4
833.8
119.9
(71.6)
–
–
30.1
912.2
923.2
834.0
Plant and
equipment,
fixtures
and fittings
£m
204.5
0.6
14.5
(64.0)
5.0
(0.2)
2.7
Total
£m
2,000.6
27.1
210.1
(182.3)
4.8
(4.7)
61.7
163.1
2,117.3
158.9
10.8
(55.8)
2.8
(0.1)
2.1
1,032.4
133.8
(139.1)
2.8
(0.1)
32.7
118.7
1,062.5
44.4
45.6
1,054.8
968.2
Details of leased assets included within property, plant and equipment are provided in note 35.
168
National Express Group PLC Annual Report 2019
156
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
157
15 Property, plant and equipment continued
Cost:
At 1 January 2018
Acquisitions
Additions
Disposals
Reclassifications
Foreign exchange
At 31 December 2018
Depreciation:
At 1 January 2018
Charge for the year
Disposals
Reclassifications
Foreign exchange
At 31 December 2018
Net book value:
At 31 December 2018
At 1 January 2018
Assets reclassified as held for sale (note 19)
Assets reclassified as held for sale (note 19)
Land
and
buildings
£m
128.3
5.3
6.9
(18.8)
(0.2)
(4.5)
1.8
118.8
39.7
3.1
(11.7)
–
–
0.5
31.6
87.2
88.6
Public
service
vehicles
£m
1,667.8
21.2
188.7
(99.5)
–
–
57.2
1,835.4
833.8
119.9
(71.6)
–
–
30.1
912.2
923.2
834.0
Plant and
equipment,
fixtures
and fittings
£m
204.5
0.6
14.5
(64.0)
5.0
(0.2)
2.7
158.9
10.8
(55.8)
2.8
(0.1)
2.1
Total
£m
2,000.6
27.1
210.1
(182.3)
4.8
(4.7)
61.7
1,032.4
133.8
(139.1)
2.8
(0.1)
32.7
163.1
2,117.3
118.7
1,062.5
44.4
45.6
1,054.8
968.2
Details of leased assets included within property, plant and equipment are provided in note 35.
16 Subsidiaries
The companies listed below include all those which principally affect the results and net assets of the Group. A full list of subsidiaries,
joint ventures and associates is disclosed in note 40, along with the addresses of their registered offices. The principal country of
operation in respect of the companies below is the country in which they are incorporated.
National Express Group PLC is the beneficial owner of all the equity share capital, either itself or through subsidiaries, of the companies.
Incorporated in England and Wales
National Express Limited
The Kings Ferry Limited
West Midlands Travel Limited
Incorporated in Scotland
Operation of coach services
Operation of coach services
Operation of bus services
Tayside Public Transport Co Limited (trading as Travel Dundee)
Operation of bus services
Incorporated in the United States
Durham School Services LP
Petermann Ltd
National Express Transit Corporation
National Express Transit Services Corporation
WeDriveU Inc.
Incorporated in Canada
Stock Transportation Limited
Incorporated in Spain
Tury Express S.A. 1
General Tecnica Industrial S.L.U. 1
NEX Continental Holdings S.L.
Incorporated in Morocco
Groupe Alsa Transport S.A.
Transport de Voyageurs en Autocar Maroc S.A.
Alsa Tanger S.A.
Alsa City Agadir S.A.
Alsa Citybus Rabat-Salé-Temara
Incorporated in Germany
National Express Rail GmbH
1 The main holding companies of the ALSA Group
Operation of school bus services
Operation of school bus services
Operation of transit bus services
Operation of transit bus services
Operation of shuttle services
Operation of school bus services
Holding company for operating companies
Holding company for operating companies
Holding company for operating companies
Operation of bus services
Operation of bus services
Operation of bus services
Operation of bus services
Operation of bus services
Operation of train passenger services
169
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Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
158
17 Non-current financial assets
Financial assets at fair value through other comprehensive income – unlisted ordinary shares
Derivative financial instruments – fuel derivatives
Derivative financial instruments – interest rate derivatives
Derivative financial instruments – cross currency swaps
Derivative financial instruments included in non-current assets
Total non-current financial instruments
Derivative financial instruments – fuel derivatives
Derivative financial instruments – interest rate derivatives
Derivative financial instruments – cross currency swaps
Derivative financial instruments – foreign exchange derivatives
Derivative financial instruments included in current assets
Further information on the Group’s use of derivatives is included in note 31.
Financial assets at fair value through other comprehensive income
Fair value:
At 1 January
Change in accounting policies1
At 1 January (restated)
Additions in the year
Disposals in the year
Foreign exchange
At 31 December
2019
£m
14.2
0.6
2.1
8.0
10.7
24.9
6.1
7.9
3.5
27.0
44.5
2019
£m
6.7
–
6.7
8.2
–
(0.7)
14.2
2018
£m
6.7
1.5
6.7
–
8.2
14.9
0.4
3.9
–
3.6
7.9
2018
£m
8.1
(0.7)
7.4
–
(0.8)
0.1
6.7
1 Opening balances in 2018 were restated for the adoption of IFRS 9 ‘Financial Instruments’
The principal financial assets at fair value through other comprehensive income are as follows:
Name
Metros Ligeros de Madrid, S.A.
Transit Technologies Holdco
Other small investments within ALSA
2019
Proportion
held
%
2018
Proportion
held
%
15
8.8
1-16
15
–
1-16
Segment
ALSA
North America
ALSA
Financial assets at fair value through other comprehensive income comprise holdings in equity shares of non-listed companies. The
Group elected to designate the non-listed equity investments at fair value through other comprehensive income as the Group considers
these investments to be strategic in nature.
The fair value measurement of non-listed equity investments are categorised within Level 3 (i.e. the fair values are determined by
reference to significant unobservable inputs), with the fair value of the two most significant investments totalling £13.5m at 31 December
2019. For the first of these, the fair value was determined from the pricing of recent investment transactions. A 10% increase/(decrease) in
the price per share would result in a £0.7m increase/(decrease) respectively in the fair value of the investment. For the second investment,
the fair value was determined using an estimate of the discounted future cash flows. Future cash flows are estimated based on inputs
including passenger growth, cost inflation and operating margin. The fair value is most sensitive to changes in passenger growth and cost
inflation assumptions. A 1% increase/(decrease) in passenger growth would result in a £0.4m increase/(decrease) respectively in the fair
value of the investment. Whereas, a 0.5% increase/(decrease) in inflation would result in a £1.1m (decrease)/increase respectively in the
fair value of the investment.
No strategic investments were disposed of during 2019, and there were no transfers of any cumulative gain or loss within equity relating
to these investments. No dividends were received from the investments during 2019 (2018: nil).
170
National Express Group PLC Annual Report 2019
158
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
18 Investments accounted for using the equity method
Investments accounted for using the equity method are as follows:
Joint ventures
Associates
Total investments accounted for under the equity method
2019
£m
10.7
7.2
17.9
The Group’s share of post-tax results from associates and joint ventures accounted for using the equity method is as follows:
Share of joint ventures’ profit
Share of associates’ loss
Total share of results from associates and joint ventures
(a) Investments in joint ventures
The Group’s interests in joint ventures are as follows:
2019
£m
0.6
(0.2)
0.4
159
2018
£m
10.2
2.7
12.9
2018
£m
1.1
(0.2)
0.9
Name
Country of
registration
Activity
Proportion held %
Bahrain Public Transport Company W.L.L.
Kingdom of Bahrain
Operation of bus services
Ibero-Eurosur S.L.
Spain
Holding company of Deutsche Touring
During the year, Ibero-Eurosur S.L. was liquidated.
The summarised financial information for individually immaterial joint ventures is set out below:
2019
50
–
2018
50
20
Bahrain Public Transport
Company W.L.L.
Ibero-Eurosur S.L.
Share of the joint ventures’ balance sheets and results
Non-current assets
Current assets
Share of gross assets
Non-current liabilities
Current liabilities
Share of gross liabilities
Net assets
Revenue
Operating profit
Profit after tax
Profit for the year and total comprehensive income
Dividends received from the joint ventures during the year
2019
£m
13.7
6.2
19.9
(3.8)
(5.8)
(9.6)
10.3
9.4
1.6
0.5
0.5
–
2018
£m
16.4
7.0
23.4
(6.8)
(6.4)
(13.2)
10.2
6.0
0.7
1.1
1.7
–
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
A reconciliation of the above summarised information to the carrying amount in the Consolidated Financial Statements is as follows:
Group share of net assets of the joint venture
Adjustments to joint venture retained earnings*
Carrying amount
*Including effect of adoption of IFRS 16 ‘Leases’
Bahrain Public Transport
Company W.L.L.
Ibero-Eurosur S.L
2019
£m
10.3
0.4
10.7
2018
£m
10.2
–
10.2
2019
£m
–
–
–
2018
£m
0.2
–
0.2
(0.2)
–
(0.2)
–
–
–
–
–
–
2018
£m
–
–
–
171
Financial assets at fair value through other comprehensive income – unlisted ordinary shares
17 Non-current financial assets
Derivative financial instruments – fuel derivatives
Derivative financial instruments – interest rate derivatives
Derivative financial instruments – cross currency swaps
Derivative financial instruments included in non-current assets
Total non-current financial instruments
Derivative financial instruments – fuel derivatives
Derivative financial instruments – interest rate derivatives
Derivative financial instruments – cross currency swaps
Derivative financial instruments – foreign exchange derivatives
Derivative financial instruments included in current assets
Further information on the Group’s use of derivatives is included in note 31.
Financial assets at fair value through other comprehensive income
Fair value:
At 1 January
Change in accounting policies1
At 1 January (restated)
Additions in the year
Disposals in the year
Foreign exchange
At 31 December
Name
Metros Ligeros de Madrid, S.A.
Transit Technologies Holdco
Other small investments within ALSA
1 Opening balances in 2018 were restated for the adoption of IFRS 9 ‘Financial Instruments’
The principal financial assets at fair value through other comprehensive income are as follows:
2019
£m
14.2
0.6
2.1
8.0
10.7
24.9
6.1
7.9
3.5
27.0
44.5
2019
£m
6.7
–
6.7
8.2
–
(0.7)
14.2
2019
held
%
15
8.8
1-16
2018
£m
6.7
1.5
6.7
–
8.2
0.4
3.9
–
3.6
7.9
14.9
2018
£m
8.1
(0.7)
7.4
–
(0.8)
0.1
6.7
2018
held
%
15
–
1-16
Proportion
Proportion
Segment
ALSA
North America
ALSA
Financial assets at fair value through other comprehensive income comprise holdings in equity shares of non-listed companies. The
Group elected to designate the non-listed equity investments at fair value through other comprehensive income as the Group considers
these investments to be strategic in nature.
The fair value measurement of non-listed equity investments are categorised within Level 3 (i.e. the fair values are determined by
reference to significant unobservable inputs), with the fair value of the two most significant investments totalling £13.5m at 31 December
2019. For the first of these, the fair value was determined from the pricing of recent investment transactions. A 10% increase/(decrease) in
the price per share would result in a £0.7m increase/(decrease) respectively in the fair value of the investment. For the second investment,
the fair value was determined using an estimate of the discounted future cash flows. Future cash flows are estimated based on inputs
including passenger growth, cost inflation and operating margin. The fair value is most sensitive to changes in passenger growth and cost
inflation assumptions. A 1% increase/(decrease) in passenger growth would result in a £0.4m increase/(decrease) respectively in the fair
value of the investment. Whereas, a 0.5% increase/(decrease) in inflation would result in a £1.1m (decrease)/increase respectively in the
fair value of the investment.
No strategic investments were disposed of during 2019, and there were no transfers of any cumulative gain or loss within equity relating
to these investments. No dividends were received from the investments during 2019 (2018: nil).
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
160
18 Investments accounted for using the equity method continued
(b) Investments in associates
The Group’s interests in associates are as follows:
Name
ALSA associates
North America associates
Country of
registration
Proportion
held %
Spain
North America
17-80
20
ALSA’s associates are generally involved in the operation of coach and bus services, management of bus stations and similar operations.
North America associates include a start-up company offering app-based rideshare and childcare services in the San Francisco area and a
software company which provides scheduling, dispatch and time management functions in the student transportation sector.
The summarised aggregated financial information for individually immaterial associates is set out below:
Share of operating loss
Share of loss for the year and total comprehensive income and expenditure
2019
£m
(0.2)
(0.2)
2018
£m
(0.2)
(0.2)
19 Business combinations, disposals and assets held for sale
(a) Acquisitions – North America
On 11 April 2019, the Group acquired 60% of the voting shares of WeDriveU Holdings, Inc. (WeDriveU), an employee shuttle company
operating in the Silicon Valley and San Francisco area. The Group has acquired WeDriveU to drive expansion in the employee, university
and hospital shuttle markets.
The fair values of the identifiable assets and liabilities of WeDriveU at the date of acquisition were:
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Deferred tax asset
Borrowings
Trade and other payables
Provisions
Minority interest
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
Payments for cash acquired in the business
£m
37.6
23.1
21.4
2.1
7.8
(40.7)
(27.2)
(8.0)
(6.3)
9.8
58.5
68.3
66.2
2.1
68.3
Trade and other receivables had a gross contracted value of £24.2m, and the best estimate at acquisition date of the contractual cash
flows not to be collected was £2.8m.
Goodwill of £58.5m arising from the acquisition consists of certain intangibles that cannot be separately identified and measured due to
their nature. This includes control over the acquired business, the increased scale in our North American operations and the future growth
opportunities. None of the goodwill recognised is expected to be deductible for income tax purposes.
172
National Express Group PLC Annual Report 2019
160
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
161
18 Investments accounted for using the equity method continued
(b) Investments in associates
The Group’s interests in associates are as follows:
Name
ALSA associates
North America associates
ALSA’s associates are generally involved in the operation of coach and bus services, management of bus stations and similar operations.
North America associates include a start-up company offering app-based rideshare and childcare services in the San Francisco area and a
software company which provides scheduling, dispatch and time management functions in the student transportation sector.
The summarised aggregated financial information for individually immaterial associates is set out below:
Country of
registration
Proportion
held %
Spain
North America
17-80
20
2019
£m
(0.2)
(0.2)
2018
£m
(0.2)
(0.2)
Share of operating loss
Share of loss for the year and total comprehensive income and expenditure
19 Business combinations, disposals and assets held for sale
(a) Acquisitions – North America
and hospital shuttle markets.
The fair values of the identifiable assets and liabilities of WeDriveU at the date of acquisition were:
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Deferred tax asset
Borrowings
Trade and other payables
Provisions
Minority interest
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
Payments for cash acquired in the business
£m
37.6
23.1
21.4
2.1
7.8
(40.7)
(27.2)
(8.0)
(6.3)
9.8
58.5
68.3
66.2
2.1
68.3
19 Business combinations, disposals and assets held for sale continued
As part of the arrangements with non-controlling shareholders of WeDriveU, the Group issued put options to the seller to sell the
remaining shares and simultaneously the seller issued call options to the Group to purchase the remaining shares. The terms of the put
and call options are symmetrical and exercisable in three tranches from 2020 to 2022. The exercise prices are based on a multiple of
future earnings. The Group has recognised non-controlling interests for the remaining shares because the interests subject to the put and
call options are not deemed to have been acquired upon acquisition. Accordingly, the financial liability arising from the put options has
not been included in the consideration transferred and is accounted for separately, with a corresponding entry recorded in equity.
At the acquisition date, the Group recognised a put liability of £100.0m, recorded at the present value of the estimated redemption value,
using forecast earnings of WeDriveU, discounted at a rate of 2.1%. Further details are provided in note 25.
The fair value of the call options is nil.
WeDriveU contributed £114.7m of revenue and £14.8m to the Group’s profit for the period between acquisition and the balance sheet date,
before deal costs incurred as detailed in section (d) of this note. Had the acquisition been completed on the first day of the financial year, the
Group’s continuing revenue would have been £2,778.4m and the Group’s continuing operating profit would have been £242.9m.
In addition, the North America division acquired 100% control of four further businesses during the period, none of which are
material individually:
Free Enterprises System, LLC – university and employee shuttle business in Chicago, IL
Total Transit Enterprises, LLC – non-emergency medical transportation and shuttle services in Phoenix and Tucson, AZ
Fox Bus Lines Inc. – charter coach services in Boston, MA
─
─
─
─ Gary L. Aisquith, Inc – school bus services in Baltimore, MD
On 11 April 2019, the Group acquired 60% of the voting shares of WeDriveU Holdings, Inc. (WeDriveU), an employee shuttle company
operating in the Silicon Valley and San Francisco area. The Group has acquired WeDriveU to drive expansion in the employee, university
In aggregate, the provisional fair values of the assets and liabilities acquired, along with adjustments to the fair values of prior year
acquisitions, were as follows:
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Deferred tax asset
Borrowings (including overdraft)
Trade and other payables
Provisions
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
Overdraft acquired in the businesses
Deferred consideration
£m
7.0
7.2
0.2
0.7
5.1
(2.7)
(5.1)
(10.2)
2.2
29.6
31.8
27.1
(1.4)
6.1
31.8
Trade and other receivables had a gross contracted value of £24.2m, and the best estimate at acquisition date of the contractual cash
flows not to be collected was £2.8m.
Goodwill of £58.5m arising from the acquisition consists of certain intangibles that cannot be separately identified and measured due to
their nature. This includes control over the acquired business, the increased scale in our North American operations and the future growth
opportunities. None of the goodwill recognised is expected to be deductible for income tax purposes.
Given the proximity of the acquisitions to the period end, and as permitted by IFRS 3 ‘Business Combinations’, the fair values of acquired
identifiable assets and liabilities have been presented on a provisional basis. The fair value adjustments will be finalised within 12 months
of the acquisition date, principally in relation to the valuation of intangible assets and provisions acquired.
Trade and other receivables had a gross contracted value of £0.9m, and the best estimate at acquisition date of the contractual cash
flows not to be collected was £0.2m.
Goodwill of £29.6m arising from the acquisitions consists of certain intangibles that cannot be separately identified and measured due to
their nature. This includes control over the acquired business and the increased scale in our North American operations, along with
synergy benefits expected to be achieved. The amount of goodwill that is expected to be deductible for income tax purposes is £12.0m.
173
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
162
19 Business combinations, disposals and assets held for sale continued
Included in the consideration shown above is contingent consideration of £4.0m relating to two of the acquisitions. For the first agreement
the Group is required to pay consideration upon pre-determined EBIT thresholds being met over a period of up to two years. For the
second agreement, the Group is required to pay consideration on renewal of a significant contract and the contingent consideration is
dependent on the renewed service levels. The payments are dependent on meeting the respective conditions, with a minimum expected
undiscounted payment of £nil and maximum expected undiscounted payment of £4.0m. Based on projections, the Group expects the
maximum amount to be paid. The amount recognised is undiscounted as the effect of discounting is not material.
The acquired businesses contributed £17.7m of revenue and £4.8m to the Group’s profit for the period between acquisition and the
balance sheet date, before deal costs incurred as detailed in section (d) of this note. Had the acquisitions been completed on the first day
of the financial year, the Group’s continuing revenue would have been £2,754.0m and the Group’s continuing operating profit would have
been £243.2m.
(b) Acquisitions – ALSA
During the year, the ALSA division acquired control of three businesses in Spain, none of which are material individually:
Semacar (60%) – a chauffeur transport business in Galicia, Spain
─
─ Gumidafe (100%) – tourist charter and other transportation services in the Canary Islands, Spain
─
AgredaBus Eocar (70%) – urban bus and other transportation services in Aragon, Spain
In aggregate, the provisional fair values of the assets and liabilities acquired were as follows:
Goodwill
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Deferred tax liabilities
Minority interests
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
Payments for cash acquired in the businesses
Deferred consideration
£m
2.3
5.2
9.4
0.3
0.6
3.6
(1.3)
(5.0)
(0.4)
(3.3)
11.4
9.9
21.3
13.2
3.6
4.5
21.3
Given the proximity of the acquisitions to the period end, and as permitted by IFRS 3 ‘Business Combinations’, the fair values of acquired
identifiable assets and liabilities have been presented on a provisional basis. The fair value adjustments will be finalised within 12 months
of the acquisition date, principally in relation to the valuation of intangible assets and provisions acquired.
Trade and other receivables had a gross contracted value of £1.5m, and the best estimate at acquisition date of the contractual cash
flows not to be collected was £0.9m.
Goodwill of £9.9m arising from the acquisition consists of certain intangibles that cannot be separately identified and measured due to
their nature. This includes control over the acquired business and the increased scale in our operations in Spain, along with synergy
benefits expected to be achieved. None of the goodwill recognised is expected to be deductible for income tax purposes.
Included in the consideration shown above is contingent consideration of £2.9m relating to one of the acquisitions. The Group is required
to pay contingent consideration on renewal of contracts, with a minimum expected undiscounted payment of £nil and maximum expected
undiscounted payment of £2.9m. Based on projections, the Group expects the maximum amount to be paid. The amount recognised is
undiscounted as the effect of discounting is not material.
174
National Express Group PLC Annual Report 2019
162
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
163
19 Business combinations, disposals and assets held for sale continued
Included in the consideration shown above is contingent consideration of £4.0m relating to two of the acquisitions. For the first agreement
the Group is required to pay consideration upon pre-determined EBIT thresholds being met over a period of up to two years. For the
second agreement, the Group is required to pay consideration on renewal of a significant contract and the contingent consideration is
dependent on the renewed service levels. The payments are dependent on meeting the respective conditions, with a minimum expected
undiscounted payment of £nil and maximum expected undiscounted payment of £4.0m. Based on projections, the Group expects the
maximum amount to be paid. The amount recognised is undiscounted as the effect of discounting is not material.
19 Business combinations, disposals and assets held for sale continued
The acquired business contributed £6.5m of revenue and £1.3m to the Group’s profit for the period between acquisition and the balance
sheet date, before deal costs incurred as detailed in section (d) of this note. Had the acquisition been completed on the first day of the
financial year, the Group’s continuing revenue would have been £2,757.4m and the Group’s continuing operating profit would have been
£242.6m.
(c) Acquisitions – UK
During the year, the UK division acquired 100% control of Accessible Transport Group.
The acquired businesses contributed £17.7m of revenue and £4.8m to the Group’s profit for the period between acquisition and the
balance sheet date, before deal costs incurred as detailed in section (d) of this note. Had the acquisitions been completed on the first day
The fair values of the assets and liabilities acquired were as follows:
of the financial year, the Group’s continuing revenue would have been £2,754.0m and the Group’s continuing operating profit would have
been £243.2m.
(b) Acquisitions – ALSA
During the year, the ALSA division acquired control of three businesses in Spain, none of which are material individually:
Semacar (60%) – a chauffeur transport business in Galicia, Spain
─ Gumidafe (100%) – tourist charter and other transportation services in the Canary Islands, Spain
AgredaBus Eocar (70%) – urban bus and other transportation services in Aragon, Spain
─
─
In aggregate, the provisional fair values of the assets and liabilities acquired were as follows:
Property, plant and equipment
Trade and other payables
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
£m
1.3
(0.9)
0.4
1.4
1.8
1.8
1.8
Goodwill
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Deferred tax liabilities
Minority interests
Net assets acquired
Goodwill
Total consideration
Represented by:
Cash consideration
Payments for cash acquired in the businesses
Deferred consideration
Given the proximity of the acquisitions to the period end, and as permitted by IFRS 3 ‘Business Combinations’, the fair values of acquired
identifiable assets and liabilities have been presented on a provisional basis. The fair value adjustments will be finalised within 12 months
of the acquisition date, principally in relation to the valuation of intangible assets and provisions acquired.
Trade and other receivables had a gross contracted value of £1.5m, and the best estimate at acquisition date of the contractual cash
flows not to be collected was £0.9m.
Goodwill of £9.9m arising from the acquisition consists of certain intangibles that cannot be separately identified and measured due to
their nature. This includes control over the acquired business and the increased scale in our operations in Spain, along with synergy
benefits expected to be achieved. None of the goodwill recognised is expected to be deductible for income tax purposes.
Included in the consideration shown above is contingent consideration of £2.9m relating to one of the acquisitions. The Group is required
to pay contingent consideration on renewal of contracts, with a minimum expected undiscounted payment of £nil and maximum expected
undiscounted payment of £2.9m. Based on projections, the Group expects the maximum amount to be paid. The amount recognised is
undiscounted as the effect of discounting is not material.
£m
2.3
5.2
9.4
0.3
0.6
3.6
(1.3)
(5.0)
(0.4)
(3.3)
11.4
9.9
21.3
13.2
3.6
4.5
21.3
Goodwill of £1.4m arising from the acquisition consists of certain intangible benefits that cannot be separately identified and measured
due to their nature. This includes control over the acquired business and synergy benefits expected to be achieved. None of the goodwill
recognised is expected to be deductible for income tax purposes.
The acquired business contributed £6.4m of revenue and £0.2m to the Group’s profit for the period between the dates of acquisition and
the balance sheet date. Had the acquisition been completed on the first day of the financial year, the Group’s continuing revenue for the
year would have been £2,750.4m and the Group’s continuing operating profit would have been £242.3m.
(d) Acquisitions – further information
Deferred consideration of £14.8m was paid in the year relating to acquisitions in North America in earlier years. Total cash outflow in the
year from acquisitions in the North America division was therefore £108.1m, comprising consideration for current year acquisitions of
£94.0m and deferred consideration of £14.8m, less cash acquired in the businesses of £0.7m.
In addition, for North America, during the year there was a reduction in the provisional fair values of businesses acquired in the prior year
of £4.8m, with a resultant increase in goodwill.
No deferred consideration was paid in the year relating to acquisitions in the ALSA division in earlier years. Total cash outflow in the year
from acquisitions in the ALSA division was therefore £13.2m, comprising consideration of £16.8m, less cash acquired in the businesses of
£3.6m.
In addition, for ALSA, during the year there was an increase in the provisional fair values of businesses acquired in the prior year of £0.8m,
with a resultant decrease in goodwill.
Total cash outflow in the year from acquisitions in the UK division was £1.8m, comprising consideration of £1.8m.
Total acquisition transaction costs of £5.7m were incurred in the year to 31 December 2019.
175
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
164
19 Business combinations, disposals and assets held for sale continued
(e) Disposals
On 24 July 2019, the Group disposed of its 100% interest in Ecolane Finland OY and Ecolane USA, Inc., providers of transit management
software programmes, in exchange for cash and an 8.8% stake in the purchaser’s holding company, Transit Technologies Holdco. The
retained investment is accounted for as a financial asset at fair value through other comprehensive income (see note 17). A gain of £8.8m
was recognised within separately disclosed items and comprises the following:
Consideration:
Cash consideration, net of transaction expenses1
Fair value of retained investment
Software intangible2
Carrying value of net assets (including goodwill)
Exchange gains recycled from currency translation reserve
Gain on disposal from continuing operations
2019
£m
17.9
7.8
4.6
30.3
(22.5)
1.0
8.8
Inclusive of contingent bonus payments
1
2 Represents discounted software services receivable over the next five years, considered to be part of the consideration received as it constitutes an asset
for asset exchange
Gross cash consideration from the disposal was £32.7m, of which £27.1m had been received at the 31 December 2019. This was offset
by transaction expenses totalling £14.8m, of which £5.4m had been settled at the 31 December 2019. Total cash inflow in the year from
the disposal was therefore £21.7m.
(f) Assets held for sale
Two buildings, in North America, met the held for sale criteria of IFRS 5 at 31 December 2019. The carrying value of the buildings at the
31 December 2019 is £4.3m. In the prior year, Ecolane Finland OY and Ecolane USA, Inc. were held for sale. Details of their disposal are
included in section (e) to this note.
20 Non-current assets – trade and other receivables
Prepayments
Other receivables
21 Inventories
Raw materials and consumables
The movement on the provision for slow moving and obsolete inventory is immaterial.
2019
£m
1.9
7.7
9.6
2019
£m
29.4
2018
£m
0.3
2.7
3.0
2018
£m
27.4
176
National Express Group PLC Annual Report 2019
164
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
165
19 Business combinations, disposals and assets held for sale continued
22 Current assets – trade and other receivables
(e) Disposals
On 24 July 2019, the Group disposed of its 100% interest in Ecolane Finland OY and Ecolane USA, Inc., providers of transit management
software programmes, in exchange for cash and an 8.8% stake in the purchaser’s holding company, Transit Technologies Holdco. The
retained investment is accounted for as a financial asset at fair value through other comprehensive income (see note 17). A gain of £8.8m
was recognised within separately disclosed items and comprises the following:
Trade receivables
Grant receivable
Contract assets
Amounts due from associates and joint ventures (note 37)
Amounts due from other related parties (note 37)
Trade and grant receivables and contract assets
Less: provision for impairment of receivables
Trade and grant receivables and contract assets – net (note 30)
Other receivables
Prepayments
Accrued income
2019
£m
221.4
23.5
102.3
3.4
0.4
351.0
(36.4)
314.6
118.5
53.4
10.3
496.8
20181
£m
189.5
38.9
86.5
3.0
0.5
318.4
(29.4)
289.0
70.7
36.7
12.2
408.6
1 Prior year comparatives were re-presented to separately present contract assets under IFRS 15
The timing of revenue recognition, billings and cash collection results in trade receivables (billed amounts), contract assets (unbilled
amounts) and customer advances and deposits (contract liabilities – note 24) on the Group’s Balance Sheet. Contract assets have
increased primarily in Germany, due to timing differences between revenue recognised on a percentage completion basis and cash
collected, and in ALSA, due to the commencement of new contracts in the year.
Trade receivables excludes £49.0m (2018: £45.0m) that was subject to factoring arrangements without recourse and for which no
customer payment had been received at year end.
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
Information about the credit risk exposure of the Group’s trade receivables is shown in note 30.
23 Cash and cash equivalents
Cash at bank and in hand
Overnight deposits
Other short-term deposits
Less: amounts included within assets classified as held for sale
Cash and cash equivalents
2019
£m
111.2
2.1
365.0
478.3
–
478.3
2018
£m
74.6
1.9
41.2
117.7
(0.2)
117.5
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the
agreed short-term floating deposit rate. The fair value of cash and cash equivalents is equal to the carrying value.
177
2 Represents discounted software services receivable over the next five years, considered to be part of the consideration received as it constitutes an asset
Gross cash consideration from the disposal was £32.7m, of which £27.1m had been received at the 31 December 2019. This was offset
by transaction expenses totalling £14.8m, of which £5.4m had been settled at the 31 December 2019. Total cash inflow in the year from
Two buildings, in North America, met the held for sale criteria of IFRS 5 at 31 December 2019. The carrying value of the buildings at the
31 December 2019 is £4.3m. In the prior year, Ecolane Finland OY and Ecolane USA, Inc. were held for sale. Details of their disposal are
20 Non-current assets – trade and other receivables
Consideration:
Cash consideration, net of transaction expenses1
Fair value of retained investment
Software intangible2
Carrying value of net assets (including goodwill)
Exchange gains recycled from currency translation reserve
Gain on disposal from continuing operations
1
Inclusive of contingent bonus payments
for asset exchange
the disposal was therefore £21.7m.
(f) Assets held for sale
included in section (e) to this note.
Prepayments
Other receivables
21 Inventories
Raw materials and consumables
2019
£m
17.9
7.8
4.6
30.3
(22.5)
1.0
8.8
2018
£m
0.3
2.7
3.0
2018
£m
27.4
2019
£m
1.9
7.7
9.6
2019
£m
29.4
The movement on the provision for slow moving and obsolete inventory is immaterial.
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
166
24 Current liabilities – trade and other payables
Trade payables
Contract liabilities
Amounts owed to associates and joint ventures (note 37)
Amounts owed to other related parties (note 37)
Other tax and social security payable
Accruals and deferred income
Other payables
2019
£m
329.7
12.9
1.3
0.6
32.2
304.4
371.8
1,052.9
20181
£m
325.3
18.4
1.0
1.6
25.8
239.6
258.8
870.5
1 Prior year comparatives were re-presented to separately present contract liabilities under IFRS 15
Trade payables are normally settled on 30 to 60 day terms and other payables have an average term of four months.
Contract liabilities represents amounts advanced by customers where the Group has not yet met the performance obligation to allow the
recognition of the balance as revenue. These mainly relate to season ticket and advance ticket sales which cross over the year end date
and are expected to be recognised as revenue in the year to 31 December 2020.
Other payables includes £263.3m (2018: £160.3m) for the purchase of property, plant and equipment. The Group settles these amounts in
accordance with the supplier standard payment terms, typically one year.
Other payables also includes deferred fixed asset grants from government or other public bodies of £1.1m (2018: £0.5m), advance
payments for factoring of divisional revenues of £58.1m (2018: £43.7m) and £36.1m (2018: £45.9m) of deferred consideration for
businesses acquired, of which £0.9m (2018: £8.5m) relates to businesses acquired in the year (note 19).
25 Other non-current liabilities
Deferred fixed asset grants
Other payables
Put liability
2019
£m
33.9
33.6
96.8
164.3
2018
£m
3.2
22.0
–
25.2
The put liability has been derived from an internal valuation, using forecast earnings over the exercise period, discounted at a rate of 2.1%
and assuming that the option is exercised in full in the third year following the date of acquisition (Y1 – 0%; Y2 – 0%; Y3 – 40%). The
table below shows on an indicative basis the Income Statement and Balance Sheet sensitivity of the put liability to reasonably possible
changes in key assumptions. The sensitivity analysis below is based on a change in assumption while holding all other assumptions
constant.
Increase/(decrease) in put liability and loss/(gain) in Income Statement
10% increase in EBITDA
10% decrease in EBITDA
0.5% increase in discount rate
0.5% decrease in discount rate
Timing of exercise (Y1 – 10%; Y2 – 0%; Y3 – 30%)
Timing of exercise (Y1 – 0%; Y2 – 20%; Y3 – 20%)
Details of the acquisition of WeDriveU are provided in note 19.
2019
£m
12.8
(12.4)
(0.9)
1.1
(6.3)
(8.2)
Other payables includes £12.9m (2018: £21.2m) of deferred consideration for businesses acquired, of which £9.7m (2018: £18.3m) relates
to businesses acquired in the year (note 19).
178
National Express Group PLC Annual Report 2019
166
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
167
24 Current liabilities – trade and other payables
Trade payables
Contract liabilities
Amounts owed to associates and joint ventures (note 37)
Amounts owed to other related parties (note 37)
Other tax and social security payable
Accruals and deferred income
Other payables
1 Prior year comparatives were re-presented to separately present contract liabilities under IFRS 15
Trade payables are normally settled on 30 to 60 day terms and other payables have an average term of four months.
Contract liabilities represents amounts advanced by customers where the Group has not yet met the performance obligation to allow the
recognition of the balance as revenue. These mainly relate to season ticket and advance ticket sales which cross over the year end date
and are expected to be recognised as revenue in the year to 31 December 2020.
Other payables includes £263.3m (2018: £160.3m) for the purchase of property, plant and equipment. The Group settles these amounts in
accordance with the supplier standard payment terms, typically one year.
Other payables also includes deferred fixed asset grants from government or other public bodies of £1.1m (2018: £0.5m), advance
payments for factoring of divisional revenues of £58.1m (2018: £43.7m) and £36.1m (2018: £45.9m) of deferred consideration for
businesses acquired, of which £0.9m (2018: £8.5m) relates to businesses acquired in the year (note 19).
The put liability has been derived from an internal valuation, using forecast earnings over the exercise period, discounted at a rate of 2.1%
and assuming that the option is exercised in full in the third year following the date of acquisition (Y1 – 0%; Y2 – 0%; Y3 – 40%). The
table below shows on an indicative basis the Income Statement and Balance Sheet sensitivity of the put liability to reasonably possible
changes in key assumptions. The sensitivity analysis below is based on a change in assumption while holding all other assumptions
constant.
25 Other non-current liabilities
Deferred fixed asset grants
Other payables
Put liability
Increase/(decrease) in put liability and loss/(gain) in Income Statement
10% increase in EBITDA
10% decrease in EBITDA
0.5% increase in discount rate
0.5% decrease in discount rate
Timing of exercise (Y1 – 10%; Y2 – 0%; Y3 – 30%)
Timing of exercise (Y1 – 0%; Y2 – 20%; Y3 – 20%)
Details of the acquisition of WeDriveU are provided in note 19.
2019
£m
329.7
12.9
1.3
0.6
32.2
304.4
371.8
1,052.9
20181
£m
325.3
18.4
1.0
1.6
25.8
239.6
258.8
870.5
2019
£m
33.9
33.6
96.8
164.3
2018
£m
3.2
22.0
–
25.2
2019
£m
12.8
(12.4)
(0.9)
1.1
(6.3)
(8.2)
26 Provisions
At 1 January 2019
Charged to the Income Statement
Utilised in the year
Unwinding of discount
Acquired in business combinations
Exchange difference
At 31 December 2019
Current 31 December 2019
Non-current 31 December 2019
Current 31 December 2018
Non-current 31 December 2018
Claims
provision
£m
95.6
33.7
(51.5)
1.2
18.2
(3.5)
93.7
52.9
40.8
93.7
49.2
46.4
95.6
Other
£m
12.3
(1.4)
(0.1)
–
–
(0.4)
10.4
8.1
2.3
10.4
9.5
2.8
12.3
The claims provision arises from estimated exposures at the year end for auto and general liability, workers’ compensation and
environmental claims, the majority of which will be utilised in the next five years. It comprises provisions for claims arising in the
UK and North America.
Other primarily relates to a potential reclaim of subsidies in ALSA, all of which is expected to be utilised within the next 12 months.
When the effect is material, the provisions are discounted to their net present value.
27 Deferred tax
At 1 January
Change in accounting policies1 & 2
At 1 January (restated)
Charge to the Income Statement
(Charge)/credit to Other Comprehensive Income or Equity
Exchange differences
Acquired in business combinations
Less: amounts reclassified as held for sale
Net deferred tax liability at 31 December
2019
£m
(20.3)
2.9
(17.4)
(17.6)
(6.3)
4.2
12.5
(24.6)
–
(24.6)
Total
£m
107.9
32.3
(51.6)
1.2
18.2
(3.9)
104.1
61.0
43.1
104.1
58.7
49.2
107.9
2018
£m
(18.6)
9.8
(8.8)
(18.5)
5.6
(0.9)
(0.3)
(22.9)
2.6
(20.3)
1 Opening balances in 2019 have been restated for the adoption of IFRS 16 ‘Leases’ (see note 2)
2 Opening balances in 2018 were restated for the adoption of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’
Based on current capital investment plans, the Group expects to be able to claim capital allowances in excess of depreciation in future
years at a similar level to the current year.
Other payables includes £12.9m (2018: £21.2m) of deferred consideration for businesses acquired, of which £9.7m (2018: £18.3m) relates
to businesses acquired in the year (note 19).
Deferred tax assets
Accelerated tax depreciation
Losses carried forward
Pensions
Other short-term temporary differences
1 Prior year balances were re-presented to correctly reflect the nature of the deferred tax asset
2019
£m
(89.4)
126.4
14.6
(19.8)
31.8
20181
£m
(1.3)
33.5
19.5
(9.0)
42.7
179
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
168
27 Deferred tax continued
Deferred tax liabilities
Accelerated tax depreciation
Losses carried forward
Intangibles and deductible goodwill
Taxation credits
Other short-term temporary differences
Less: amounts included within liabilities classified as held for sale
2019
£m
(143.5)
3.9
46.3
1.6
35.3
(56.4)
–
(56.4)
20181
£m
(212.4)
60.0
47.1
1.8
37.9
(65.6)
2.6
(63.0)
1 Prior year balances were re-presented to correctly reflect the nature of the deferred tax liability
Deferred tax assets and liabilities within the same jurisdiction have been offset, with deferred tax assets of £31.8m arising in our UK, US
and German businesses and deferred tax liabilities of £56.4m arising in our Spanish and Canadian businesses.
The deferred tax assets relating to losses carried forward are £130.3m (2018: £93.5m). This comprises £126.4m (2018: £33.5m) within
deferred tax assets and £3.9m (2018: £60.0m) within deferred tax liabilities. At the 31 December 2019, the analysis of deferred tax assets
includes the US business, however in the prior year, the US business had a net deferred tax liability which was included within the
analysis of deferred tax liabilities.
The Group has recognised deferred tax assets across the UK, US, Spanish and German businesses amounting to £228.1m
(2018: £202.4m) that are considered to be able to be offset against the Group’s future taxable profits. Management has based its
assessment on the latest forecast budget approved by the Board which reflects improved trading performance across all divisions largely
due to the expansion of the business.
28 Borrowings and derivative financial liabilities
Non-current
Bank loans
Bonds
Lease obligations
Other debt payable
Non-current borrowings
Fuel derivatives
Cross currency swaps
Non-current derivative financial instruments
Non-current borrowings and derivative financial liabilities
Current
Bank loans
Bonds
Lease obligations
Accrued interest on borrowings
Current borrowings
Fuel derivatives
Interest rate derivatives
Foreign exchange derivatives
Current derivative financial instruments
Current borrowings and derivative financial liabilities
2019
£m
82.1
644.8
309.7
68.3
2018
£m
8.6
852.4
94.6
73.7
1,104.9
1,029.3
3.1
6.5
9.6
8.2
4.4
12.6
1,114.5
1,041.9
105.1
437.1
97.8
12.8
652.8
2.3
3.7
31.8
37.8
690.6
0.4
–
48.0
10.9
59.3
6.4
–
10.5
16.9
76.2
An analysis of interest-bearing loans and borrowings is provided in note 29. Further information on derivative financial instruments
is provided in note 31.
180
National Express Group PLC Annual Report 2019
169
Effective
interest rate
6.85%
2.54%
–
168
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
29 Interest-bearing borrowings
The effective interest rates on loans and borrowings at the balance sheet date were as follows:
–
2018
£m
227.9
Maturity
June 2020
400.3 November 2023
May 2020
EURIBOR + 0.40%
–
–
2019-2024
EURIBOR + 0.90%
2019-2023
4.66%-4.85%
2019-2024
2019-2023
3.23%
3.02%
2019-2022
EURIBOR + 1.10%
2019-2024
2.71%
August 2021
4.55%
1 Prior year balances were re-presented to correctly reflect the nature of the deferred tax liability
Deferred tax assets and liabilities within the same jurisdiction have been offset, with deferred tax assets of £31.8m arising in our UK, US
and German businesses and deferred tax liabilities of £56.4m arising in our Spanish and Canadian businesses.
The deferred tax assets relating to losses carried forward are £130.3m (2018: £93.5m). This comprises £126.4m (2018: £33.5m) within
deferred tax assets and £3.9m (2018: £60.0m) within deferred tax liabilities. At the 31 December 2019, the analysis of deferred tax assets
includes the US business, however in the prior year, the US business had a net deferred tax liability which was included within the
analysis of deferred tax liabilities.
The Group has recognised deferred tax assets across the UK, US, Spanish and German businesses amounting to £228.1m
(2018: £202.4m) that are considered to be able to be offset against the Group’s future taxable profits. Management has based its
assessment on the latest forecast budget approved by the Board which reflects improved trading performance across all divisions largely
due to the expansion of the business.
28 Borrowings and derivative financial liabilities
10-year Sterling bond
7-year Sterling bond
9-year Sterling bond
2.5-year Euro floating rate note
Bonds
Short-term bank loans
European bank loans
Moroccan bank loans
Bank loans
US Dollar leases at fixed rate
European leases at fixed rate
European leases at floating rate
Sterling leases at fixed rate
Leases
Euro Private Placement
Other debt payable
Accrued interest – Bonds
Accrued interest – Private Placement
Accrued interest – Bank loans
Accrued interest on borrowings
Total
2019
£m
Maturity
225.8
June 2020
400.2 November 2023
244.6 November 2028
Effective
interest rate
6.85%
2.54%
2.38%
May 2020
EURIBOR + 0.4%
2020-2021
Various
2022
EURIBOR + 0.90%
2020-2022
1.40%-4.66%
2020-2035
2020-2025
2020-2025
2020-2037
August 2021
3.94%
1.52%
EURIBOR + 1.00%
3.12%
4.55%
211.3
1,081.9
175.4
2.5
9.3
187.2
232.7
30.9
33.7
110.2
407.5
68.3
68.3
11.4
1.2
0.2
12.8
1,757.7
27 Deferred tax continued
Deferred tax liabilities
Accelerated tax depreciation
Losses carried forward
Intangibles and deductible goodwill
Taxation credits
Other short-term temporary differences
Less: amounts included within liabilities classified as held for sale
Non-current
Bank loans
Bonds
Lease obligations
Other debt payable
Non-current borrowings
Fuel derivatives
Cross currency swaps
Current
Bank loans
Bonds
Lease obligations
Accrued interest on borrowings
Current borrowings
Fuel derivatives
Interest rate derivatives
Foreign exchange derivatives
Current derivative financial instruments
Current borrowings and derivative financial liabilities
2019
£m
(143.5)
3.9
46.3
1.6
35.3
(56.4)
–
(56.4)
20181
£m
(212.4)
60.0
47.1
1.8
37.9
(65.6)
2.6
(63.0)
2019
£m
82.1
644.8
309.7
68.3
3.1
6.5
9.6
105.1
437.1
97.8
12.8
652.8
2.3
3.7
31.8
37.8
690.6
2018
£m
8.6
852.4
94.6
73.7
8.2
4.4
12.6
0.4
–
48.0
10.9
59.3
6.4
–
10.5
16.9
76.2
Non-current derivative financial instruments
Non-current borrowings and derivative financial liabilities
1,114.5
1,041.9
The Group is subject to a number of financial covenants in relation to its syndicated credit facilities which, if contravened, could result
in its borrowings under those facilities becoming immediately repayable. These covenants specify maximum net debt to EBITDA and
minimum EBITDA to net interest payable.
The Group currently has £557.0m of unsecured committed revolving credit facilities, which mature between 2020 and 2023. At 31
December 2019, there was £nil (2018: £nil) drawn down on the facilities, with £2.7m of capitalised deal fees remaining, which are
classified within other receivables.
In October 2019, the Group issued a series of private placements totalling £414m denominated in USD, Sterling and Euros with maturities
ranging from 2027 to 2032 with an effective interest rate of 1.92%, to be drawn from May 2020.
1,104.9
1,029.3
Details of the Group’s interest rate risk management strategy and associated interest rate derivatives are included in notes 30 and 31.
An analysis of interest-bearing loans and borrowings is provided in note 29. Further information on derivative financial instruments
is provided in note 31.
The following table sets out the carrying amount, by maturity, of the Group’s interest-bearing borrowings and deposits:
As at 31 December 2019
< 1 year
£m
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
> 5 years
£m
Fixed rate
Bank loans
Bonds
Finance leases
Other debt payable
Floating rate
Cash assets
Other debt receivables
Bank loans
Bonds
Finance leases
(5.1)
(225.8)
(86.2)
–
478.3
2.4
(100.0)
(211.3)
(11.6)
(2.2)
–
(64.0)
(68.3)
–
–
(75.4)
–
(9.7)
(0.1)
–
(52.3)
–
–
–
(2.5)
–
(5.4)
(1.8)
(400.2)
(41.6)
(0.1)
–
(37.8)
–
(244.6)
(91.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.5)
(1.7)
(1.8)
Total
£m
(9.3)
(870.6)
(373.8)
(68.3)
478.3
2.4
(177.9)
(211.3)
(33.7)
181
–
224.2
852.4
–
2.8
6.2
9.0
119.9
9.1
9.0
4.6
142.6
73.7
73.7
9.7
1.2
–
10.9
1,088.6
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
170
29 Interest-bearing borrowings continued
As at 31 December 2018
< 1 year
£m
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
> 5 years
£m
Fixed rate
Bank loans
Bonds
Finance leases
Other debt payable
Floating rate
Cash assets
Other debt receivables
Bank loans
Bonds
Finance leases
(0.1)
–
(45.2)
–
117.7
2.1
(0.3)
–
(2.8)
(2.1)
(227.9)
(30.3)
–
–
–
–
(224.2)
(2.2)
–
–
(20.0)
(73.7)
–
–
(2.4)
–
(1.6)
(1.8)
–
(19.1)
(2.2)
(400.3)
(12.2)
–
–
–
–
–
–
–
–
–
–
(1.2)
(0.8)
–
–
(6.8)
–
–
–
(0.1)
–
(0.4)
Total
£m
(6.2)
(628.2)
(133.6)
(73.7)
117.7
2.1
(2.8)
(224.2)
(9.0)
30 Financial risk management objectives and policies
Financial risk factors and management
The Group is exposed to risks relating to fuel prices, foreign currency exchange rates, interest rates and the availability of funding at
reasonable margins. The Group has in place a risk management programme that seeks to manage the impact of these risks on the
financial performance of the Group by using financial instruments including borrowings, committed facilities and forward foreign
exchange, fuel and interest rate derivatives.
The Board of Directors has delegated the responsibility for implementing the financial risk management policies laid down by the Board
to the Group Finance Director and the Group Treasurer. The policies are implemented by the Group Treasury department with regular
reporting to the Group Finance Director and the Audit Committee on its activities.
Foreign currency
The Group has major foreign operations in the USA, Canada, Spain and Morocco and as a result is exposed to the movements in foreign
currency exchange rates on the translation of these foreign currency denominated net assets.
The Group seeks to reduce this foreign currency exchange movement risk by using a combination of foreign currency borrowings and
entering into derivative financial instruments such as cross currency interest rate swaps and foreign exchange forward contracts.
At the year end, the Group had outstanding foreign exchange derivatives for net investment purposes of USD 492.2m and CAD 46.2m,
and cross currency interest rate swaps of €222.7m. These foreign exchange forward contracts and cross currency interest rate swaps are
derivative financial instruments designated as net investment hedges of foreign currency assets. The effective portion of the gain or loss
on the hedge is recognised in the Group Statement of Comprehensive Income and recycled to the Income Statement at the same time as
the underlying hedged net assets affect the Income Statement. Any material ineffectiveness is taken to the Income Statement.
The Group expects changes in value of both the hedging instrument and the hedged net investment to offset and systematically move in
opposite directions and that there will be a 1:1 hedge ratio, given that the critical terms are closely aligned.
The Group applies the ‘forward rate method’ under IFRS 9 such that the effective portion of changes in fair value of forward points are
retained in other comprehensive income. The currency basis is excluded from the hedging instrument, and the actual currency basis on
inception of the trade is treated as the ‘cost of hedging’ and recognised in profit or loss over the life of the hedging relationship on a
straight-line basis. Any changes in the currency basis since inception will be deferred into a separate component of other comprehensive
income.
In these hedge relationships, the main source of ineffectiveness is movements in the Group’s or the derivative counterparty’s credit
spread resulting in fair value movements in the hedging instrument that are not reflected in the fair value movements of the hedged net
investment.
182
National Express Group PLC Annual Report 2019
170
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
171
29 Interest-bearing borrowings continued
As at 31 December 2018
< 1 year
1-2 years
2-3 years
3-4 years
4-5 years
> 5 years
£m
£m
£m
£m
£m
£m
Fixed rate
Bank loans
Bonds
Finance leases
Other debt payable
Floating rate
Cash assets
Other debt receivables
Bank loans
Bonds
Finance leases
(0.1)
(45.2)
–
–
117.7
2.1
(0.3)
–
(2.8)
(2.1)
(227.9)
(30.3)
–
–
–
–
(224.2)
(2.2)
(20.0)
(73.7)
–
–
–
–
–
(2.4)
(1.6)
(1.8)
(19.1)
–
–
–
–
–
–
(2.2)
(400.3)
(12.2)
–
–
–
–
–
(1.2)
(0.8)
(6.8)
–
–
–
–
–
–
(0.1)
(0.4)
Total
£m
(6.2)
(628.2)
(133.6)
(73.7)
117.7
2.1
(2.8)
(224.2)
(9.0)
30 Financial risk management objectives and policies
Financial risk factors and management
The Group is exposed to risks relating to fuel prices, foreign currency exchange rates, interest rates and the availability of funding at
reasonable margins. The Group has in place a risk management programme that seeks to manage the impact of these risks on the
financial performance of the Group by using financial instruments including borrowings, committed facilities and forward foreign
exchange, fuel and interest rate derivatives.
The Board of Directors has delegated the responsibility for implementing the financial risk management policies laid down by the Board
to the Group Finance Director and the Group Treasurer. The policies are implemented by the Group Treasury department with regular
reporting to the Group Finance Director and the Audit Committee on its activities.
Foreign currency
The Group has major foreign operations in the USA, Canada, Spain and Morocco and as a result is exposed to the movements in foreign
currency exchange rates on the translation of these foreign currency denominated net assets.
The Group seeks to reduce this foreign currency exchange movement risk by using a combination of foreign currency borrowings and
entering into derivative financial instruments such as cross currency interest rate swaps and foreign exchange forward contracts.
At the year end, the Group had outstanding foreign exchange derivatives for net investment purposes of USD 492.2m and CAD 46.2m,
and cross currency interest rate swaps of €222.7m. These foreign exchange forward contracts and cross currency interest rate swaps are
derivative financial instruments designated as net investment hedges of foreign currency assets. The effective portion of the gain or loss
on the hedge is recognised in the Group Statement of Comprehensive Income and recycled to the Income Statement at the same time as
the underlying hedged net assets affect the Income Statement. Any material ineffectiveness is taken to the Income Statement.
The Group expects changes in value of both the hedging instrument and the hedged net investment to offset and systematically move in
opposite directions and that there will be a 1:1 hedge ratio, given that the critical terms are closely aligned.
The Group applies the ‘forward rate method’ under IFRS 9 such that the effective portion of changes in fair value of forward points are
retained in other comprehensive income. The currency basis is excluded from the hedging instrument, and the actual currency basis on
inception of the trade is treated as the ‘cost of hedging’ and recognised in profit or loss over the life of the hedging relationship on a
straight-line basis. Any changes in the currency basis since inception will be deferred into a separate component of other comprehensive
In these hedge relationships, the main source of ineffectiveness is movements in the Group’s or the derivative counterparty’s credit
spread resulting in fair value movements in the hedging instrument that are not reflected in the fair value movements of the hedged net
income.
investment.
30 Financial risk management objectives and policies continued
The table below demonstrates the sensitivity of the Group’s financial instruments to a reasonably possible change in foreign exchange
rates, with all other variables held constant. This would affect the Group’s profit before tax and translation reserve. The effect on the
translation reserve represents the movement in the translated value of the foreign currency denominated loans and change in fair value
of the derivative contracts. These movements would be offset by an opposite movement in the translated value of the related portion of
the Group’s overseas net investments. It is estimated that a 10% change in the corresponding exchange rates would result in an
exchange gain or loss in the translation reserve of £41.2m.
As at 31 December
US Dollar
Euro
Canadian Dollar
US Dollar
Euro
Canadian Dollar
Strengthening/
(weakening)
in currency
Effect
on profit
before tax
£m
2019
Effect on
translation
reserve
£m
Effect
on profit
before tax
£m
2018
Effect on
translation
reserve
£m
10%
10%
10%
(10)%
(10)%
(10)%
–
–
–
–
–
–
(33.7)
(5.1)
(2.4)
33.7
5.1
2.4
–
–
–
–
–
–
(14.1)
(39.4)
(3.0)
14.1
39.4
3.0
Interest rate risk
The Group is exposed to movements in interest rates on both interest-bearing assets and liabilities. It is the Group’s policy to maintain an
appropriate balance between fixed and floating interest rates on borrowings in order to provide a level of certainty to interest expense in
the short term and to reduce the year-on-year impact of interest rate fluctuations over the medium term. To achieve the desired
fixed:floating ratio, the Group has entered into a series of interest rate swaps that have the effect of converting fixed rate debt to floating
rate debt. The net effect of these transactions was that as at 31 December 2019, the proportion of the Group’s gross debt at floating rates
was 24% (2018: 37%).
The Group expects changes in value of both the hedging instrument and the hedged transaction to offset and systematically move in
opposite directions and that there will be a 1:1 hedge ratio, given that the critical terms are closely aligned.
In these hedge relationships, the main sources of ineffectiveness are:
─ movement in the Group’s and the derivative counterparty’s credit spread, resulting in fair value movements in the hedging instrument
that are not reflected in fair value movements in the hedged transaction; and
any changes in the critical terms of the hedged transaction such that they no longer match those of the hedging instrument.
─
The table below demonstrates the sensitivity of the Group’s financial instruments to a reasonably possible change in interest rates, with all
other variables held constant, on the Group’s profit before tax and on the Group’s hedging reserve.
The sensitivity analysis covers all floating rate financial instruments, including the interest rate swaps. If the interest rates applicable
to floating rate instruments were increased by 100 basis points it is estimated that the Group’s profit before taxation would decrease by
approximately £0.7m relating to Sterling, £2.2m relating to the US Dollar and £1.4m relating to the Euro. The analysis assumes that the
amount and mix of floating rate debt, including finance leases, remains unchanged from that in place at 31 December 2019.
As at 31 December
Sterling
US Dollar
Euro
Sterling
US Dollar
Euro
Increase/
(decrease)
in basis
points
Effect
on profit
before tax
£m
2019
Effect on
reserves
£m
Effect
on profit
before tax
£m
2018
Effect on
reserves
£m
100
100
100
(100)
(100)
(100)
(0.7)
(2.2)
(1.4)
0.7
2.2
1.4
–
–
–
–
–
–
(0.5)
0.3
(2.8)
0.5
(0.3)
2.8
–
–
–
–
–
–
183
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
172
30 Financial risk management objectives and policies continued
Commodity prices
The Group is exposed to movements in commodity prices as a result of its fuel usage. It is the Group’s policy to hedge this exposure in
order to provide a level of certainty as to its cost in the short term and to reduce the year-on-year impact of price fluctuations over the
medium term. This is achieved by entering into fuel derivatives. At 31 December 2019, the Group had hedged approximately 100% of its
2020 expected usage, 60% of its expected usage in 2021 and 7% of its expected usage in 2022.
Fuel derivatives are designated as cash flow hedges, with the effective portion of changes in fair value of the hedging instrument being
recorded within a separate component of equity, and recycled to the Income Statement as the hedged item impacts the Income Statement.
Risk component hedging has been adopted under IFRS 9, such that the hedged price risk component of the purchased fuel matches that
of the underlying derivative commodity. The hedged risk component, being the commodity index of each location where fuel is
purchased, is considered to be separately identifiable and reliably measurable. The use of commodity derivatives to hedge the fuel
exposure is expected to result in a 1:1 hedge ratio as the notional value of the hedging instrument is consistent with the designated
amount of the underlying exposure.
In these hedge relationships, the main source of ineffectiveness is changes in the actual settlement date and/or settlement amount.
The table below demonstrates the effect of a reasonably possible variation in fuel prices, with all other variables held constant, on the fair
value of the Group’s financial instruments and accordingly on the Group’s profit before tax and the Group’s hedging reserve.
The sensitivity analysis includes all fuel derivatives. The effect on the hedging reserve arises through movements on the fair value of the
Group’s fuel derivatives. For these derivative contracts the sensitivity of the net fair value to an immediate 10% increase or decrease
in all prices would have been £13.5m at 31 December 2019. The figure does not include any corresponding economic advantage
or disadvantage that would arise from the natural business exposure which would be expected to offset the gain or loss on
the derivatives.
As at 31 December
Sterling denominated diesel
US Dollar denominated diesel
US Dollar denominated gasoline
Euro denominated diesel
Sterling denominated diesel
US Dollar denominated diesel
US Dollar denominated gasoline
Euro denominated diesel
Increase/
(decrease)
in price
Effect
on profit
before tax
£m
2019
Effect on
hedging
reserve
£m
Effect
on profit
before tax
£m
2018
Effect on
hedging
reserve
£m
10%
10%
10%
10%
(10)%
(10)%
(10)%
(10)%
–
–
–
–
–
–
–
–
4.4
2.4
1.5
5.2
(4.4)
(2.4)
(1.5)
(5.2)
–
–
–
–
–
–
–
–
5.2
2.8
1.6
5.3
(5.2)
(2.8)
(1.6)
(5.3)
Credit risk
(i) Risk management
The maximum credit risk exposure of the Group is the gross carrying value of each of its financial assets which comprises trade and other
receivables of £421.6m (2018: £345.6m), cash and cash equivalents of £478.3m (2018: £117.5m), finance lease receivables of £5.0m
(2018: £nil), investments of £14.2m (2018: £6.7m) and derivative financial instruments of £55.2m (2018: £16.1m).
Credit risk is primarily attributable to trade receivables and is mitigated by a number of factors. Many of the Group’s principal customers,
suppliers and financial institutions with which it conducts business are local public (or quasi-public) bodies, including school boards in
North America, municipal authorities in Spain and Morocco and the West Midlands Combined Authority in the UK, and regional authorities
in Germany. The Group does not consider these counterparties to pose a significant credit risk. Outside of this, the Group does not
consider it has significant concentrations of credit risk. The Group has implemented policies that require appropriate credit checks on
potential customers before sales commence.
Cash and cash equivalents and derivative financial instruments are held with counterparties with a minimum of BBB- credit rating
assigned by international credit rating agencies. The Group Treasury Committee continually assesses the credit risk of each counterparty,
including monitoring credit ratings and tier 1 capital of each counterparty. Additionally, Group policy allows a maximum exposure of
£75.0m per counterparty.
184
National Express Group PLC Annual Report 2019
172
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
173
30 Financial risk management objectives and policies continued
Commodity prices
The Group is exposed to movements in commodity prices as a result of its fuel usage. It is the Group’s policy to hedge this exposure in
order to provide a level of certainty as to its cost in the short term and to reduce the year-on-year impact of price fluctuations over the
medium term. This is achieved by entering into fuel derivatives. At 31 December 2019, the Group had hedged approximately 100% of its
2020 expected usage, 60% of its expected usage in 2021 and 7% of its expected usage in 2022.
Fuel derivatives are designated as cash flow hedges, with the effective portion of changes in fair value of the hedging instrument being
recorded within a separate component of equity, and recycled to the Income Statement as the hedged item impacts the Income Statement.
Risk component hedging has been adopted under IFRS 9, such that the hedged price risk component of the purchased fuel matches that
of the underlying derivative commodity. The hedged risk component, being the commodity index of each location where fuel is
purchased, is considered to be separately identifiable and reliably measurable. The use of commodity derivatives to hedge the fuel
exposure is expected to result in a 1:1 hedge ratio as the notional value of the hedging instrument is consistent with the designated
amount of the underlying exposure.
In these hedge relationships, the main source of ineffectiveness is changes in the actual settlement date and/or settlement amount.
The table below demonstrates the effect of a reasonably possible variation in fuel prices, with all other variables held constant, on the fair
value of the Group’s financial instruments and accordingly on the Group’s profit before tax and the Group’s hedging reserve.
The sensitivity analysis includes all fuel derivatives. The effect on the hedging reserve arises through movements on the fair value of the
Group’s fuel derivatives. For these derivative contracts the sensitivity of the net fair value to an immediate 10% increase or decrease
in all prices would have been £13.5m at 31 December 2019. The figure does not include any corresponding economic advantage
or disadvantage that would arise from the natural business exposure which would be expected to offset the gain or loss on
the derivatives.
Increase/
(decrease)
in price
Effect
on profit
before tax
£m
2019
Effect on
hedging
reserve
Effect
on profit
before tax
£m
2018
Effect on
hedging
reserve
10%
10%
10%
10%
(10)%
(10)%
(10)%
(10)%
–
–
–
–
–
–
–
–
£m
4.4
2.4
1.5
5.2
(4.4)
(2.4)
(1.5)
(5.2)
–
–
–
–
–
–
–
–
£m
5.2
2.8
1.6
5.3
(5.2)
(2.8)
(1.6)
(5.3)
As at 31 December
Sterling denominated diesel
US Dollar denominated diesel
US Dollar denominated gasoline
Euro denominated diesel
Sterling denominated diesel
US Dollar denominated diesel
US Dollar denominated gasoline
Euro denominated diesel
Credit risk
(i) Risk management
The maximum credit risk exposure of the Group is the gross carrying value of each of its financial assets which comprises trade and other
receivables of £421.6m (2018: £345.6m), cash and cash equivalents of £478.3m (2018: £117.5m), finance lease receivables of £5.0m
(2018: £nil), investments of £14.2m (2018: £6.7m) and derivative financial instruments of £55.2m (2018: £16.1m).
Credit risk is primarily attributable to trade receivables and is mitigated by a number of factors. Many of the Group’s principal customers,
suppliers and financial institutions with which it conducts business are local public (or quasi-public) bodies, including school boards in
North America, municipal authorities in Spain and Morocco and the West Midlands Combined Authority in the UK, and regional authorities
in Germany. The Group does not consider these counterparties to pose a significant credit risk. Outside of this, the Group does not
consider it has significant concentrations of credit risk. The Group has implemented policies that require appropriate credit checks on
potential customers before sales commence.
Cash and cash equivalents and derivative financial instruments are held with counterparties with a minimum of BBB- credit rating
assigned by international credit rating agencies. The Group Treasury Committee continually assesses the credit risk of each counterparty,
including monitoring credit ratings and tier 1 capital of each counterparty. Additionally, Group policy allows a maximum exposure of
£75.0m per counterparty.
30 Financial risk management objectives and policies continued
(ii) Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses for all trade receivables at each reporting date.
Provision matrices are used to measure expected losses. The provision rates are based on days past due for groupings of various
customer segments with similar loss patterns, such as geographical region, service type, and customer type and rating. The calculation
reflects the probability-weighted outcome and reasonable and supportable information that is available at the reporting date about past
events, current conditions and forecasts of future economic conditions. The characteristics used to determine the groupings of customer
segments are those that have the greatest impact on the likelihood of default. Given the diversity of characteristics of different customer
segments, the Group applies different definitions of default for different groups of customers. The risk of default increases once the
receivable is past due and increases in 30 day increments.
The table below shows the credit risk exposure on the Group’s trade receivables as at 31 December 2019:
31 December 2019
Expected loss rate
Gross carrying amount – trade and grant receivables and
contract assets
Loss allowance
31 December 20181
Expected loss rate
Gross carrying amount – trade and grant receivables and
contract assets
Loss allowance
Days past due
Carrying
amount
£m
Current
£m
Less than
30 days
£m
Between 30
and 60 days
£m
Between
61 and 90
days
£m
Over 90 days
£m
10.4%
0.7%
3.5%
4.2%
14.5%
47.5%
351.0
36.4
226.5
1.6
39.6
1.4
9.6
0.4
8.3
1.2
67.0
31.8
Carrying
amount
£m
9.2%
318.4
29.4
Current
£m
0.8%
175.2
1.4
Days past due
Less than
30 days
£m
Between 30
and 60 days
£m
Between
61 and 90
days
£m
Over 90 days
£m
3.6%
3.7%
9.6%
27.4%
25.2
0.9
13.6
0.5
11.5
1.1
92.9
25.5
1
Prior year comparatives were re-presented to include IFRS 15 contract assets, consistent with the presentation in note 22
Trade receivables over 90 days primarily comprises amounts due from public authorities in ALSA, along with receivables for school bus
services in North America where amounts are settled on approval from the local governing bodies at the end of the school period. A loss
provision of £31.8m (2018: £25.5m) is in place against these receivables. Given that these are predominantly ongoing contractual
relationships and with public bodies, the Directors believe that the remaining amounts will be collected.
The closing loss allowance for trade receivables as at 31 December 2019 reconciles to the opening loss allowance as follows:
At 31 December
Amounts restated through opening retained earnings for IFRS 91
Opening loss allowance as at 1 January
Increase in loss allowance recognised in Income Statement during the year
Utilised in the year
Arising on acquisitions
Exchange difference
At 31 December
2019
£m
(29.4)
–
(29.4)
(8.1)
3.4
(3.9)
1.6
2018
£m
(13.5)
(16.7)
(30.2)
(3.0)
4.8
(0.6)
(0.4)
(36.4)
(29.4)
1 Opening balances in 2018 were restated for the adoption of IFRS 9 ‘Financial Instruments’
Trade receivables are written off when there is no reasonable expectation of recovery.
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts
previously written off are credited against the same item.
185
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
174
30 Financial risk management objectives and policies continued
Impairment provisions in respect of cash and cash equivalents are also subject to the requirements of IFRS 9. As our cash and cash
equivalents are held with counterparties with a minimum of BBB- credit rating, no impairment loss was identified at the reporting date.
Liquidity risk
Liquidity risk is the risk that the Group, although solvent, will have difficulty in meeting its obligations associated with its financial liabilities
as they fall due.
Funding for the Group is coordinated centrally by the treasury function and comprises committed bilateral facilities with a syndicate of banks,
and a series of medium-term notes. The level of facilities is maintained such that facilities and term loans exceed the forecast peak gross debt
of the Group over a rolling 12-month view, with minimum headroom maintained, taking into account market conditions and corporate activity,
including acquisitions and organic growth plans. The minimum funding headroom assumes that factoring facilities are not available.
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2019 based on the contractual
undiscounted cash flows including interest cash flows. As such, the amounts in this table will not agree to the carrying amounts disclosed
in the Balance Sheet or other notes. The table includes cash flows associated with derivative hedging instruments. Their amounts reflect
the maturity profile of the fair value liability where the instrument will be settled net, and the gross settlement amount where the pay leg
of a derivative will be settled separately to the receive leg.
Year ended 31 December 2019
Bank loans
Bonds
Lease liabilities
Other debt payable
Trade and other payables
Foreign exchange derivatives
Cross currency interest rate swaps
Interest rate derivatives
Fuel derivatives
Year ended 31 December 2018
Bank loans
Bonds
Lease liabilities
Other debt payable
Trade and other payables
Foreign exchange derivatives
Cross currency interest rate swaps
Fuel derivatives
< 1 year
£m
1-5 years
£m
> 5 years
£m
108.4
466.7
107.7
3.1
1,051.8
1,737.7
31.8
(6.4)
1.0
2.4
28.8
83.2
451.6
263.5
69.4
130.4
998.1
–
12.4
–
3.2
15.6
–
271.6
86.7
–
–
358.3
–
–
–
–
–
< 1 year
£m
1-5 years
£m
> 5 years
£m
3.0
25.1
49.1
3.2
870.0
950.4
10.5
2.0
5.7
18.2
8.5
904.7
94.9
77.0
22.0
1,107.1
–
7.6
7.3
14.9
0.1
–
8.4
–
–
8.5
–
–
–
–
Total
£m
191.6
1,189.9
457.9
72.5
1,182.2
3,094.1
31.8
6.0
1.0
5.6
44.4
Total
£m
11.6
929.8
152.4
80.2
892.0
2,066.0
10.5
9.6
13.0
33.1
Capital risk management
The Group’s capital structure consists of equity (refer to the Group Statement of Changes in Equity) and net debt (refer to note 39).
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debt.
The Group’s debt is monitored on the basis of a gearing ratio, being net debt divided by EBITDA, further details of which are provided
in the Group Finance Director’s review.
186
National Express Group PLC Annual Report 2019
174
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
175
30 Financial risk management objectives and policies continued
Impairment provisions in respect of cash and cash equivalents are also subject to the requirements of IFRS 9. As our cash and cash
equivalents are held with counterparties with a minimum of BBB- credit rating, no impairment loss was identified at the reporting date.
31 Financial instruments (including cash, trade receivables and payables)
The Group also uses return on capital employed ‘ROCE’ as a measure of its ability to drive better returns on the capital invested in the
Group’s operations, further details of which are provided in the Group Finance Director’s review.
Fair values
Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and include trade and other receivables and cash and cash equivalents. They are measured at amortised cost using the effective
interest rate method. The fair value of these instruments approximates their carrying amounts largely due to the short-term maturities.
and a series of medium-term notes. The level of facilities is maintained such that facilities and term loans exceed the forecast peak gross debt
Financial assets at fair value through other comprehensive income relates to the Group’s non-listed equity investments.
The Group’s derivatives are measured at fair value. Derivatives, other than those designated as effective hedging instruments, are classified
as fair value through profit or loss and are carried on the Balance Sheet at their fair value with gains or losses recognised in the Income
Statement. Derivatives designated as hedging instruments in an effective hedge are carried on the Balance Sheet at their fair value. For cash
flow hedges and hedges of net investments in foreign operations, the effective portion of the gain or loss on the hedging instrument is
recognised directly in Other Comprehensive Income, while the ineffective portion is recognised in the Income Statement. Amounts taken to
Other Comprehensive Income are transferred to the Income Statement when the hedged transaction affects profit or loss or when the foreign
operation is sold or partially disposed of. For fair value hedges, all gains or losses are recognised in the Income Statement.
The fair value measurement of derivative instruments is categorised within Level 2 (i.e. the fair values are derived based on observable
market inputs). The Group has no financial instruments with fair values that are determined by reference to significant unobservable
inputs, i.e. those that would be classified as Level 3 in the fair value hierarchy, other than the deferred contingent consideration disclosed
in note 19 and financial assets at fair value through other comprehensive income in note 17. There have not been any transfers of assets
or liabilities between levels of the fair value hierarchy and there are no non-recurring fair value movements.
Certain Group bonds are held at a hybrid amortised cost with a fair value hedging adjustment. After initial recognition at fair value, the
bonds are measured at amortised cost using the effective interest rate method. A portion of the bonds is designated as the hedged item
in an effective fair value hedging relationship. As such, the carrying value of this portion is adjusted for changes in fair value attributable to
the risk being hedged. This net carrying value will differ to the fair value depending on movements in the Group’s credit risk, movements
in interest rates on the un-hedged portion and unamortised fees. At 31 December 2019 the carrying value of the Group’s bonds was
£1,083.6m (2018: £849.7m) and compares to the fair value as presented in the table below.
All other liabilities, including finance leases, bank loans, trade and other payables and other debt payable, are held at amortised cost.
After initial fair value recognition, these instruments are measured at amortised cost using the effective interest rate method. The carrying
value of these liabilities approximates to the fair value.
The following table overleaf illustrates the fair values of all financial assets and liabilities held by the Group at 31 December 2019:
187
Liquidity risk
as they fall due.
Liquidity risk is the risk that the Group, although solvent, will have difficulty in meeting its obligations associated with its financial liabilities
Funding for the Group is coordinated centrally by the treasury function and comprises committed bilateral facilities with a syndicate of banks,
of the Group over a rolling 12-month view, with minimum headroom maintained, taking into account market conditions and corporate activity,
including acquisitions and organic growth plans. The minimum funding headroom assumes that factoring facilities are not available.
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2019 based on the contractual
undiscounted cash flows including interest cash flows. As such, the amounts in this table will not agree to the carrying amounts disclosed
in the Balance Sheet or other notes. The table includes cash flows associated with derivative hedging instruments. Their amounts reflect
the maturity profile of the fair value liability where the instrument will be settled net, and the gross settlement amount where the pay leg
of a derivative will be settled separately to the receive leg.
< 1 year
1-5 years
> 5 years
Year ended 31 December 2019
Bank loans
Bonds
Lease liabilities
Other debt payable
Trade and other payables
Foreign exchange derivatives
Cross currency interest rate swaps
Interest rate derivatives
Fuel derivatives
Year ended 31 December 2018
Bank loans
Bonds
Lease liabilities
Other debt payable
Trade and other payables
Foreign exchange derivatives
Cross currency interest rate swaps
Fuel derivatives
£m
108.4
466.7
107.7
3.1
1,051.8
1,737.7
31.8
(6.4)
1.0
2.4
28.8
£m
3.0
25.1
49.1
3.2
870.0
950.4
10.5
2.0
5.7
18.2
£m
83.2
451.6
263.5
69.4
130.4
998.1
12.4
–
–
3.2
15.6
£m
8.5
904.7
94.9
77.0
22.0
–
7.6
7.3
14.9
£m
–
271.6
86.7
358.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
0.1
8.4
Total
£m
191.6
1,189.9
457.9
72.5
1,182.2
3,094.1
31.8
6.0
1.0
5.6
44.4
Total
£m
11.6
929.8
152.4
80.2
892.0
10.5
9.6
13.0
33.1
1,107.1
8.5
2,066.0
< 1 year
1-5 years
> 5 years
Capital risk management
The Group’s capital structure consists of equity (refer to the Group Statement of Changes in Equity) and net debt (refer to note 39).
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debt.
in the Group Finance Director’s review.
The Group’s debt is monitored on the basis of a gearing ratio, being net debt divided by EBITDA, further details of which are provided
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
176
31 Financial instruments (including cash, trade receivables and payables) continued
Classification of financial instruments
As at 31 December 2019
Assets and
liabilities at
amortised
cost
£m
At fair value
through other
comprehensive
income
£m
At fair value
through
profit or loss
£m
Derivatives
used for
hedging
£m
Assets
Investments
Fuel derivatives
Interest rate derivatives
Cross currency swaps
Foreign exchange derivatives
Cash and cash equivalents
Finance lease receivables
Trade and other receivables
Liabilities
Bank loans
Bonds
Finance lease obligations
Other debt payable
Interest rate derivatives
Fuel derivatives
Cross currency swaps
Foreign exchange derivatives
Trade and other payables
Classification of financial instruments
As at 31 December 2018
Assets
Investments
Fuel derivatives
Interest rate derivatives
Foreign exchange derivatives
Cash and cash equivalents
Trade and other receivables
Liabilities
Bank loans
Bonds
Finance lease obligations
Other debt payable
Fuel derivatives
Cross currency swaps
Foreign exchange derivatives
Trade and other payables1
–
–
–
–
–
478.3
5.0
421.6
904.9
(187.2)
(1,081.9)
(407.5)
(68.3)
–
–
–
–
(1,137.1)
(2,882.0)
14.2
–
–
–
–
–
–
–
–
–
10.0
–
11.2
–
–
–
–
6.7
–
11.5
15.8
–
–
–
14.2
21.2
34.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.7)
–
–
–
–
(3.7)
–
–
–
–
–
(5.4)
(6.5)
(31.8)
–
(43.7)
Assets and
liabilities at
amortised
cost1
£m
At fair value
through other
comprehensive
income
£m
At fair value
through
profit or loss
£m
Derivatives
used for
hedging
£m
–
–
–
–
117.5
345.6
463.1
(9.0)
(862.1)
(142.6)
(74.9)
–
–
–
(847.8)
(1,936.4)
6.7
–
–
–
–
–
–
–
10.6
–
–
–
6.7
10.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.9
–
3.6
–
–
5.5
–
–
–
–
(14.6)
(4.4)
(10.5)
–
(29.5)
1 Trade & other payables has been re-presented to remove contract liabilities, which have been separately presented under IFRS 15
Other receivables and other payables are to be settled in cash in the currency they are held in.
188
Total
£m
14.2
6.7
10.0
11.5
27.0
478.3
5.0
421.6
974.3
(187.2)
(1,081.9)
(407.5)
(68.3)
(3.7)
(5.4)
(6.5)
(31.8)
(1,137.1)
(2,929.4)
Total1
£m
6.7
1.9
10.6
3.6
117.5
345.6
485.9
(9.0)
(862.1)
(142.6)
(74.9)
(14.6)
(4.4)
(10.5)
(847.8)
(1,965.9)
National Express Group PLC Annual Report 2019
176
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
177
31 Financial instruments (including cash, trade receivables and payables) continued
Classification of financial instruments
As at 31 December 2019
Assets and
At fair value
liabilities at
through other
At fair value
Derivatives
amortised
comprehensive
through
cost
£m
income
profit or loss
£m
£m
used for
hedging
£m
Assets
Investments
Fuel derivatives
Interest rate derivatives
Cross currency swaps
Foreign exchange derivatives
Cash and cash equivalents
Finance lease receivables
Trade and other receivables
Liabilities
Bank loans
Bonds
Finance lease obligations
Other debt payable
Interest rate derivatives
Fuel derivatives
Cross currency swaps
Foreign exchange derivatives
Trade and other payables
Classification of financial instruments
As at 31 December 2018
Assets
Investments
Fuel derivatives
Interest rate derivatives
Foreign exchange derivatives
Cash and cash equivalents
Trade and other receivables
Liabilities
Bank loans
Bonds
Finance lease obligations
Other debt payable
Fuel derivatives
Cross currency swaps
Foreign exchange derivatives
Trade and other payables1
14.2
21.2
34.0
Total
£m
14.2
6.7
10.0
11.5
27.0
478.3
5.0
421.6
974.3
(187.2)
(1,081.9)
(407.5)
(68.3)
(3.7)
(5.4)
(6.5)
(31.8)
(1,137.1)
(2,929.4)
Total1
£m
6.7
1.9
10.6
3.6
117.5
345.6
485.9
(9.0)
(862.1)
(142.6)
(74.9)
(14.6)
(4.4)
(10.5)
(847.8)
(1,965.9)
6.7
–
–
11.5
15.8
–
–
–
–
–
–
–
–
(5.4)
(6.5)
(31.8)
–
(43.7)
1.9
3.6
–
–
–
–
–
–
–
–
(14.6)
(4.4)
(10.5)
–
(29.5)
10.0
11.2
(3.7)
(3.7)
10.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
6.7
Assets and
liabilities at
At fair value
through other
At fair value
Derivatives
amortised
comprehensive
through
cost1
£m
income
profit or loss
£m
used for
hedging
£m
6.7
10.6
5.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
478.3
5.0
421.6
904.9
(187.2)
(1,081.9)
(407.5)
(68.3)
(1,137.1)
(2,882.0)
117.5
345.6
463.1
(9.0)
(862.1)
(142.6)
(74.9)
(847.8)
(1,936.4)
31 Financial instruments (including cash, trade receivables and payables) continued
The Group assesses at each year end reporting date whether a financial asset or group of financial assets is impaired. In the financial year
2019, there was no objective evidence that would have necessitated the impairment of loans and receivables or available-for-sale assets
except the provision for impairment of receivables (see note 30).
Embedded derivatives
In accordance with IFRS 9 ‘Financial Instruments’, the Group has reviewed its contracts for embedded derivatives that are required to be
separately accounted for. No embedded derivatives have been identified.
Hedging activities
The Group uses derivative financial instruments to manage exposures to market risk, such as movements in foreign exchange rates, fuel
prices and interest rates. Such derivative financial instruments are initially recognised at fair value and are subsequently re-measured
at fair value at the end of each reporting period. In line with IFRS 9 the Group classifies hedges as (i) fair value hedges used to hedge
exposure to changes in the fair value of a recognised asset or liability, (ii) cash flow hedges used to hedge exposure to variability in cash
flows associated with a recognised asset or liability or a highly probable forecast transaction, and (iii) hedges of a net investment in a
foreign operation.
In 2019, the Group applied cash flow hedge accounting to hedge fuel price risk, to hedge net investments in its North American and
European foreign operations, and to hedge interest rate risk on certain bank loans. The Group also applied fair value hedge accounting on
£100.0m of the Group’s fixed rate bonds and €78.5m Private Placement to hedge changes in fair value due to interest rate fluctuations.
The movement on derivative financial instruments is detailed below:
At fair value through
profit and loss
Derivatives used
for hedging
Interest rate
swaps
£m
Net asset/(liability) at 1 January 2019
Movements through Income Statement
Movements through Other Comprehensive Income
Cash settlements
Net asset/(liability) at 31 December 2019
10.6
(3.3)
–
–
7.3
Net asset/(liability) at 1 January 2018
Transfers to the Income Statement on cash flow hedges
Cash settlements
Revaluation through Income Statement
Revaluation through Other Comprehensive Income
Costs of hedging
Exchange differences
Net asset/(liability) at 31 December 2018
Foreign
exchange
forward
contracts
£m
(5.8)
6.2
–
(20.8)
(20.4)
At fair value
through profit
and loss
Interest rate
swaps
£m
14.2
–
–
(3.6)
–
–
–
10.6
Fuel
swaps
£
Interest rate
swaps
£m
(12.7)
(4.5)
18.5
–
1.3
–
(0.9)
(0.1)
–
(1.0)
Cross
currency
swaps
£m
Foreign
exchange
forward
contracts
£m
(4.4)
(0.7)
12.6
(2.5)
5.0
(1.1)
–
5.7
11.0
15.6
Derivatives used
for hedging
Cross
currency
swaps
£m
(3.2)
–
7.6
–
–
1.4
(10.2)
(4.4)
Foreign
exchange
forward
contracts
£m
1.5
–
20.0
–
–
–
(28.4)
(6.9)
Fuel
swaps
£m
5.2
(11.5)
–
–
(6.4)
–
–
(12.7)
Total
£m
(13.4)
(3.2)
36.7
(12.3)
7.8
Total
£m
17.7
(11.5)
27.6
(3.6)
(6.4)
1.4
(38.6)
(13.4)
1 Trade & other payables has been re-presented to remove contract liabilities, which have been separately presented under IFRS 15
Other receivables and other payables are to be settled in cash in the currency they are held in.
189
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
178
31 Financial instruments (including cash, trade receivables and payables) continued
The movement on the hedging reserve is detailed below:
At 1 January
Transferred to Income Statement
Revaluation through Other Comprehensive Income
Exchange differences
Tax on revaluation
At 31 December
A summary of the Group’s hedging activities is as follows:
Hedge type
Risk
Nominal amount of hedging
Ageing of nominal amount:
< 1 year
1-2 years
2-5 years
> 5 years
Average hedged rate
Maturity
Carrying amount of hedging instruments (£m)
Assets – derivatives
Liabilities – derivatives
Liabilities - borrowings
Carrying amount of hedged item – borrowings (£m)
Changes in fair value of hedged item for calculating
hedge effectiveness2
Changes in fair value of hedged instrument used
for calculating hedge effectiveness2
Amounts accumulated in reserves at 31 December 2019, net of tax
Accumulated fair value hedge adjustment on borrowings
Net investment
hedge
Foreign
currency risk
CAD $46.2m
USD $492.2m
€551.2m
CAD $46.2m
USD $492.2m
€250.0m
€78.5m
€222.7m
2019
£m
(10.2)
(2.6)
10.8
–
(2.5)
(4.5)
2018
£m
4.5
(11.5)
(6.4)
0.1
3.1
(10.2)
Fair value
hedge
Interest rate
risk (Euro
private
placement)
Fair value
hedge
Interest rate
risk (2020
bond)
Cash flow
hedge
Foreign
currency &
Interest rate
risk
Cash flow
hedge
Commodity
price risk
€78.5m
£100.0m
£178.7m
396.4m litres
–
£100.0m
£99.0m
226.1m litres
€78.5m
–
–
–
–
–
–
6m EURIBOR +
2.827%
–
6m LIBOR +
3.2%
£79.7m
152.8m litres
–
–
17.5m litres
–
1.627%
£0.36/litre
2020-2023
2021
2020
2020-2021
2020-2022
14.2
(0.2)
(279.6)1
–
(38.1)
38.1
36.3
–
3.7
(0.9)
–
(68.3)
1.0
(1.0)
–
(2.0)
6.3
(1.8)
–
1.4
(7.5)
–
(225.8)
(174.4)
2.1
(2.1)
–
(0.8)
8.1
(7.6)
(5.7)
–
6.7
(5.4)
–
–
(21.8)
21.5
1.2
–
1
2
Represents the carrying value of the €78.5m Euro Private Placement and the €250m Euro floating rate note, as shown in note 29.
Inclusive of cash settlements for the period
Hedge of net investments in foreign entities
The Group uses foreign currency borrowings and derivative financial instruments to hedge the net investment in material foreign currency
net assets of the Group, which are used to reduce the exposure to foreign exchange rate movements. At 31 December 2019, the Group
had designated €222.7m of cross currency interest rate swaps, a €250.0m floating rate note and a €78.5m Private Placement as net
investment hedges of the net assets of the Group’s European subsidiaries. Similarly, USD 492.2m and CAD 46.2m of foreign exchange
forward contracts were designated as a hedge of the net assets of the Group’s North America subsidiaries. No material ineffectiveness
was recognised in relation to these hedges.
190
National Express Group PLC Annual Report 2019
178
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
179
31 Financial instruments (including cash, trade receivables and payables) continued
The movement on the hedging reserve is detailed below:
At 1 January
Transferred to Income Statement
Revaluation through Other Comprehensive Income
Exchange differences
Tax on revaluation
At 31 December
A summary of the Group’s hedging activities is as follows:
Hedge type
Risk
Nominal amount of hedging
Ageing of nominal amount:
< 1 year
1-2 years
2-5 years
> 5 years
Average hedged rate
Maturity
Assets – derivatives
Liabilities – derivatives
Liabilities - borrowings
Carrying amount of hedging instruments (£m)
Carrying amount of hedged item – borrowings (£m)
Changes in fair value of hedged item for calculating
hedge effectiveness2
Changes in fair value of hedged instrument used
for calculating hedge effectiveness2
Amounts accumulated in reserves at 31 December 2019, net of tax
Accumulated fair value hedge adjustment on borrowings
Net investment
hedge
Fair value
hedge
Interest rate
Fair value
hedge
Cash flow
hedge
Foreign
Cash flow
hedge
risk (Euro
Interest rate
currency &
Foreign
private
risk (2020
Interest rate
Commodity
currency risk
placement)
bond)
risk
price risk
€78.5m
£100.0m
£178.7m
396.4m litres
CAD $46.2m
USD $492.2m
€551.2m
CAD $46.2m
USD $492.2m
€250.0m
€78.5m
€222.7m
–
–
2020-2023
14.2
(0.2)
(279.6)1
–
(38.1)
38.1
36.3
–
£100.0m
£99.0m
226.1m litres
€78.5m
£79.7m
152.8m litres
–
–
17.5m litres
–
6m EURIBOR +
6m LIBOR +
2.827%
2021
3.2%
2020
1.627%
£0.36/litre
2020-2021
2020-2022
–
–
–
6.3
(1.8)
–
2.1
(2.1)
–
(0.8)
(225.8)
(174.4)
1.4
(7.5)
–
8.1
(7.6)
(5.7)
–
6.7
(5.4)
–
–
(21.8)
21.5
1.2
–
–
–
–
3.7
(0.9)
–
(68.3)
1.0
(1.0)
–
(2.0)
Represents the carrying value of the €78.5m Euro Private Placement and the €250m Euro floating rate note, as shown in note 29.
1
2
Inclusive of cash settlements for the period
Hedge of net investments in foreign entities
The Group uses foreign currency borrowings and derivative financial instruments to hedge the net investment in material foreign currency
net assets of the Group, which are used to reduce the exposure to foreign exchange rate movements. At 31 December 2019, the Group
had designated €222.7m of cross currency interest rate swaps, a €250.0m floating rate note and a €78.5m Private Placement as net
investment hedges of the net assets of the Group’s European subsidiaries. Similarly, USD 492.2m and CAD 46.2m of foreign exchange
forward contracts were designated as a hedge of the net assets of the Group’s North America subsidiaries. No material ineffectiveness
was recognised in relation to these hedges.
2019
£m
(10.2)
(2.6)
10.8
–
(2.5)
(4.5)
2018
£m
4.5
(11.5)
(6.4)
0.1
3.1
(10.2)
31 Financial instruments (including cash, trade receivables and payables) continued
Fuel derivatives
The Group has a number of fuel derivatives in place to hedge the different types of fuel used in each division. Fuel swaps are used to
match the timing, type of fuel and currency in which the domestic physical fuel is purchased as closely as possible, with hedges currently
in place from 2019 through to 2022.
During the year, £18.5m of fair value losses (2018: £6.4m losses) have been transferred to the hedging reserve due to movements in market
fuel prices. A fair value gain of £4.5m (2018: £11.5m gain) has been transferred from the hedging reserve to the Income Statement following
settlement of fuel trades, of which a £14.4m gain was in the hedging reserve at 1 January 2019 and the remainder was generated during the
year due to movements in market fuel prices. No material ineffectiveness was recognised in relation to these hedges.
Fuel derivatives can be analysed as follows:
Hedge fuel derivatives
Sterling denominated – UK
Euro denominated – ALSA
US Dollar and Canadian Dollar denominated – North America
Fuel derivatives included in current assets/(liabilities)
Sterling denominated – UK
Euro denominated – ALSA
US Dollar and Canadian Dollar denominated – North America
Fuel derivatives included in non-current assets/(liabilities)
Total hedge fuel derivatives
31 December
2019
Fair value
£m
31 December
2018
Fair value
£m
31 December
2019
Volume
million litres
31 December
2018
Volume
million litres
2.4
0.9
0.5
3.8
(0.7)
(0.7)
(1.1)
(2.5)
1.3
(1.0)
(2.8)
(2.3)
(6.1)
(0.7)
(2.3)
(3.6)
(6.6)
(12.7)
68.4
83.9
73.8
226.1
47.3
66.7
56.3
170.3
396.4
74.5
80.1
62.1
216.7
79.1
81.4
73.6
234.1
450.8
Interest rate swaps at fair value through profit or loss
In July 2010, the Group entered into two £50m interest rate swaps that pay floating interest (LIBOR + margin) semi-annually and receive
fixed interest annually. These are designated as fair value hedges of interest rate risk with maturities matching the Group’s £225m Sterling
bonds maturing in June 2020. These swaps are measured at fair value through profit or loss, with any gains or losses being taken
immediately to the Income Statement to offset any fair value gains or losses due to changes in the risk-free interest rate on the swapped
portion of the bonds. A fair value loss of £2.2m was recognised in the Income Statement during the year in relation to these swaps.
This was offset by a fair value gain of £2.2m on the underlying hedged item, being the change in fair value on £100m of the Group’s
£225m bonds due to changes in the risk-free interest rate.
In September 2012, the Group entered into two €39.25m denominated interest rate swaps equal in value to the Euro Private Placement.
These interest rate swaps all pay floating interest (EURIBOR + margin) semi-annually, receive fixed interest semi-annually with maturities
matching the Euro Private Placement maturing in August 2021 and are designated as a fair value hedge of the interest rate risk on the
Private Placement. These swaps are measured at fair value through profit and loss, with any gains or losses being taken immediately to
the Income Statement to offset any fair value gains or losses due to changes in the risk-free rate on the Euro Private Placement. A
fair value loss of £1.0m was recognised in the Income Statement during the year in relation to these swaps. This was offset by a fair value
gain of £1.0m on the underlying hedged item, in this case changes in fair value of the Euro Private Placement due to changes in the risk-
free interest rate.
Cash flow hedges
In January 2019, the Group entered into a $100m cross currency interest rate swap that pays fixed interest annually and receives floating
interest (USD LIBOR + margin) semi-annually. This is designated as a cash flow hedge of foreign currency and interest rate risk with
maturities matching a $100m short-term bank loan maturing in June 2021.
In May 2019, the Group entered into a £99m interest rate swap that pays fixed interest semi-annually and receives floating interest
(LIBOR + margin) monthly. This is designated as a cash flow hedge of interest rate risk with maturities matching a £99m short-term
bank loan maturing in November 2020.
No material ineffectiveness was recognised in relation to either of these hedges during the year.
191
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
180
32 Called-up share capital
At 31 December:
Authorised:
800,000,000 (2018: 800,000,000) ordinary shares of 5p each
Issued called-up and fully paid:
511,738,648 (2018: 511,738,648) ordinary shares of 5p each
2019
£m
2018
£m
40.0
25.6
40.0
25.6
The total number of share options exercised in the year by employees of the Group was 1,825,123 (2018: 2,248,309) of which all
(2018: 1,910,086) exercises were satisfied by transferring shares from the National Express Employee Benefit Trust. The remaining
exercises in 2018 were settled via a direct purchase of shares from the open market.
Own shares
Own shares comprises 1,404,751 (2018: 1,758,660) ordinary shares in the Company that have been purchased by the trustees of the
National Express Employee Benefit Trust (the Trust). During the year, the Trust purchased 1,471,214 (2018: 2,025,000) shares and
1,825,123 (2018: 1,910,086) shares were used to satisfy options granted under a number of the Company’s share schemes. No
shares (2018: nil) were sold during the year to the open market.
The market value of the shares held by the Trust at 31 December 2019 was £6.6m (2018: £6.6m). The dividends payable on 972,605
of these shares (2018: 3,551,284) have been waived.
33 Other reserves
At 1 January 2019
Exchange differences, net of tax1
Exchange gains reclassified to Income Statement on disposal of a subsidiary
Hedge movements, net of tax
Hedging gains reclassified to Income Statement
Cost of hedging
Reclassified to retained earnings
At 31 December 2019
Merger
reserve
£m
Hedging
reserve
£m
Translation
reserve
£m
15.4
(10.2)
–
–
–
–
–
–
–
–
8.3
(2.6)
–
–
191.0
(72.7)
(1.0)
–
(0.6)
1.0
1.9
Total
£m
196.2
(72.7)
(1.0)
8.3
(3.2)
1.0
1.9
15.4
(4.5)
119.6
130.5
1 Represents the retranslation of foreign currency denominated subsidiaries, joint ventures and associates of the Group, net of tax of £110.8m, offset by a hedging gain
on the net investment in foreign subsidiaries of £38.1m
At 1 January 2018
Exchange differences, net of tax
Hedge movements, net of tax
Cost of hedging
At 31 December 2018
Merger
reserve
£m
15.4
–
–
–
15.4
Hedging
reserve
£m
Translation
reserve
£m
4.5
–
(14.7)
–
(10.2)
161.7
27.9
–
1.4
191.0
Total
£m
181.6
27.9
(14.7)
1.4
196.2
The nature and purpose of the other reserves are as follows:
─
─
─
The merger reserve included the premium on shares issued to satisfy the purchase of Prism Rail PLC in 2000.
The hedging reserve records the movements on designated hedging instruments, offset by any movements recognised in equity
on underlying hedged items.
The translation reserve records exchange differences arising from the translation of the accounts of foreign currency denominated
subsidiaries offset by the movements on loans and derivatives used to hedge the net investment in foreign subsidiaries and cost
of hedging.
192
National Express Group PLC Annual Report 2019
180
181
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
32 Called-up share capital
At 31 December:
Authorised:
800,000,000 (2018: 800,000,000) ordinary shares of 5p each
Issued called-up and fully paid:
511,738,648 (2018: 511,738,648) ordinary shares of 5p each
2019
£m
2018
£m
40.0
25.6
40.0
25.6
The total number of share options exercised in the year by employees of the Group was 1,825,123 (2018: 2,248,309) of which all
(2018: 1,910,086) exercises were satisfied by transferring shares from the National Express Employee Benefit Trust. The remaining
exercises in 2018 were settled via a direct purchase of shares from the open market.
Own shares
Own shares comprises 1,404,751 (2018: 1,758,660) ordinary shares in the Company that have been purchased by the trustees of the
National Express Employee Benefit Trust (the Trust). During the year, the Trust purchased 1,471,214 (2018: 2,025,000) shares and
1,825,123 (2018: 1,910,086) shares were used to satisfy options granted under a number of the Company’s share schemes. No
shares (2018: nil) were sold during the year to the open market.
The market value of the shares held by the Trust at 31 December 2019 was £6.6m (2018: £6.6m). The dividends payable on 972,605
of these shares (2018: 3,551,284) have been waived.
33 Other reserves
Exchange gains reclassified to Income Statement on disposal of a subsidiary
At 1 January 2019
Exchange differences, net of tax1
Hedge movements, net of tax
Hedging gains reclassified to Income Statement
Cost of hedging
Reclassified to retained earnings
At 31 December 2019
Merger
reserve
£m
15.4
–
–
–
–
–
–
Merger
reserve
£m
15.4
–
–
–
15.4
Hedging
Translation
reserve
£m
(10.2)
8.3
(2.6)
–
–
–
–
reserve
£m
191.0
(72.7)
(1.0)
–
(0.6)
1.0
1.9
Hedging
reserve
Translation
reserve
£m
£m
4.5
–
–
(14.7)
(10.2)
161.7
27.9
–
1.4
191.0
Total
£m
196.2
(72.7)
(1.0)
8.3
(3.2)
1.0
1.9
Total
£m
181.6
27.9
(14.7)
1.4
196.2
1 Represents the retranslation of foreign currency denominated subsidiaries, joint ventures and associates of the Group, net of tax of £110.8m, offset by a hedging gain
on the net investment in foreign subsidiaries of £38.1m
15.4
(4.5)
119.6
130.5
At 1 January 2018
Exchange differences, net of tax
Hedge movements, net of tax
Cost of hedging
At 31 December 2018
─
─
─
on underlying hedged items.
of hedging.
The nature and purpose of the other reserves are as follows:
The merger reserve included the premium on shares issued to satisfy the purchase of Prism Rail PLC in 2000.
The hedging reserve records the movements on designated hedging instruments, offset by any movements recognised in equity
The translation reserve records exchange differences arising from the translation of the accounts of foreign currency denominated
subsidiaries offset by the movements on loans and derivatives used to hedge the net investment in foreign subsidiaries and cost
34 Pensions and other post-employment benefits
(a) Summary of pension benefits and assumptions
The UK division (UK) and National Express Group PLC (the Company) both operate defined benefit pension schemes.
The Group also provides certain additional unfunded post-employment benefits to employees in North America and maintains a small defined
benefit scheme for National Express Services Limited. These post-employment benefits have been combined into the ‘Other’ category.
The UK, the Company and North America also operate or contribute into a number of defined contribution schemes.
On 11 October 2018, the trustees of the Company defined benefit scheme completed a buy-in transaction whereby the assets of the scheme
were invested in a bulk annuity policy with the insurer Rothesay Life, under which the benefits payable to defined benefit members became
fully insured. The insurance policy was purchased using the existing assets of the plan. As the buy-in transaction has resulted in the defined
benefit obligations being fully insured, the Company has no obligation to make any further payments into the scheme.
For the UK defined benefit scheme, in 2017 a three-year annual deficit repayment plan was agreed with the trustees of the West Midlands
Integrated Transport Authority Pension Fund, which continues until March 2020 with an average contribution of £7.7m per annum. The
plan remains open to accrual for existing members only.
The assets of the defined benefit schemes are held separately from those of the Group and contributions to the schemes are determined
by independent professionally qualified actuaries.
The Group expects to contribute £7.8m into its defined benefit pension plans in 2020.
The total pension cost charged to operating profit in the year for the Group was £10.3m (2018: £10.3m), of which £6.4m (2018: £4.9m)
relates to the defined contribution schemes.
The defined benefit pension (liability)/asset included in the Balance Sheet is as follows:
Company
Pension assets
UK
Other
Pension liabilities
Total
2019
£m
14.2
14.2
(99.1)
(5.1)
(104.2)
(90.0)
2018
£m
14.9
14.9
(127.3)
(4.4)
(131.7)
(116.8)
Through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which relate to the UK and are
detailed below. The Company scheme has a low level of risk due to the buy-in policy, whereby the present value of the scheme liabilities
is fully matched by the fair value of the insurance asset.
Investment risk
The present values of scheme liabilities are calculated using a discount rate set with reference to corporate bond yields; if the return on
scheme assets is below this yield, it will create a deficit. The UK scheme holds a significant proportion of return-seeking assets (equities
and diversified growth funds) which, though expected to outperform corporate bonds in the long term, create volatility and risk in the
short term.
Interest risk
A decrease in bond interest rates will increase scheme liabilities but this will be partially offset by an increase in the returns on the
scheme assets.
Inflation risk
A significant proportion of the schemes’ obligations are linked to inflation, and higher inflation will lead to higher liabilities. The Group has
some inflation linking in its revenue streams, which helps to offset this risk. In addition, the UK scheme holds a small proportion of index-
linked bonds which will help to protect against this risk.
193
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
182
34 Pensions and other post-employment benefits continued
Longevity risk
The majority of the obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in
the liabilities. The UK scheme includes a buy-in policy covering part of the pensioner members’ liabilities, which partly helps to mitigate
longevity risk. The Company scheme is fully covered by a buy-in policy.
Legislative risk
Future legislative changes are uncertain. In the past these have led to both increases in obligations, for example, reduced investment
return through the ability to reclaim Advance Corporation Tax, and decreases in obligations, for example, through the ability to use CPI
inflation instead of RPI to set pension increase rates. For the UK scheme the Group receives professional advice on the impact of
legislative changes.
The valuations conducted for financial reporting purposes are based on the triennial actuarial valuations. A summary of the latest triennial
actuarial valuations for the principal schemes, and assumptions made, is as follows:
Date of actuarial valuation
Rate of investment returns per annum
Increase in earnings per annum
Scheme assets taken at market value
Funding level
UK
Company
31 March
2016
5 April
2016
4.5%
2.3%
0%-2.1%
–
£449.1m
£114.8m
81%
97%
The most recent triennial valuations are then updated by independent professionally qualified actuaries for financial reporting purposes,
in accordance with IAS 19. The main actuarial assumptions underlying the IAS 19 valuations as follows:
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Post-retirement mortality in years:
Current pensioners at 65 – male
Future pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 – female
2019
2018
UK
Company
UK
Company
2.5%
2.1%
2.0%
3.0%
2.1%
19.8
21.2
23.0
24.5
–
2.9%
2.1%
2.9%
2.0%
22.3
23.6
24.9
26.4
2.5%
2.2%
2.8%
3.2%
2.2%
21.2
22.6
23.1
24.7
–
3.2%
2.9%
3.2%
2.2%
22.7
24.1
25.4
26.9
The demographic assumptions reflect those adopted in the most recent triennial actuarial valuation.
The Directors regard the assumptions around pensions in payment, discount rate, inflation and mortality to be the key assumptions in the
IAS 19 valuation. The following table provides an approximate sensitivity analysis of a reasonably possible change to these assumptions:
(Increase)/decrease in the defined benefit obligation
Effect of a 0.1% increase in pensions in payment
Effect of a 0.1% increase in the discount rate
Effect of a 0.1% increase in inflation
Effect of a 0.1 year increase in mortality rates
UK
2019
£m
(5.1)
6.3
(5.7)
(1.4)
Company
2019
£m
–
–
–
–
UK
2018
£m
(6.0)
6.4
(6.7)
(1.3)
Company
2018
£m
–
–
–
–
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. Aside from the
matching insurance contracts held in the UK and Company schemes, no allowance has been made for any change in assets that might
arise under any of the scenarios set out above.
194
National Express Group PLC Annual Report 2019
182
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
183
34 Pensions and other post-employment benefits continued
Longevity risk
The majority of the obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in
the liabilities. The UK scheme includes a buy-in policy covering part of the pensioner members’ liabilities, which partly helps to mitigate
longevity risk. The Company scheme is fully covered by a buy-in policy.
Future legislative changes are uncertain. In the past these have led to both increases in obligations, for example, reduced investment
return through the ability to reclaim Advance Corporation Tax, and decreases in obligations, for example, through the ability to use CPI
inflation instead of RPI to set pension increase rates. For the UK scheme the Group receives professional advice on the impact of
Legislative risk
legislative changes.
The valuations conducted for financial reporting purposes are based on the triennial actuarial valuations. A summary of the latest triennial
actuarial valuations for the principal schemes, and assumptions made, is as follows:
The most recent triennial valuations are then updated by independent professionally qualified actuaries for financial reporting purposes,
in accordance with IAS 19. The main actuarial assumptions underlying the IAS 19 valuations as follows:
34 Pensions and other post-employment benefits continued
Scheme assets are stated at their market values at the respective Balance Sheet dates. The expected rate of return on scheme assets is
determined based on market returns on each category of scheme assets.
(b) Financial results for pension benefits
The amounts charged to the Group Income Statement and Group Statement of Comprehensive Income for the years ended 31 December
2019 and 2018 are set out in the following tables:
Group Income Statement
Amounts (charged)/credited:
Current service cost
Past service cost
Net interest (expense)/income
Total (charge)/credit to Income Statement
UK
2019
£m
Company
2019
£m
(3.3)
–
(3.4)
(6.7)
–
–
0.4
0.4
In addition, during the year £0.6m (2018: £0.5m) of administrative expenses were incurred.
The net interest expense has been included within finance costs (see note 9).
Group Statement of Comprehensive Income
Actuarial gain/(loss) during the period from obligations
Expected return on plan assets greater than discount rate
Net actuarial gain/(loss)
UK
2019
£m
16.3
8.9
25.2
Company
2019
£m
(11.5)
10.8
(0.7)
Other
2019
£m
–
–
(0.2)
(0.2)
Other
2019
£m
(0.6)
0.2
(0.4)
Total
2019
£m
(3.3)
–
(3.2)
(6.5)
Total
2019
£m
4.2
19.9
24.1
UK
Company
UK
Company
In addition to the above actuarial movements, the Statement of Comprehensive includes a £0.3m loss for investment advice that was
incurred directly by the Company.
Group Income Statement
Amounts (charged)/credited:
Current service cost
Past service cost
Net interest (expense)/income
Total (charge)/credit to Income Statement
UK
2018
£m
Company
2018
£m
(4.0)
–
(3.2)
(7.2)
–
(0.9)
1.1
0.2
The past service cost in the Company relates to Guaranteed Minimum Pension equalisation recognised in 2018.
Group Statement of Comprehensive Income
Actuarial gain during the period from obligations
Expected return on plan assets less than discount rate
Net actuarial loss
UK
2018
£m
33.8
(30.0)
3.8
Company
2018
£m
7.3
(35.6)
(28.3)
Other
2018
£m
–
–
(0.1)
(0.1)
Other
2018
£m
0.2
–
0.2
Total
2018
£m
(4.0)
(0.9)
(2.2)
(7.1)
Total
2018
£m
41.3
(65.6)
(24.3)
The Company actuarial loss of £35.6m includes £26.5m representing the difference between the costs of the insurance policy and the
accounting value of the liabilities secured through the buy-in transaction.
In addition to the above actuarial movements, the Statement of Comprehensive included a £0.6m loss for investment advice that was
incurred directly by the Company, primarily in relation to the buy-in transaction.
195
Date of actuarial valuation
Rate of investment returns per annum
Increase in earnings per annum
Scheme assets taken at market value
Funding level
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Post-retirement mortality in years:
Current pensioners at 65 – male
Future pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 – female
UK
Company
31 March
2016
4.5%
2.3%
5 April
2016
0%-2.1%
–
£449.1m
£114.8m
81%
97%
2018
–
3.2%
2.9%
3.2%
2.2%
22.7
24.1
25.4
26.9
2.5%
2.2%
2.8%
3.2%
2.2%
21.2
22.6
23.1
24.7
UK
2018
£m
(6.0)
6.4
(6.7)
(1.3)
Company
2018
£m
–
–
–
–
2019
–
2.9%
2.1%
2.9%
2.0%
22.3
23.6
24.9
26.4
2019
£m
–
–
–
–
2.5%
2.1%
2.0%
3.0%
2.1%
19.8
21.2
23.0
24.5
2019
£m
(5.1)
6.3
(5.7)
(1.4)
The demographic assumptions reflect those adopted in the most recent triennial actuarial valuation.
The Directors regard the assumptions around pensions in payment, discount rate, inflation and mortality to be the key assumptions in the
IAS 19 valuation. The following table provides an approximate sensitivity analysis of a reasonably possible change to these assumptions:
UK
Company
(Increase)/decrease in the defined benefit obligation
Effect of a 0.1% increase in pensions in payment
Effect of a 0.1% increase in the discount rate
Effect of a 0.1% increase in inflation
Effect of a 0.1 year increase in mortality rates
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. Aside from the
matching insurance contracts held in the UK and Company schemes, no allowance has been made for any change in assets that might
arise under any of the scenarios set out above.
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
184
34 Pensions and other post-employment benefits continued
The amounts recognised in the Balance Sheet at 31 December as follows:
As at 31 December 2019
Equities
Bonds and multi-asset credit
Insurance policy
Diversified growth fund
Other
Fair value of scheme assets
Present value of liabilities and defined benefit obligation
Defined benefit pension (deficit)/surplus
UK
2019
£m
75.1
83.8
196.0
101.7
1.4
458.0
(557.1)
(99.1)
Company
2019
£m
Other
2019
£m
–
–
95.1
–
14.2
109.3
(95.1)
14.2
2.1
0.8
–
–
0.1
3.0
(8.1)
(5.1)
Total
2019
£m
77.2
84.6
291.1
101.7
15.7
570.3
(660.3)
(90.0)
None of the pension arrangements directly invest in any of the Group’s own financial instruments nor any property occupied by, or other
assets used by, the Group. The majority of the benefits within the plans are covered by insurance contracts. The insurance assets have
been valued so as to match the defined benefit obligations. The fair value of the remainder equity and debt instruments have primarily
been determined based on quoted prices in active markets.
As at 31 December 2018
Equities
Bonds and multi-asset credit
Insurance policy
Diversified growth fund
Other
Fair value of scheme assets
Present value of liabilities and defined benefit obligation
Defined benefit pension (deficit)/surplus
UK
2018
£m
63.0
78.4
220.2
90.6
0.8
453.0
(580.3)
(127.3)
Company
2018
£m
–
–
83.7
–
14.9
98.6
(83.7)
14.9
Other
2018
£m
1.8
0.8
–
–
0.1
2.7
(7.1)
(4.4)
Total
2018
£m
64.8
79.2
303.9
90.6
15.8
554.3
(671.1)
(116.8)
The movement in the present value of the defined benefit obligation in the year is as stated overleaf.
The Group’s defined benefit obligation comprises £656.5m (2018: £668.4m) arising from plans that are wholly or partly funded and £3.8m
(2018: £2.7m) from unfunded plans.
Based on the terms and conditions of the Company scheme, and from consultation with independent advisers, the Group determined that
an ultimate future economic benefit exists in the form of a refund or a reduction in future contributions. Therefore, in accordance with
IFRIC 14, the closing defined benefit surplus of this scheme has been recognised.
196
National Express Group PLC Annual Report 2019
184
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
185
34 Pensions and other post-employment benefits continued
The amounts recognised in the Balance Sheet at 31 December as follows:
34 Pensions and other post-employment benefits continued
The movement in the defined benefit obligations is as follows:
As at 31 December 2019
Equities
Bonds and multi-asset credit
Insurance policy
Diversified growth fund
Other
Fair value of scheme assets
Present value of liabilities and defined benefit obligation
Defined benefit pension (deficit)/surplus
As at 31 December 2018
Equities
Bonds and multi-asset credit
Insurance policy
Diversified growth fund
Other
Fair value of scheme assets
Present value of liabilities and defined benefit obligation
Defined benefit pension (deficit)/surplus
UK
2019
£m
75.1
83.8
196.0
101.7
1.4
458.0
(557.1)
(99.1)
UK
2018
£m
63.0
78.4
220.2
90.6
0.8
453.0
(580.3)
(127.3)
Company
2019
£m
–
–
–
95.1
14.2
109.3
(95.1)
14.2
Company
2018
£m
–
–
–
83.7
14.9
98.6
(83.7)
14.9
Other
2019
£m
2.1
0.8
–
–
0.1
3.0
(8.1)
(5.1)
Other
2018
£m
1.8
0.8
–
–
0.1
2.7
(7.1)
(4.4)
Total
2019
£m
77.2
84.6
291.1
101.7
15.7
570.3
(660.3)
(90.0)
Total
2018
£m
64.8
79.2
303.9
90.6
15.8
554.3
(671.1)
(116.8)
Defined benefit obligation at 1 January 2019
Current service cost
Past service cost
Benefits paid
Contributions by employees
Finance charge
Actuarial loss from changes in financial assumptions
Actuarial gain arising from changes in demographics
Actuarial gain arising from experience adjustments
Foreign exchange
Defined benefit obligation at 31 December 2019
Defined benefit obligation at 1 January 2018
Current service cost
Past service cost
Benefits paid
Contributions by employees
Finance charge
Actuarial gain from changes in financial assumptions
Actuarial gain arising from changes in demographics
Actuarial loss arising from experience adjustments
Foreign exchange
Defined benefit obligation at 31 December 2018
None of the pension arrangements directly invest in any of the Group’s own financial instruments nor any property occupied by, or other
assets used by, the Group. The majority of the benefits within the plans are covered by insurance contracts. The insurance assets have
been valued so as to match the defined benefit obligations. The fair value of the remainder equity and debt instruments have primarily
been determined based on quoted prices in active markets.
The movement in the present value of the defined benefit obligation in the year is as stated overleaf.
The movement in the fair value of scheme assets is as follows:
The Group’s defined benefit obligation comprises £656.5m (2018: £668.4m) arising from plans that are wholly or partly funded and £3.8m
(2018: £2.7m) from unfunded plans.
Based on the terms and conditions of the Company scheme, and from consultation with independent advisers, the Group determined that
an ultimate future economic benefit exists in the form of a refund or a reduction in future contributions. Therefore, in accordance with
IFRIC 14, the closing defined benefit surplus of this scheme has been recognised.
Fair value of scheme assets at 1 January 2019
Expected return on plan assets
Expected return on plan assets greater/less than discount rate
Cash contributions – employer
Administrative expenses
Cash contributions – employee
Benefits paid
Fair value of scheme assets at 31 December 2019
UK
£m
Company
£m
(580.3)
(83.7)
Other
£m
(7.1)
(3.3)
–
26.4
(0.6)
(15.6)
(54.4)
18.5
52.2
–
–
–
2.5
–
(2.4)
(13.8)
2.0
0.3
–
(557.1)
(95.1)
UK
£m
Company
£m
(620.0)
(90.8)
(4.0)
–
25.5
(0.7)
(14.9)
26.4
8.5
(1.1)
–
–
(0.9)
2.9
–
(2.2)
7.4
2.2
(2.3)
–
(580.3)
(83.7)
–
–
0.1
–
(0.3)
(0.6)
–
–
(0.2)
(8.1)
Other
£m
(6.7)
–
–
0.1
–
(0.1)
0.2
–
–
(0.6)
(7.1)
UK
£m
Company
£m
Other
£m
453.0
12.2
8.9
9.9
(0.2)
0.6
(26.4)
458.0
98.6
2.8
10.8
–
(0.4)
–
(2.5)
109.3
2.7
0.1
0.2
0.1
–
–
(0.1)
3.0
Total
£m
(671.1)
(3.3)
–
29.0
(0.6)
(18.3)
(68.8)
20.5
52.5
(0.2)
(660.3)
Total
£m
(717.5)
(4.0)
(0.9)
28.5
(0.7)
(17.2)
34.0
10.7
(3.4)
(0.6)
(671.1)
Total
£m
554.3
15.1
19.9
10.0
(0.6)
0.6
(29.0)
570.3
197
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
186
34 Pensions and other post-employment benefits continued
Fair value of scheme assets at 1 January 2018
Expected return on plan assets
Expected return on plan assets greater/less than discount rate
Cash contributions – employer
Administrative expenses
Cash contributions – employee
Benefits paid
Fair value of scheme assets at 31 December 2018
History of experience gains and losses:
UK
Fair value of scheme assets
Present value of defined benefit obligation
Asset ceiling
Deficit in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
Company
Fair value of scheme assets
Present value of defined benefit obligation
Surplus in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
Other
Fair value of scheme assets
Present value of defined benefit obligation
Members’ share of deficit
(Deficit)/surplus in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
UK
£m
486.2
11.7
(30.0)
10.1
(0.2)
0.7
(25.5)
453.0
2018
£m
453.0
(580.3)
–
(127.3)
(1.1)
(30.0)
98.6
(83.7)
14.9
(2.3)
(35.6)
2.7
(7.1)
–
(4.4)
–
–
Company
£m
Other
£m
134.0
3.3
(35.6)
–
(0.2)
–
(2.9)
98.6
2017
£m
486.2
(620.0)
–
(133.8)
(4.3)
20.2
134.0
(90.8)
43.2
–
(0.4)
2.8
(6.7)
–
(3.9)
–
0.2
2.8
–
–
0.1
(0.1)
–
(0.1)
2.7
2016
£m
542.4
(658.1)
(12.8)
(128.5)
1.3
57.8
134.2
(89.7)
44.5
(0.3)
28.1
2.6
(6.8)
–
(4.2)
0.1
0.3
Total
£m
623.0
15.0
(65.6)
10.2
(0.5)
0.7
(28.5)
554.3
2015
£m
484.2
(529.4)
(15.2)
(60.4)
3.2
(7.9)
105.1
(70.2)
34.9
–
(2.2)
89.7
(90.4)
13.6
12.9
4.2
1.1
2019
£m
458.0
(557.1)
–
(99.1)
52.2
8.9
109.3
(95.1)
14.2
0.3
10.8
3.0
(8.1)
–
(5.1)
–
0.2
The cumulative amount of actuarial gains and losses recognised in the Statement of Comprehensive Income since 1 January 2004 is a
£129.3m loss (2018: £153.1m loss). The Directors are unable to determine how much of the pension scheme deficit recognised on
transition to IFRS and taken directly to equity of £51.9m is attributable to actuarial gains and losses since inception of those pension
schemes. Consequently the Directors are unable to determine the amount of actuarial gains and losses that would have been recognised
in the Statement of Comprehensive Income before 1 January 2004.
198
National Express Group PLC Annual Report 2019
34 Pensions and other post-employment benefits continued
Fair value of scheme assets at 1 January 2018
Expected return on plan assets
Expected return on plan assets greater/less than discount rate
Cash contributions – employer
Administrative expenses
Cash contributions – employee
Benefits paid
Fair value of scheme assets at 31 December 2018
History of experience gains and losses:
UK
Fair value of scheme assets
Present value of defined benefit obligation
Asset ceiling
Deficit in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
Company
Fair value of scheme assets
Present value of defined benefit obligation
Surplus in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
Other
Fair value of scheme assets
Present value of defined benefit obligation
Members’ share of deficit
(Deficit)/surplus in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
UK
£m
486.2
11.7
(30.0)
10.1
(0.2)
0.7
(25.5)
453.0
2018
£m
453.0
(580.3)
–
(127.3)
(1.1)
(30.0)
98.6
(83.7)
14.9
(2.3)
(35.6)
2.7
(7.1)
(4.4)
–
–
–
Company
Other
£m
134.0
3.3
(35.6)
(0.2)
–
–
(2.9)
98.6
2017
£m
486.2
(620.0)
–
(133.8)
(4.3)
20.2
134.0
(90.8)
43.2
–
(0.4)
2.8
(6.7)
(3.9)
–
–
0.2
£m
2.8
–
–
0.1
(0.1)
–
(0.1)
2.7
2016
£m
542.4
(658.1)
(12.8)
(128.5)
1.3
57.8
134.2
(89.7)
44.5
(0.3)
28.1
2.6
(6.8)
–
(4.2)
0.1
0.3
Total
£m
623.0
15.0
(65.6)
10.2
(0.5)
0.7
(28.5)
554.3
2015
£m
484.2
(529.4)
(15.2)
(60.4)
3.2
(7.9)
105.1
(70.2)
34.9
–
(2.2)
89.7
(90.4)
13.6
12.9
4.2
1.1
2019
£m
458.0
(557.1)
–
(99.1)
52.2
8.9
109.3
(95.1)
14.2
0.3
10.8
3.0
(8.1)
(5.1)
–
–
0.2
The cumulative amount of actuarial gains and losses recognised in the Statement of Comprehensive Income since 1 January 2004 is a
£129.3m loss (2018: £153.1m loss). The Directors are unable to determine how much of the pension scheme deficit recognised on
transition to IFRS and taken directly to equity of £51.9m is attributable to actuarial gains and losses since inception of those pension
schemes. Consequently the Directors are unable to determine the amount of actuarial gains and losses that would have been recognised
in the Statement of Comprehensive Income before 1 January 2004.
186
187
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
35 Leases
Group as a lessee
The Group has lease contracts for various items of property, vehicles, plant and other equipment. Lease terms are negotiated on an
individual basis, contain a wide range of different terms and conditions and may include extension and termination options. These options
are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs.
Management exercises judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Group’s obligations under its leases are secured by the lessor’s title to the leased assets.
(a) Amounts recognised in the Balance Sheet
Set out below is the net book value of right-of-use assets and additions during the year (included in property, plant and equipment – note 15):
Plant and
equipment,
fixtures
and fittings
£m
0.1
(0.7)
1.5
2019
£m
97.8
309.7
407.5
Right-of-use assets
Additions
Depreciation charge
Net book value at 31 December 2019
Land
and
buildings
£m
30.1
(28.7)
118.2
Public
service
vehicles
£m
74.1
(41.3)
265.5
Set out below are the carrying amounts of lease liabilities (included in borrowings – note 29) at 31 December 2019:
Lease liabilities
Current
Non-current
The maturity analysis of lease liabilities is presented in note 29.
(b) Amounts recognised in the Income Statement
Depreciation expense on right-of use assets
Interest on lease liabilities
Interest income on sub-leases
Variable lease payments (included in operating costs)
Expenses relating to short-term leases (included in operating costs)
Expenses relating to leases of low-value assets (included in operating costs)
Income from sub-leasing right-of-use assets (included in other revenue)
Gains and losses arising from sale and leaseback transactions
Total
£m
104.3
(70.7)
385.2
2018
£m
48.0
94.6
142.6
2019
£m
70.7
12.8
(0.2)
–
10.3
7.6
(1.6)
(6.8)
It is not expected that commitments for short-term leases will materially differ from those in place at 31 December 2019.
(c) Amounts recognised in the Cash Flow
Total cash outflow for leases
2019
£m
(91.1)
2018
£m
(49.9)
199
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
188
35 Leases continued
(d) Extension and termination options
Some property and vehicle leases contain extension or termination options exercisable by the Group before the end of the non-
cancellable contract period. Where practicable, the Group seeks to include extension or termination options in new leases to provide
operational flexibility. The extension and termination options held are exercisable only by the Group and not by the lessors. The Group
assesses at lease commencement date whether it is reasonably certain to exercise the extension or termination options and reassesses
these assumptions when there is a significant event or significant change in circumstances within its control. Where the Group determines
it is reasonably certain that a termination option will be exercised, any termination penalty is included in the lease liability.
The Group has estimated that the potential future lease payments, should it exercise the extension or termination options, would result in
an immaterial change in the lease liability.
(e) Variable lease payments
The Group does not have variable lease payments that are not included in the lease liability.
(f) Residual value guarantees
The Group has a small number of leased vehicles with residual value guarantees. At the lease commencement date the amounts
expected to be payable have been included in the lease liability.
(g) Future lease commitments
At the year end the Group had commitments relating to leases not yet commenced of £7.7m.
Group as a lessor
The Group entered into finance leasing arrangements as a lessor for certain vehicles to its customers. During 2019, the Group recognised
interest income on lease receivables of £0.2m (2018: £nil).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the
reporting date. Under IAS 17, the Group did not have any finance leases as a lessor.
Net investment in the lease
Finance lease receivable
1-5 years
£m
> 5 years
£m
Total
undiscounted
lease
receivable
£m
Unearned
finance
income
£m
Net
investment in
the lease
£m
3.5
0.4
5.5
(0.5)
5.0
< 1 year
£m
1.6
The maturity analysis of the discounted lease payments are as follows:
Net investment in the lease
Current
Non-current
2019
£m
1.4
3.6
5.0
2018
£m
–
–
–
The Group also sub-leases some of its property and public service vehicles. The Group has classified these sub-leases as operating
leases, because they do not transfer substantially all of the risks and rewards incidental to the right-of-use assets. The following table sets
out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date.
Operating leases under IFRS 16
Operating lease receipts
< 1 year
£m
1 – 2 years
£m
2 – 3 years
£m
3 – 4 years
£m
4 – 5 years
£m
> 5 years
£m
2.1
2.1
2.0
0.9
0.3
0.1
Total
£m
7.5
200
National Express Group PLC Annual Report 2019
188
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
189
35 Leases continued
(d) Extension and termination options
36 Commitments and contingencies
(a) Capital commitments
Some property and vehicle leases contain extension or termination options exercisable by the Group before the end of the non-
cancellable contract period. Where practicable, the Group seeks to include extension or termination options in new leases to provide
operational flexibility. The extension and termination options held are exercisable only by the Group and not by the lessors. The Group
Contracted
2019
£m
141.7
2018
£m
62.6
assesses at lease commencement date whether it is reasonably certain to exercise the extension or termination options and reassesses
these assumptions when there is a significant event or significant change in circumstances within its control. Where the Group determines
it is reasonably certain that a termination option will be exercised, any termination penalty is included in the lease liability.
The Group has estimated that the potential future lease payments, should it exercise the extension or termination options, would result in
an immaterial change in the lease liability.
(e) Variable lease payments
(f) Residual value guarantees
The Group does not have variable lease payments that are not included in the lease liability.
The Group has a small number of leased vehicles with residual value guarantees. At the lease commencement date the amounts
expected to be payable have been included in the lease liability.
(g) Future lease commitments
At the year end the Group had commitments relating to leases not yet commenced of £7.7m.
Group as a lessor
The Group entered into finance leasing arrangements as a lessor for certain vehicles to its customers. During 2019, the Group recognised
interest income on lease receivables of £0.2m (2018: £nil).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the
reporting date. Under IAS 17, the Group did not have any finance leases as a lessor.
The maturity analysis of the discounted lease payments are as follows:
Net investment in the lease
Finance lease receivable
Net investment in the lease
Current
Non-current
< 1 year
1-5 years
> 5 years
receivable
£m
1.6
£m
3.5
£m
0.4
undiscounted
Unearned
finance
income
investment in
the lease
Total
lease
£m
5.5
Net
£m
5.0
2018
£m
–
–
–
£m
(0.5)
2019
£m
1.4
3.6
5.0
The Group also sub-leases some of its property and public service vehicles. The Group has classified these sub-leases as operating
leases, because they do not transfer substantially all of the risks and rewards incidental to the right-of-use assets. The following table sets
out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date.
Operating leases under IFRS 16
Operating lease receipts
< 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
> 5 years
£m
2.1
£m
2.1
£m
2.0
£m
0.9
£m
0.3
£m
0.1
Total
£m
7.5
The Group is committed to vehicle purchases and various land and buildings improvements.
(b) Contingent liabilities
Guarantees
The Group has guaranteed credit facilities totalling £13.4m (2018: £21.4m) of certain joint ventures.
Bonds and letters of credit
In the ordinary course of business, the Group is required to issue counter-indemnities in support of its operations. As at 31 December
2019, the Group had performance bonds in respect of businesses in the US of £157.9m (2018: £172.3m), in Spain of £83.6m (2018:
£46.0m), in Germany of £26.0m (2018: £11.3m) and in the Middle East of £6.2m (2018: £6.3m). Letters of credit have been issued to
support insurance retentions of £112.4m (2018: £118.2m).
Long-term contracts
The Group has a long-term service contract to operate Rhine-Ruhr Express train services on behalf of the Public Transport Authority in
Germany. Consideration for the Group’s services is fixed, with profitability under the contract dependent on the value of operating costs
incurred by the Group. Given the contract has only recently been mobilised and the wide range of operating cost outcomes, the Directors
are satisfied that, with mitigating actions available to the Group, it is possible, not probable, that the contract could be loss making in the
future.
Tax
Tax authorities in the markets in which we operate (UK, Spain, Germany, USA, Canada and Morocco) carry out tax audits from time to
time. As was detailed in note 10(d) tax provisions, the current ongoing tax audits relate to our Moroccan business. The Directors are
satisfied that, based on current knowledge, adequate tax provisions are held to cover any tax uncertainties. The Group had tax provisions
at 31 December 2019 of £10.8m (2018: £7.9m). There are no material contingent liabilities relating to tax.
37 Related party transactions
Joint ventures
Bahrain Public Transport Company W.L.L.
ALSA joint venture
Associates
ALSA associates
Total joint ventures and associates
Trade investments
ALSA trade investments
North America trade investments
Total investments
Property transactions
ALSA property transactions
North America property transactions
Total property transactions
Total other related parties
Total
Amount of
transactions
2019
£m
2018
£m
Amounts due from
related parties
2019
£m
2018
£m
Amounts due to
related parties
2019
£m
2018
£m
0.4
–
5.7
6.1
5.8
0.3
6.1
4.2
4.3
8.5
14.6
20.7
0.5
–
4.7
5.2
6.1
–
6.1
5.5
–
5.5
11.6
16.8
–
–
3.4
3.4
–
–
–
0.4
–
0.4
0.4
3.8
0.5
0.2
2.3
3.0
0.1
–
0.1
0.4
–
0.4
0.5
3.5
–
–
(1.3)
(1.3)
(0.1)
–
(0.1)
(0.5)
–
(0.5)
(0.6)
(1.9)
–
–
(1.0)
(1.0)
(0.9)
–
(0.9)
(0.7)
–
(0.7)
(1.6)
(2.6)
A number of Spanish companies have leased properties from companies related to the Cosmen family. Jorge Cosmen is a Non-Executive
Director of the Group and was appointed as Deputy Chairman in October 2008. These leases were in place before the Group’s acquisition
of ALSA and are at appropriate market rates.
The details of the post-employment benefit plans operated for the benefit of employees of the Group are disclosed in note 34.
201
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
190
37 Related party transactions continued
Compensation of key management personnel of the Group
Total compensation paid to key management personnel (note 7)
38 Service concession arrangements
The following table sets out the nature and extent of the Group’s service concession arrangements:
2019
£m
6.9
2018
£m
6.9
Concession period
Concession
commencement Nature of infrastructure
Classification under
IFRIC 12
Concession
German Rail
Moroccan Urban Bus
Description of the
arrangement
The Group operates
two train services in
Germany.
The Group has two
contracts with the
Moroccan authority for
the operation of public
transport bus services.
15 years
2015 – 2020
Rolling stock and tracks used in
the operation of the service are
provided by the delegating
authority.
15 years
September 2019 Public service vehicles used in
the operation are provided by
the Group.
Up to 15 years
November 2019
No financial or intangible
asset is recognised for
construction as the
infrastructure is provided to
the Group.
Intangible asset
Financial asset
Financial asset
Initially, public service vehicles
used in operation are provided
by the public authority.
Replacement
public service vehicles will
be provided by the Group
and public authority in
future years.
Public service vehicles used
in the operation are provided
by the Group.
Spanish Urban Bus
The Group has a
contract with the Spanish
government to operate
urban commuter coach
services in Spain.
10 years
August 2019
During the year no revenue or profit was recognised in exchanging construction services for financial or intangible assets.
202
National Express Group PLC Annual Report 2019
190
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
191
37 Related party transactions continued
Compensation of key management personnel of the Group
39 Cash flow statement
(a) Reconciliation of Group profit before tax to cash generated from operations
Total compensation paid to key management personnel (note 7)
38 Service concession arrangements
The following table sets out the nature and extent of the Group’s service concession arrangements:
2019
£m
6.9
2018
£m
6.9
Concession
German Rail
Concession period
commencement Nature of infrastructure
IFRIC 12
Concession
Classification under
Moroccan Urban Bus
The Group has two
15 years
September 2019 Public service vehicles used in
Intangible asset
the operation of the service are
asset is recognised for
provided by the delegating
construction as the
authority.
infrastructure is provided to
the Group.
Up to 15 years
November 2019
Initially, public service vehicles
Financial asset
the operation are provided by
the Group.
used in operation are provided
by the public authority.
Replacement
public service vehicles will
be provided by the Group
and public authority in
future years.
in the operation are provided
by the Group.
Description of the
arrangement
two train services in
Germany.
contracts with the
Moroccan authority for
the operation of public
transport bus services.
contract with the Spanish
government to operate
urban commuter coach
services in Spain.
Spanish Urban Bus
The Group has a
10 years
August 2019
Public service vehicles used
Financial asset
During the year no revenue or profit was recognised in exchanging construction services for financial or intangible assets.
The Group operates
15 years
2015 – 2020
Rolling stock and tracks used in
No financial or intangible
Gain on disposal of property, plant and equipment
Total operations
Profit before tax from continuing operations
Loss before tax from discontinued operations (note 11)
Total profit before tax
Net finance costs
Share of results from associates and joint ventures
Depreciation of property, plant and equipment
Intangible asset amortisation
Amortisation of fixed asset grants
Gain on disposal of intangible assets
Share-based payments
Increase in inventories
Increase in receivables
Increase in payables
Decrease in provisions
Cash generated from operations
(b) Analysis of changes in net debt
Components of financing activities:
Bank and other loans1
Bonds
Fair value of interest rate derivatives
Fair value of foreign exchange forward contracts
Cross currency swaps
Net lease liabilities2
Other debt payable
At
1 January
2019
£m
(9.0)
(852.4)
6.6
(6.8)
(0.2)
(356.3)
(73.7)
2019
£m
187.0
–
187.0
55.7
(0.4)
203.1
59.7
(1.3)
(10.3)
(3.6)
6.4
(2.6)
(75.0)
46.2
(26.7)
438.2
2018
£m
177.7
(1.7)
176.0
38.6
(0.9)
133.8
47.0
(0.5)
(8.4)
(8.3)
6.4
(1.4)
(57.7)
86.3
(49.7)
361.2
Cash flow
£m
Acquisitions
and disposals
£m
Exchange
differences
£m
Other
movements
£m
At
31 December
2019
£m
(169.8)
(244.6)
–
(20.8)
–
91.1
–
(0.7)
–
–
–
–
(42.6)
–
(43.3)
4.3
–
–
4.3
–
–
(39.0)
(5.1)
13.4
(0.2)
7.2
–
12.3
4.4
32.0
(4.5)
–
–
(4.5)
–
(7.2)
20.3
0.1
1.7
(3.1)
–
11.9
(107.0)
1.0
(95.4)
–
–
–
–
–
–
(184.5)
(1,081.9)
3.3
(20.4)
11.7
(402.5)
(68.3)
(1,742.6)
111.2
2.1
365.0
478.3
2.4
20.4
(95.4)
(1,241.5)
Total components of financing activities
(1,291.8)
(344.1)
Cash
Overnight deposits
Other short-term deposits
Cash and cash equivalents
Other debt receivables
Remove: fair value of foreign exchange forward contracts
Net debt3
74.6
1.9
41.2
117.7
2.1
6.8
(1,165.2)
36.8
0.2
323.8
360.8
0.3
20.8
37.8
1 Net of arrangement fees totalling £2.7m on bank and other loans
2 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’ (see note 1). The closing balance is inclusive of finance leases receivables which are
reported separately from borrowings on the face of the Group’s Balance Sheet
3 Excludes accrued interest on long-term borrowings
203
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
192
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
39 Cash flow statement continued
For the purpose of calculating the Group’s financial covenants, net debt is retranslated using the average exchanges rates for the year to
31 December 2019, resulting in adjusted net debt of £1,266.0m (2018: £939.8m).
Short-term deposits relate to term deposits repayable within three months.
Borrowings include non-current interest-bearing borrowings of £1,104.9m (2018: £1,029.3m) as disclosed in note 28.
Other non-cash movements represent lease additions and disposals of £107.0m (2018: £5.4m), an £11.9m increase in the fair value of the
cross currency swaps (2018: £nil) and a £0.7m net reduction from the amortisation of loan and bond arrangement fees (2018: £0.3m). A
£3.1m decrease in the fair value of the hedging derivatives is offset by opposite movements in the fair value of the related hedged
borrowings. This comprises a £2.1m fair value increase in bonds and a £1.0m fair value increase in other debt payable.
Cash flow
£m
Acquisitions
and disposals
£m
Exchange
differences
£m
Other
movements
£m
At
31 December
2018
£m
Components of financing activities:
Bank and other loans1
Bonds
Fair value of interest rate derivatives
Fair value of foreign exchange swaps
Cross currency swaps
Lease liabilities
Other debt payable
Total components of financing activities
Cash
Overnight deposits
Other short-term deposits
Cash and cash equivalents
Other debt receivables
Remove: fair value of foreign exchange swaps
Net debt2
At
1 January
2018
£m
(115.6)
(851.9)
10.3
1.5
1.0
(173.1)
(73.6)
(1,201.4)
100.7
4.9
208.7
314.3
0.7
(1.5)
(887.9)
93.0
–
–
20.0
7.6
49.9
–
170.5
(50.7)
(3.0)
(167.5)
(221.2)
1.4
(20.0)
(69.3)
(1.7)
–
–
–
–
(6.7)
–
(8.4)
22.7
–
–
22.7
–
–
14.3
14.7
(2.6)
–
(28.3)
(8.8)
(7.3)
(0.8)
(33.1)
1.9
–
–
1.9
–
28.3
(2.9)
0.6
2.1
(3.7)
–
–
(5.4)
0.7
(5.7)
–
–
–
–
–
–
(9.0)
(852.4)
6.6
(6.8)
(0.2)
(142.6)
(73.7)
(1,078.1)
74.6
1.9
41.2
117.7
2.1
6.8
(5.7)
(951.5)
2019
£m
365.1
0.3
(366.6)
(1.2)
(75.1)
(76.3)
(1,165.2)
(1,241.5)
2018
£m
(198.5)
1.4
142.1
(55.0)
(8.6)
(63.6)
(887.9)
(951.5)
1 Net of arrangement fees totalling £2.6m on bank and other loans
2 Excludes accrued interest on long-term borrowings
(c) Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents in the year
Cash inflow from movement in other debt receivables
Cash (outflow)/inflow from movement in debt and leases liabilities
Change in net debt resulting from cash flows
Change in net debt resulting from non-cash movements
Movement in net debt in the year
Opening net debt1
Net debt
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’
204
National Express Group PLC Annual Report 2019
192
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Short-term deposits relate to term deposits repayable within three months.
Borrowings include non-current interest-bearing borrowings of £1,104.9m (2018: £1,029.3m) as disclosed in note 28.
Other non-cash movements represent lease additions and disposals of £107.0m (2018: £5.4m), an £11.9m increase in the fair value of the
cross currency swaps (2018: £nil) and a £0.7m net reduction from the amortisation of loan and bond arrangement fees (2018: £0.3m). A
£3.1m decrease in the fair value of the hedging derivatives is offset by opposite movements in the fair value of the related hedged
borrowings. This comprises a £2.1m fair value increase in bonds and a £1.0m fair value increase in other debt payable.
Acquisitions
Exchange
Other
31 December
Cash flow
and disposals
differences
movements
£m
£m
£m
£m
Components of financing activities:
Bank and other loans1
Bonds
Fair value of interest rate derivatives
Fair value of foreign exchange swaps
Total components of financing activities
Cross currency swaps
Lease liabilities
Other debt payable
Cash
Overnight deposits
Other short-term deposits
Cash and cash equivalents
Other debt receivables
Remove: fair value of foreign exchange swaps
Net debt2
At
1 January
2018
£m
(115.6)
(851.9)
10.3
1.5
1.0
(173.1)
(73.6)
(1,201.4)
100.7
4.9
208.7
314.3
0.7
(1.5)
(887.9)
93.0
–
–
20.0
7.6
49.9
–
170.5
(50.7)
(3.0)
(167.5)
(221.2)
1.4
(20.0)
(69.3)
(1.7)
–
–
–
–
–
–
–
–
–
(6.7)
(8.4)
22.7
22.7
14.3
14.7
(2.6)
–
(28.3)
(8.8)
(7.3)
(0.8)
(33.1)
1.9
1.9
–
–
–
28.3
(2.9)
1 Net of arrangement fees totalling £2.6m on bank and other loans
2 Excludes accrued interest on long-term borrowings
(c) Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents in the year
Cash inflow from movement in other debt receivables
Cash (outflow)/inflow from movement in debt and leases liabilities
Change in net debt resulting from cash flows
Change in net debt resulting from non-cash movements
Movement in net debt in the year
Opening net debt1
Net debt
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’
At
2018
£m
(9.0)
(852.4)
6.6
(6.8)
(0.2)
(142.6)
(73.7)
(1,078.1)
74.6
1.9
41.2
117.7
2.1
6.8
2018
£m
(198.5)
1.4
142.1
(55.0)
(8.6)
(63.6)
(887.9)
(951.5)
0.6
2.1
(3.7)
(5.4)
0.7
(5.7)
–
–
–
–
–
–
–
–
2019
£m
365.1
0.3
(366.6)
(1.2)
(75.1)
(76.3)
(1,165.2)
(1,241.5)
(5.7)
(951.5)
39 Cash flow statement continued
For the purpose of calculating the Group’s financial covenants, net debt is retranslated using the average exchanges rates for the year to
31 December 2019, resulting in adjusted net debt of £1,266.0m (2018: £939.8m).
40 Subsidiary undertakings and other significant holdings
A full list of subsidiaries, joint ventures and companies in which National Express Group PLC has a controlling interest as at 31 December
2019 is shown below, along with the country of incorporation and the effective percentage of equity owned.
Name and country of incorporation
United Kingdom & Ireland
Airlinks The Airport Coach Company Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
Altram LRT Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
Brooke Management Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
Central Trains Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
E Clarke & Son (Coaches) Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
Eurolines (UK) Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
Clarkes Holdco Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD, (previously Helium Miracle 236 Limited)
Inter-Capital and Regional Rail Limited, National Express House,
Mill Lane, Digbeth, Birmingham, B5 6DD
London Eastern Railway Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
Maintrain Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
Midland Main Line Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
National Express Bus & Coach Services Limited, 4th Floor, 7/8
Wilton Terrace, Dublin 2, Ireland
National Express East Anglia Trains Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express European Holdings Limited (05652775)*,
National Express House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Finance Company Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Financing LP, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
National Express Group Holdings Limited (04339932)*, National
Express House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Holdings Limited (02156473)*, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Intermediate Holdings Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express International Limited, National Express House,
Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
National Express Manchester Metrolink Limited, 51 Bordesley
Green, Birmingham, B9 4BZ
National Express North America Holdings Limited (07855182)*,
National Express House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Operations (Stansted) Limited, Heathrow Coach
Centre, Sipson Road, West Drayton, Middlesex, UB7 0HN
National Express Operations Limited, Heathrow Coach Centre,
Sipson Road, West Drayton, Middlesex, UB7 0HN
% equity
interest
100
100
100
100
100
100
100
40
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name and country of incorporation
National Express Petermann UK Limited (07855188)*, National
Express House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Rail Replacement Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Services Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
National Express Spanish Holdings Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express Trains Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
National Express Transport Holdings Limited (04338163)*,
National Express House, Mill Lane, Digbeth, Birmingham, B5 6DD
National Express UK Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
NE Canada Limited (08596333)*, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
NE Durham UK Limited (08270480)*, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
NE Europe Finance Limited (07876047)*, National Express House,
Mill Lane, Digbeth, Birmingham, B5 6DD
NE No.1 Ltd, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NE No.2 Ltd, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NE No. 3 Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NE Trains South Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
National Express Middle East Plc (previously NX Bahrain Bus
Company Plc), National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NX Crossrail Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NX Services Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NXEA Trains Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NXEC Trains Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
NXSR Trains Limited, National Express House, Mill Lane, Digbeth,
Birmingham, B5 6DD
Scotrail Railways Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
Silverlink Train Services Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
Speedlink Airport Services Limited, National Express House, Mill
Lane, Digbeth, Birmingham, B5 6DD
Stewarts Coach Group Limited, National Express House
Birmingham Coach Station, Mill Lane, Digbeth, Birmingham,
England, B5 6DD
% equity
interest
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
193
205
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
194
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Stewarts Coaches Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
Taybus Holdings Limited, 44/48 East Dock Street, Dundee, DD1 3JS
Tayside Public Transport Co. Limited, 44/48 East Dock Street,
Dundee, DD1 3JS
The Kings Ferry Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
Travel Birmingham Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
Travel Coventry Limited (previously WM Card Systems Limited),
51 Bordesley Green, Birmingham, B9 4BZ
Travel Dundee Limited, 44/48 East Dock Street, Dundee, DD1 3JS
Travel Merryhill Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Travel West Midlands Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
Travel WM Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Travel Yourbus Limited, 51 Bordesley Green, Birmingham, B9 4BZ
West Anglia Great Northern Railway Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
West Midlands Accessible Transport Limited (previously Travel
Coventry Limited), 51 Bordesley Green, Birmingham, B9 4BZ
West Midlands Transport Information Services Limited, Unit 8 −
Pendeford Place, Pendeford Business Park, Wobaston Road,
Wolverhampton, WV9 5HD
West Midlands Travel Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
WM Property Holdings Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
WM Travel Limited, 51 Bordesley Green, Birmingham, B9 4BZ
WM Ventures Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Woods Coaches Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
Woods Reisen Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
Canada
National Express Canada (Holdings) Limited, 40 King Street West,
Suite 5800, Toronto, ON M5H 3S1 Canada
National Express Canada Transit Ltd., 40 King Street West, Suite
5800, Toronto, ON M5H 3S1 Canada
Stock Transportation Ltd., 40 King Street West, Suite 5800,
Toronto, ON M5H 3S1 Canada
US
"The Provider" Enterprises, Inc., 9 Capitol Street, Concord, NH 03301
A1A Transportation, Inc., 1200 Pine Island Road, Plantation,
FL 33324
Aristocrat Limousine and Bus, Inc., 820 Bear Tavern Road, West
Trenton, NJ 08628
A&S Transportation Incorporated, 1200 Pine Island Road,
Plantation, FL 33324
Atlantic & Southern Transportation, 289 Culver Street,
Lawrenceville, GA 30046
Atlantic & Southern Transportation, 3867 Plaza Tower Drive,
Baton Rouge, LA 70816
% equity
interest
100
100
100
100
100
100
100
100
100
100
100
100
100
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name and country of incorporation
Atlantic & Southern Transportation, 150 Market Street, Suite 800,
Indianapolis, IN 46204
Beck Bus Transportation Corp., 208 S. LaSalle Street, Chicago,
County of Cook, IL 60604
Beck Bus Transportation III, LLC, 208 S. LaSalle Street, Chicago,
County of Cook, IL 60604
Beck Bus Transportation IV, LLC, 208 S. LaSalle Street, Chicago,
County of Cook, IL 60604
Beck Bus Transportation, LLC, 208 S. LaSalle Street, Chicago,
County of Cook, IL 60604
Bus Co., Inc., 208 S. LaSalle Street, Chicago, County of Cook, IL
60604
Caravan Leasing Vehicles LLC, 8020 Excelsior Drive, Suite 200,
Madison, WI 53717
Carrier Management Corporation, 600 N. 2nd Street, Suite 401,
Harrisburg, PA 17101-1071
Chicagoland Coach Lines LLC, 1209 Orange Street, Wilmington,
DE 19801-1120
Community Transportation, Inc., 600 N. 2nd Street, Suite 401,
Harrisburg, PA 17101-1071
Cook-DuPage Transportation Company, Inc., 208 S. LaSalle
Street, Chicago, IL 60604
Diamond Transportation Services, Inc., 4701 Cox Road, Glen
Allen, County of Henrico, VA 23060
Discount Enterprises, Inc., 3800 North Central Avenue, Ste. 460
Phoenix, AZ 85012
Durham D&M LLC, 1209 Orange Street, Corporation Trust Center,
New Castle County, Wilmington, DE 19801-1120
Durham Holding I, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Durham Holding II, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Durham School Services, L.P., 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Fox Bus Lines Inc., 155 Federal Street, Suite 700, Boston, MA 02110
Greensburg Yellow Cab Co., 600 N. 2nd Street, Suite 401,
Harrisburg, PA 17101-1071
Haid Acquisitions LLC, 4400 Easton Commons Way, Suite 125,
Columbus, OH 43219
JNC Leasing, Inc., 40600 Ann Arbor Road E., Suite 201,
Plymouth, MI 48170-4675
Kiessling Transit, Inc., 155 Federal Street, Suite 700, Boston,
MA 02110
Meda-Care Vans of Waukesha, Inc., 301 S. Bedford St., Suite 1,
Madison, WI 53703
MF Petermann Investment Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
19801-1120
Monroe School Transportation, Inc., 28 Liberty Street, New York,
NY 10005
MV Student Transportation, Inc., 40 West Lawrence, Suite A,
Helena, Montana 59601
National Express Acquisition Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
19801-1120
% equity
interest
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
206
National Express Group PLC Annual Report 2019
194
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
40 Subsidiary undertakings and other significant holdings continued
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Stewarts Coaches Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
% equity
interest
Name and country of incorporation
% equity
interest
Atlantic & Southern Transportation, 150 Market Street, Suite 800,
Taybus Holdings Limited, 44/48 East Dock Street, Dundee, DD1 3JS
Beck Bus Transportation Corp., 208 S. LaSalle Street, Chicago,
Tayside Public Transport Co. Limited, 44/48 East Dock Street,
Dundee, DD1 3JS
The Kings Ferry Limited, National Express House, Mill Lane,
Digbeth, Birmingham, B5 6DD
Travel Birmingham Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
Travel Coventry Limited (previously WM Card Systems Limited),
51 Bordesley Green, Birmingham, B9 4BZ
Travel Dundee Limited, 44/48 East Dock Street, Dundee, DD1 3JS
Travel Merryhill Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Travel West Midlands Limited, 51 Bordesley Green, Birmingham,
B9 4BZ
Travel WM Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Indianapolis, IN 46204
County of Cook, IL 60604
County of Cook, IL 60604
County of Cook, IL 60604
Beck Bus Transportation III, LLC, 208 S. LaSalle Street, Chicago,
Beck Bus Transportation IV, LLC, 208 S. LaSalle Street, Chicago,
Beck Bus Transportation, LLC, 208 S. LaSalle Street, Chicago,
County of Cook, IL 60604
Bus Co., Inc., 208 S. LaSalle Street, Chicago, County of Cook, IL
60604
Madison, WI 53717
Caravan Leasing Vehicles LLC, 8020 Excelsior Drive, Suite 200,
Carrier Management Corporation, 600 N. 2nd Street, Suite 401,
Harrisburg, PA 17101-1071
Chicagoland Coach Lines LLC, 1209 Orange Street, Wilmington,
Travel Yourbus Limited, 51 Bordesley Green, Birmingham, B9 4BZ
DE 19801-1120
West Anglia Great Northern Railway Limited, National Express
House, Mill Lane, Digbeth, Birmingham, B5 6DD
West Midlands Accessible Transport Limited (previously Travel
Coventry Limited), 51 Bordesley Green, Birmingham, B9 4BZ
West Midlands Transport Information Services Limited, Unit 8 −
Pendeford Place, Pendeford Business Park, Wobaston Road,
Wolverhampton, WV9 5HD
Community Transportation, Inc., 600 N. 2nd Street, Suite 401,
100
Harrisburg, PA 17101-1071
Cook-DuPage Transportation Company, Inc., 208 S. LaSalle
100
Street, Chicago, IL 60604
Diamond Transportation Services, Inc., 4701 Cox Road, Glen
Allen, County of Henrico, VA 23060
Discount Enterprises, Inc., 3800 North Central Avenue, Ste. 460
West Midlands Travel Limited, 51 Bordesley Green, Birmingham,
Phoenix, AZ 85012
B9 4BZ
B9 4BZ
Canada
US
FL 33324
WM Property Holdings Limited, 51 Bordesley Green, Birmingham,
WM Travel Limited, 51 Bordesley Green, Birmingham, B9 4BZ
WM Ventures Limited, 51 Bordesley Green, Birmingham, B9 4BZ
Woods Coaches Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
Woods Reisen Limited, National Express House Birmingham
Coach Station, Mill Lane, Digbeth, Birmingham, England, B5 6DD
National Express Canada (Holdings) Limited, 40 King Street West,
Suite 5800, Toronto, ON M5H 3S1 Canada
National Express Canada Transit Ltd., 40 King Street West, Suite
5800, Toronto, ON M5H 3S1 Canada
Stock Transportation Ltd., 40 King Street West, Suite 5800,
Toronto, ON M5H 3S1 Canada
"The Provider" Enterprises, Inc., 9 Capitol Street, Concord, NH 03301
A1A Transportation, Inc., 1200 Pine Island Road, Plantation,
Aristocrat Limousine and Bus, Inc., 820 Bear Tavern Road, West
Trenton, NJ 08628
Plantation, FL 33324
A&S Transportation Incorporated, 1200 Pine Island Road,
Atlantic & Southern Transportation, 289 Culver Street,
Lawrenceville, GA 30046
Atlantic & Southern Transportation, 3867 Plaza Tower Drive,
Baton Rouge, LA 70816
Durham D&M LLC, 1209 Orange Street, Corporation Trust Center,
New Castle County, Wilmington, DE 19801-1120
Durham Holding I, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Durham Holding II, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Durham School Services, L.P., 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Fox Bus Lines Inc., 155 Federal Street, Suite 700, Boston, MA 02110
Greensburg Yellow Cab Co., 600 N. 2nd Street, Suite 401,
Harrisburg, PA 17101-1071
100
Haid Acquisitions LLC, 4400 Easton Commons Way, Suite 125,
100
JNC Leasing, Inc., 40600 Ann Arbor Road E., Suite 201,
100
Kiessling Transit, Inc., 155 Federal Street, Suite 700, Boston,
Columbus, OH 43219
Plymouth, MI 48170-4675
MA 02110
Madison, WI 53703
Meda-Care Vans of Waukesha, Inc., 301 S. Bedford St., Suite 1,
MF Petermann Investment Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
Monroe School Transportation, Inc., 28 Liberty Street, New York,
19801-1120
NY 10005
MV Student Transportation, Inc., 40 West Lawrence, Suite A,
Helena, Montana 59601
National Express Acquisition Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
19801-1120
100
100
100
100
100
100
100
100
100
100
100
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name and country of incorporation
National Express Durham Holding Corporation, 1209 Orange
Street, Corporation Trust Center, New Castle County, Wilmington,
DE 19801-1120
National Express Leasing Company LLC, 1209 Orange Street,
Wilmington, DE 19801-1120
National Express LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
National Express Transit Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
19801-1120
National Express Transit Services Corporation, 1209 Orange
Street, Corporation Trust Center, New Castle County, Wilmington,
DE 19801-1120
New Dawn Transit LLC, 28 Liberty Street, New York, NY 10005
NU Express LLC, 1209 Orange Street, Wilmington, DE 19801-1120
Petermann Acquisition Co., LLC, 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Petermann Acquisition Corporation, 1209 Orange Street,
Corporation Trust Center, New Castle County, Wilmington, DE
19801-1120
Petermann Holding Co., LLC, 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Petermann Ltd., 4400 Easton Commons Way, Columbus, County
of Franklin, OH 43219
Petermann Northeast, LLC, 4400 Easton Commons Way,
Columbus, County of Franklin, OH 43219
Petermann Northwest, LLC, 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Petermann Partners, Inc., 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Petermann Southwest, LLC, 1209 Orange Street, Corporation
Trust Center, New Castle County, Wilmington, DE 19801-1120
Petermann STS, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Petermann STSA, LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
PM2 Co. LLC, 1209 Orange Street, Corporation Trust Center,
New Castle County, Wilmington, DE 19801-1120
Quality Bus Service, LLC, 28 Liberty Street, New York, NY 10005
Queen City Transportation, LLC, 4400 East Commons Way, Suite
125, Columbus, OH 43219
Rainbow Management Service, Inc., 28 Liberty Street, New York,
NY 10005
Safeway Training and Transportation Services, Inc., 9 Capitol
Street, Concord, NH 03301
Septran, Inc., 150 West Market Street, Suite 800, Indianapolis,
IN 46204
Smith Bus Service, Inc., 2405 York Road, Ste. 201, Lutherville
Timonium, MD 21093-2264
Suburban Paratransit Services, Inc., 28 Liberty Street, New York,
NY 10005
Total Transit Enterprises, LLC, 12815 N 39th Avenue, Phoenix,
AZ 85029
% equity
interest
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name and country of incorporation
Trans Express, Inc., 28 Liberty Street, New York, NY 10005
Transit Express, Inc., 301 S. Bedford St., Suite 1, Madison, WI
53703
Transit Express Services, Inc., 301 S. Bedford St., Suite 1,
Madison, WI 53703
Trinity, Inc., 40600 Ann Arbor Road E., Suite 201, Plymouth, MI
48170-4675
Trinity Cars, Inc., 40600 Ann Arbor Road E., Suite 201, Plymouth,
MI 48170-4675
Trinity Coach LLC, 40600 Ann Arbor Road E., Suite 201,
Plymouth, MI 48170-4675
Trinity Management Services Co. LLC, 4624 13th St., Wyandotte,
MI 48192
Trinity Student Delivery LLC, 40600 Ann Arbor Road E., Suite 201,
Plymouth, MI 48170-4675
TWB Transport, LLC, 208 S. LaSalle Street, Chicago, County of
Cook, IL 60604
WeDriveU America LLC, 150 West Market Street, Suite 800
Indianapolis, IN, 46204
WeDriveU Inc., 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA 95833
WeDriveU Canada Inc., 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA 95833
WeDriveU Holdings, Inc., 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA 95833
WeDriveU Leasing Inc., 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA 95833
White Plains Bus Co., Inc., 28 Liberty Street, New York, NY 10005
Whitetail Bid Co., LLC, 1209 Orange Street, Corporation Trust
Center, New Castle County, Wilmington, DE 19801-1120
Wise Coaches, Inc., 300 Montvue Road, Knoxville, TN 37919
Andorra
Estació 2017, S.A. Carrer de la Cúria, s/n, Andorra la Vella
Estació d'Autobusos d'Andorra, Av. de Tarragona, 42, AD500
Andorra la Vella
Transports Dels Pirineus, - Carrer de la Cúria, s/n – Andorra la Vella
France
Iberolines, 41 Boulevard Poniatowski, 75012, Paris
SARL Chamexpress.com, 498 Avenue des Alpages,
74310 Les Houches
Morocco
Alsa al Baida, twin center ang bd zerktouni et al massira etg 5 et
6, Casablanca
Alsa City Agadir S.A., Rue De Teheran, Q.I Agadir
Alsa City Sightseeing Maroc, Ahwaz, Ferme Ahzib Achayech
Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Alsa City Tour S.A.R.L., Ahwaz, Ferme Ahzib Achayech Ferkat Ain
Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Alsa Education a la Sécurité Routière S.A.R.L., Ahwaz, Ferme
Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat
Saada, Marrakech
195
% equity
interest
100
100
100
100
100
100
100
100
100
100
60
60
60
60
100
100
100
11
100
100
46
100
100
100
100
95
98
207
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
196
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Alsa Khouribga S.A., No 22 Rue Meknes Hay Haboub, Khouribga
Alsa Tanger S.A., 37 Rue Omar Ibn Khattab, Immeuble
Maspalomas 2, Tanger
Centre de Formation Techn. Profes. Transport S.A.R.L., Ahwaz,
Ferme Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et
Kiadat Saada, Marrakech
Groupe Alsa Transport S.A., Ahwaz, Ferme Ahzib Achayech
Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Immeubles Véhicules Accessoires Maroc S.A.R.L., Ahwaz, Ferme
Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat
Saada, Marrakech
Interprovincial Maroc S.A.R.L., Ahwaz, Ferme Ahzib Achayech
Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Transport de Voyageurs en Autocar Maroc S.A Ahwaz, Ferme
Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat
Saada, Marrakech
Alsa Citybus Rabat-Salé-Temara, S.A., Rue cadi Srayri et Cadi
Ben Hammadi, Quartier de la Pinede – Rabat
Portugal
Alsa Metropolitano do Porto, Lda, Avenida das Forças Armadas,
N 125, 12 Lisboa
Tiac Viagens e Turismo Lda, Rua de Pedro Nunes, 39, Lisboa
Slovakia
Efc Spol s.r.o., Tehelná 23 83103, Bratislava – Nové Mesto
Spain
Alsa Internacional, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Internacional, S.L.U. y Otros U.T.E., C/ Alcalá, 478, Madrid
(28027)
Agreda Bus, S.L. Avda. Manuel Rodríguez Ayuso, 110 - Zaragoza
Alianza Bus, S.L.U., C/ Alcalá, 478, Madrid (28027)
Almeria–Murcia Bus, S.L., Avda Juan Pablo II, 33, Granada
Alsa Atlántica, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Ferrocarril, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Granada Airport S.L., Avda Juan Pablo II, 33, Granada
Alsa Grupo Intercontinental, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Metropolitana, S.A.U., C/ Alcalá, 478, Madrid (28027)
Alsa Rail, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Grupo, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Aplic. y Sist. Integrales Para el Transporte, S.A., Pol. San Mateo,
Ctra Coll D’ En Rabassa, Palma de Mallorca (07002)
Aragonesa de Estación de Autobuses, S.A., Urbanización Plaza
de Roma, F-1, Zaragoza
Argabus, S.A. C/ Real 116 – Arganda del Rey (Madrid)
Argantours, S.A. C/ Real 116 – Arganda del Rey (Madrid)
Artazo Servicios Integrales, S.L., Gáldar (Las Palmas de Gran
Canaria), calle Pedro de Arguello, 10
Asturies Berlinas de Luxu, S.L., C/Jorge Juan, 19 - 2º Izquierda,
Madrid (28001)
Autedia, S.L., Avda Juan Pablo II, 33, Granada
Autobuses Urbanos de Arganda, S.A. Avda. del Mediterráneo 50 -
Madrid
% equity
interest
100
100
99
100
80
100
100
51
100
100
80
100
100
70
100
100
100
100
100
100
100
100
100
100
23
100
100
100
100
50
100
Name and country of incorporation
Autobuses Urbanos de Bilbao, S.A., C/ Tellaetxebidea 3, Bilbao
Autobuses Urbanos de León, S.A.U., Pol. Ind. Vilecha Oeste,
León (24192)
Autocares Castilla–Leon, S.A.U., Estación de Autobuses, Av
Ingeniero Sáenz de Miera, León (24009)
Autocares Discrecionales del Norte, S.L.U., Alameda de Urquijo, n
o 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Automóviles Luarca, S.A.U., Magnus Blikstad 2, Gijón (33207)
Automóviles Sigras Carral, S.A. Ctra. El Burgo-Los Pelamios s/n
Culleredo – A Coruña
Autos Cal Pita, S.A. Ctra. El Burgo-Los Pelamios s/n Culleredo –
A Coruña
Autos Pelayo, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Autos Rodríguez Eocar, S.L., Cedofeita, c/ Requiande, 1 -
Ribadeo-Lugo
Baleares Business Cars, S.L., C/ Jorge Juan, 19- 2º Izquierda,
Madrid (28001)
Berlinas de Asturias, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
(28001)
Berlinas de Extremadura, S.L., C/ Jorge Juan, 19-2º Izquierda,
Madrid (28001)
Berlinas Calecar, S.L.U., Avenida Ingeniero Saenz de Miera, s/n
(Estación de Autobuses), León (24009)
Berlinas de Canarias, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
(28001)
Berlinas de Toledo, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
(28001)
Berlinas Tibus, S.L.U, C/ Alcalá, 478, Madrid (28027)
Berlinas VTC de Cantabria, S.L.U., Avenida de Candina, nº 35,
Santander (39011)
Buses de Palencia, S.L., C/ Campaneros, 4, 1o Dcha, Palencia
(34003)
Bus Metropolitano de Granada, S.L. Avenida Juan Pablo II, 33
(Estación de Autobuses), Granada (18013)
Busturialdea Lea Artibai Bus, S.A., Centro de Transportes de
Vizcaya, Barrio el Juncal, Naves 3 y 4 (Valle de Trápaga-
Trapagaran), Vizcaya (48510)
Canary Business Cars, S.L., C/ Jorge Juan, 19-2º Izquierda,
Madrid (28001)
Cataluña Business Cars, S.L., C/ Jorge Juan, 19-2º Izquierda,
Madrid (28001)
Center Bus, S.L., Paseo de Moret, 7, Madrid
Cetralsa Formación, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Cía. del Tranvía Eléctrico de Avilés, S.A., Avda Conde de
Guadalhorce 123, Aviles (33400)
Compañia Navarra de Autobuses, S.A., C/ Yanguas y Miranda, 2
(Estación de Autobuses), Pamplona
Compostelana, S.A.U., Plaza San Cayetano, s/n. Estación
Autobuses Taq. 10, Santiago de Compostela (La Coruña)
Concesionario Estación Autobuses Logroño, S.A., Avda de
España, 1, Logroño- La Rioja
Dainco, S.A.U., Avda Filiberto Villalobos, nº 71, Salamanca
% equity
interest
75
100
100
100
100
100
97
100
80
100
100
100
100
100
100
100
100
100
50
65
100
100
90
100
87
50
100
21
50
208
National Express Group PLC Annual Report 2019
196
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Name and country of incorporation
% equity
interest
Name and country of incorporation
% equity
interest
Alsa Khouribga S.A., No 22 Rue Meknes Hay Haboub, Khouribga
Autobuses Urbanos de Bilbao, S.A., C/ Tellaetxebidea 3, Bilbao
Alsa Tanger S.A., 37 Rue Omar Ibn Khattab, Immeuble
Autobuses Urbanos de León, S.A.U., Pol. Ind. Vilecha Oeste,
Maspalomas 2, Tanger
León (24192)
Centre de Formation Techn. Profes. Transport S.A.R.L., Ahwaz,
Ferme Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et
Autocares Castilla–Leon, S.A.U., Estación de Autobuses, Av
Ingeniero Sáenz de Miera, León (24009)
Kiadat Saada, Marrakech
Groupe Alsa Transport S.A., Ahwaz, Ferme Ahzib Achayech
Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Immeubles Véhicules Accessoires Maroc S.A.R.L., Ahwaz, Ferme
Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat
Saada, Marrakech
Interprovincial Maroc S.A.R.L., Ahwaz, Ferme Ahzib Achayech
Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat Saada, Marrakech
Transport de Voyageurs en Autocar Maroc S.A Ahwaz, Ferme
Ahzib Achayech Ferkat Ain Dada, Askedjour, Jamaat Et Kiadat
Saada, Marrakech
Alsa Citybus Rabat-Salé-Temara, S.A., Rue cadi Srayri et Cadi
Ben Hammadi, Quartier de la Pinede – Rabat
Alsa Metropolitano do Porto, Lda, Avenida das Forças Armadas,
Tiac Viagens e Turismo Lda, Rua de Pedro Nunes, 39, Lisboa
Efc Spol s.r.o., Tehelná 23 83103, Bratislava – Nové Mesto
Portugal
N 125, 12 Lisboa
Slovakia
Spain
(28027)
Alsa Internacional, S.L.U. y Otros U.T.E., C/ Alcalá, 478, Madrid
Alianza Bus, S.L.U., C/ Alcalá, 478, Madrid (28027)
Almeria–Murcia Bus, S.L., Avda Juan Pablo II, 33, Granada
Alsa Atlántica, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Granada Airport S.L., Avda Juan Pablo II, 33, Granada
Alsa Grupo Intercontinental, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Metropolitana, S.A.U., C/ Alcalá, 478, Madrid (28027)
Alsa Rail, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Alsa Grupo, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Aplic. y Sist. Integrales Para el Transporte, S.A., Pol. San Mateo,
Ctra Coll D’ En Rabassa, Palma de Mallorca (07002)
de Roma, F-1, Zaragoza
Argabus, S.A. C/ Real 116 – Arganda del Rey (Madrid)
Argantours, S.A. C/ Real 116 – Arganda del Rey (Madrid)
Artazo Servicios Integrales, S.L., Gáldar (Las Palmas de Gran
Canaria), calle Pedro de Arguello, 10
Asturies Berlinas de Luxu, S.L., C/Jorge Juan, 19 - 2º Izquierda,
Madrid (28001)
Autedia, S.L., Avda Juan Pablo II, 33, Granada
Autobuses Urbanos de Arganda, S.A. Avda. del Mediterráneo 50 -
Madrid
100
100
99
100
80
100
100
51
100
100
80
100
100
70
100
100
100
100
100
100
100
100
100
100
23
100
100
100
100
50
100
Autocares Discrecionales del Norte, S.L.U., Alameda de Urquijo, n
o 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Automóviles Luarca, S.A.U., Magnus Blikstad 2, Gijón (33207)
Automóviles Sigras Carral, S.A. Ctra. El Burgo-Los Pelamios s/n
Culleredo – A Coruña
A Coruña
Autos Cal Pita, S.A. Ctra. El Burgo-Los Pelamios s/n Culleredo –
Autos Pelayo, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Autos Rodríguez Eocar, S.L., Cedofeita, c/ Requiande, 1 -
Baleares Business Cars, S.L., C/ Jorge Juan, 19- 2º Izquierda,
Berlinas de Asturias, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
Berlinas de Extremadura, S.L., C/ Jorge Juan, 19-2º Izquierda,
Berlinas Calecar, S.L.U., Avenida Ingeniero Saenz de Miera, s/n
(Estación de Autobuses), León (24009)
Berlinas de Canarias, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
Ribadeo-Lugo
Madrid (28001)
(28001)
Madrid (28001)
(28001)
(28001)
Berlinas Tibus, S.L.U, C/ Alcalá, 478, Madrid (28027)
Santander (39011)
(34003)
Buses de Palencia, S.L., C/ Campaneros, 4, 1o Dcha, Palencia
Bus Metropolitano de Granada, S.L. Avenida Juan Pablo II, 33
Busturialdea Lea Artibai Bus, S.A., Centro de Transportes de
Vizcaya, Barrio el Juncal, Naves 3 y 4 (Valle de Trápaga-
Trapagaran), Vizcaya (48510)
Canary Business Cars, S.L., C/ Jorge Juan, 19-2º Izquierda,
Madrid (28001)
Madrid (28001)
Cataluña Business Cars, S.L., C/ Jorge Juan, 19-2º Izquierda,
Center Bus, S.L., Paseo de Moret, 7, Madrid
Cía. del Tranvía Eléctrico de Avilés, S.A., Avda Conde de
Guadalhorce 123, Aviles (33400)
Compañia Navarra de Autobuses, S.A., C/ Yanguas y Miranda, 2
(Estación de Autobuses), Pamplona
Compostelana, S.A.U., Plaza San Cayetano, s/n. Estación
Autobuses Taq. 10, Santiago de Compostela (La Coruña)
Concesionario Estación Autobuses Logroño, S.A., Avda de
España, 1, Logroño- La Rioja
Dainco, S.A.U., Avda Filiberto Villalobos, nº 71, Salamanca
75
100
100
100
100
100
97
100
80
100
100
100
100
100
100
100
100
100
50
65
100
100
90
100
87
50
100
21
50
Alsa Internacional, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Berlinas de Toledo, S.L., C/ Jorge Juan, 19-2º Izquierda, Madrid
Agreda Bus, S.L. Avda. Manuel Rodríguez Ayuso, 110 - Zaragoza
Berlinas VTC de Cantabria, S.L.U., Avenida de Candina, nº 35,
Alsa Ferrocarril, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
(Estación de Autobuses), Granada (18013)
Aragonesa de Estación de Autobuses, S.A., Urbanización Plaza
Cetralsa Formación, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
40 Subsidiary undertakings and other significant holdings continued
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Ebrobus, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Eme Association Business, S.A., Avda. del Mediterráneo 50 –
Madrid
Estación Autobuses de Cartagena, S.A., Avda Trovero Marín. Nº
3,(Estación Autobuses), Cartagena (30202)
Estación Autobuses de Ponferrada, S.A., Ctra de Asturias,
Ponferrada
Estación Central de Autobuses de Zaragoza, S.A., Avda de
Navarra, 80 (Estación Central de Autobuses), Zaragoza (50011)
Estación de Autobuses de Siero, S.L., C/ Ramón y Cajal,
Pola de Siero
Estación de Autobuses Aguilar de Campoo, S.L., Avda de Ronda
52 Bis, Aguilar de Campoo (Palencia)
Estación de Autobuses Chamartin, S.A., Pº de la Castellana,
216, Madrid
Estación de Autobuses de Aranda de Duero, S.L., Avda
Valladolid, Aranda de Duero (Burgos)
Estación de Autobuses de Astorga, S.L., Avda Las Murallas, nº
52, Astorga-León (24700)
Estación de Autobuses de Aviles S.L., C/ Los Telares (Estación de
Autobuses) Aviles (33400)
Estación de Autobuses de Benavente, S.L., Avda Primo de
Rivera, Benavente
Estación de Autobuses de León, S.A., Estación de Autobuses,
Avda Ingeniero Saenz de Miera, León (24009)
Estación de Autobuses de Plasencia, S.A., C/ Tornavacas,
2, Plasencia
Estación de Autobuses de Ribadeo, S.L., Avda Rosalía de Castro,
Ribadeo
Estación de Autobuses de Vitoria, S.L., C/ Los Herran, 50
(Estación de Autobuses), Alava (Vitoria)
Estación de Líneas Regulares, S.L., Plaza de las Estaciones,
Santander (Cantabria)
Estaciones Terminales de Autobuses, S.A., Avda Menéndez Pidal,
nº 13 (Estación de Autobuses), Valencia (46009)
Euska Alsa, S.L.U., Alameda de Urquijo, n o 85, 1o – Dcha.,
Bilbao- Vizaya (48013)
Extremadura Business Limousines, S.L., C/ Jorge Juan, 19-2º
Izquierda, Madrid (28001)
Ezkerraldea-Meatzaldea Bus, S.A., Centro de Transportes de
Vizcaya, Barrio el Juncal, Naves 3 y 4 (Valle de Trápaga-
Trapagaran), Vizcaya (48510)
Gal Bus, S.L. Ctra. El Burgo-Los Pelamios s/n Culleredo – A
Coruña
G.S. Carretera, Plaza de la Constitución, Estación de Autobuses,
2ª Planta, Oficina 26, Lugo
General Técnica Industrial, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Gorbea Representaciones, S.L., Alameda de Urquijo, n o 85, 1o –
Dcha., Bilbao- Vizcaya (48013)
Guaguas Gumidafe, S.L. Gáldar (Las Palmas de Gran Canaria),
calle Pedro de Arguello, 10
% equity
interest
100
100
Name and country of incorporation
Grupo Enatcar, S.A., C/ Alcalá, 478, Madrid (28027)
Ibero-Euro Sur, S.L., C/ Alcalá, 478, Madrid (28027)
Inforcyl, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
54
49
19
50
67
49
43
79
Informática, Comunicaciones y Logística, S.L.U., Alameda de
Urquijo, no 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Intercambiadores Europeos, S.L., C/ Miguel Fleta, 4, Madrid (28037)
International Business Limousines, S.A.U., Pol. Ind. Las Fronteras.
C/Límite,Torrejón de Ardoz (Madrid)
Interurbana de Autocares, S.A.U., C/ Miguel Fleta, 4, Madrid
(28037)
Irubus, S.A.U., C/ Alcalá, 478, Madrid (28027)
Jimenez Lopera, S.A.U., Pol. Ind. Las Fronteras. C/ Limite,
Torrejón de Ardoz (Madrid)
Julia Travel S.A., Automoviles Luarca S.A.U., Transportes
Bacoma S.A.U. U.T.E., C/ Puerto Used, 20, Madrid
Julia Travel y Automóviles Luarca Sa Ute, Avda Sancho El Sabio,
31, Donostia
La Tafallesa, S.A.U., C/ Yanguas y Miranda, 2 (Estación de
Autobuses), Pamplona
100
La Unión Alavesa, S.L., C/ Los Herran, 50 (Estación de
Autobuses), Alava (Vitoria)
23
89
52
50
32
46
79
100
100
65
100
25
100
100
100
La Unión de Benisa, S.A., C/ Comunicaciones, 10 (P. de Babel),
Alicante (03008)
Lineas Europeas de Autobuses, S.A., C/Guillem de Castro, 77,
Valencia
Los Abades de la Gineta, S.L.U., C/ Alcalá, 478, Madrid (28027)
Mai Tours, S.L.U., Avenida de la Hispanidad O- Parking P12,
Barajas, Madrid
Manuel Vázquez, S.L., C/ Jacques Cousteau,
2 – Arteijo (A Coruña)
Movelia Tecnologias, S.L., C/ Santa Leonor, 65 –Avalón Parque
Empresarial, Edificio A, Madrid
Mundaka Consultoria, S.L.U., Alameda de Urquijo, no 85, 1o –
Dcha., Bilbao- Vizaya (48013)
NEX Continental Holdings, S.L.U., C/ Miguel Fleta, 4,
Madrid (28037)
NX Middle East, S.L.U., C/ Inglaterra, 20-22, Palencia (34004)
Proyectos Unificados, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Rapid Aeroport, S.A.U., C/ Ali Bei, 80 (Estación de Autobuses),
Barcelona (08013)
Representaciones Mecánica, S.A.U., Alameda de Urquijo, n o 85,
1o –Dcha., Bilbao- Vizcaya (48013)
Rutas a Cataluña, S.A., C/ Musico Gustavo Freire, 1 -1° Dcha,
Lugo (27001)
Rutas del Cantábrico, S.L., Alameda de Urquijo, no 85, 1o –Dcha.,
Bilbao- Vizcaya (48013)
Semarvi, C/ Miguel Fleta, 4, Madrid (28037)
Serviareas 2000, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Servicios Auxiliares del Transporte C.B., C/Méndez Álvaro
(Estación de Autobuses), Madrid
197
% equity
interest
100
20
100
100
60
100
100
100
100
50
50
50
50
98
43
100
100
60
78
100
100
100
100
100
100
28
95
34
100
100
209
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
198
Financial Statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Servicios El Temple, S.L. Ctra. El Burgo-Los Pelamios s/n
Culleredo – A Coruña
Servicios Empresariales Especiales, S.L.U., Alameda de Urquijo,
no 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Servicios Generales de Automoción, S.A.U., Alameda de Urquijo,
no 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Servicios VTC Tibus, S.L.U. C/ Alcalá, 478, Madrid (28027)
Setra Ventas y Servicios, S.A.U., Pol. Ind. Las Fronteras.
C/ Límite, Torrejón de Ardoz (Madrid)
Sisalde Arrendamiento de vehículos con conductor, S.L.,
C/ Deyanira, 29 - Madrid
Sociedad Anónima Unipersonal Alsina Graells de A.T., C/ Ali Bei,
80 (Estación de Autobuses), Barcelona (08013)
Técnicas en Vehículos Automóviles, S.L.U., C/ Alcalá, 478,
Madrid (28027)
Tecnologías Formativas en Simuladores, S.L., Newton, 6,Edificio
6, Nave, 6.P, Leganés, Madrid (28914)
Terminal de Autobuses de Garellano, S.L., Alameda de
Mazarredo, 21, Bilbao
Tibus, S.A., C/ Ali Bei, 80 (Estación de Autobuses), Barcelona (08013)
Tibus Berlines de Luxe, S.L.U., C/ Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Tibus Business Cars, S.L.U., C/ Ali Bei, 80 (Estación de
Autobuses) Barcelona, (08013)
Tibus Business Limousines, S.L.U., C/ Alcalá, 478, Madrid (28027)
Tibus Luxury Services, S.L.U., C/Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Transporte Colectivos, S.A.U., Gran Vía de D. Ingacio de Haro, 81,
Bilbao
Transportes Accesibles Peninsulares, S.L., C/Pepe Cosmen,
(Estación de Autobuses), Oviedo (33001)
Transportes Adaptados Andaluces, S.A.U., Plaza Coca Piñera,
s/n (Estación de Autobuses), Jaén
Transportes Adaptados Regionales, S.L.U., Estación de
Autobuses, Av Ingeniero Sáenz de Miera, León (24009)
Transportes Adaptados Cántabros, S.A., Avda Candina, 35-37,
Santander (39011)
Transportes Bacoma, S.A.U., C/ Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Transportes de Viajeros de Aragón, S.A., Avda de Navarra, 80
(Estación Central de Autobuses), Zaragoza (50011)
Transportes Santo Domingo, S.L.U. C/ Investigación. Nº 2 –
Getafe (Madrid)
Transportes Terrestres Cantabros, S.A., Avda Candina, 35-37,
Santander (39011)
Transportes Unidos de Asturias, S.L., Pol. Ind. Espírtiu Santo,
Oviedo (33010)
Transportes Unidos, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Transportes Urbanos de Cantabria, S.L.U., Avda Candina, 35-37,
Santander (39011)
Transportes Urbanos de Cartagena, S.A., Paraje de la Asomada,
Cartagena (Murcia)
Tranvía de Vélez, S.A.U., Avda Juan Carlos I, s/n. Ronda del
Ingeniero, Vélez Málaga (Málaga)
210
% equity
interest
100
100
100
100
100
60
100
100
50
41
60
100
100
100
100
100
100
Name and country of incorporation
Transportes Urbanos de Guadalajara, S.L., Polígono Industrial del
Henares, Calle Livorno, 55, Marchamalo, Guadalajara (19180)
Tranvías Metropolitanas de Granada, S.A.U., Avenida de Cádiz,
número 70, 1º-B, Granada
Tury Express, S.A., Alameda de Urquijo, n o 85, 1o -Dcha.,
Bilbao- Vizaya (48013)
Ute Catamaranes Bahía Cadiz, Avda José León de Carranza, nº
20, Cádiz
Ute Ea Cordoba, Glorieta de las Tres Culturas, Córdoba
Ute Extremadura, C/ Alcalá, 478, Madrid (28027)
Ute Guadalajara, C/ Miguel Fleta, 4, Madrid (28037)
Ute Mundiplan, C/ Ruiz Perelló, 15, Madrid
Ute Murcia City Tour, Magnus Blikstad 2, Gijón (33207)
Ute Ea Alicante, Muelle de Poniente, Alicante
Viajes ALSA, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Viajes Por Carretera, S.A.U., Alameda de Urquijo, n o 85, 1o -
Dcha., Bilbao- Vizcaya (48013)
Vecolux Lleida, S.L., calle Ali Bei, nº 80 - Barcelona
Voramar el Gaucho S.L.U., S’ Hort den Serral (San Agustín) Sant
Josep de sa Talaia, Illes Balears
Switzerland
AlpyBus S.a.r.l., 8 Chemin de Morglas, 1214, Genève
Eggmann Frey, Rue du Mont Blanc 14, 1201, Genève
GVA Transfers.com SARL, Chemin de Morglas, 8 - Vernier
Linien Abfertigung GmbH, Rue du Mont Blanc 14, 1201, Genève
Odier Excursions, S.A., Chemin Des Aulx 9 – Plan Les Ouates -
Switzerland
Bahrain
Bahrain Public Transport Company W.L.L., Garage 1087, Road
4025, Isa Town 840, Southern Governorate, Kingdom of Bahrain
100
Germany
National Express Germany GmbH, Trakehner Strasse 7-9, 60487
Frankfurt am Main, Germany
National Express Holding GmbH, Vogelsanger Weg 38, 40470
Düsseldorf, Germany
National Express Rail GmbH, Maximinenstrasse 6, 50668
Cologne, Germany
Süddeutsche Regionalbahn GmbH, Vogelsanger Weg 38, 40470
Düsseldorf, Germany
(Renamed: previously called National Express Südwest GmbH)
Netherlands
National Express Holdings LLC BV, Dr Willem Dreesweg 2, 1st Fl.
South Wing, 1185 VB Amstelveen, The Netherlands
Czech Republic
National Express Cz s.r.o. (in liquidation), Seifertova 327/85, 130
00 Praha, Zizkov, Czech Republic
% equity
interest
100
100
100
23
50
100
100
17
50
50
100
100
60
100
100
100
100
80
100
50
95
100
100
100
100
100
* These subsidiaries are exempt from the requirements of the UK companies Act
2006 relating to the audit of individual accounts by virtue of S479A of the Act.
Outstanding liabilities of the exempt companies at the Balance Sheet date are
guaranteed pursuant to Sections 479A-C of the Act.
100
98
100
59
100
93
100
100
100
97
100
National Express Group PLC Annual Report 2019
198
Financial statements
Notes to the Consolidated Accounts continued
For the year ended 31 December 2019
40 Subsidiary undertakings and other significant holdings continued
Name and country of incorporation
Servicios El Temple, S.L. Ctra. El Burgo-Los Pelamios s/n
Culleredo – A Coruña
Servicios Empresariales Especiales, S.L.U., Alameda de Urquijo,
no 85, 1o –Dcha., Bilbao- Vizcaya (48013)
% equity
interest
Name and country of incorporation
% equity
interest
Transportes Urbanos de Guadalajara, S.L., Polígono Industrial del
Henares, Calle Livorno, 55, Marchamalo, Guadalajara (19180)
Tranvías Metropolitanas de Granada, S.A.U., Avenida de Cádiz,
número 70, 1º-B, Granada
Servicios Generales de Automoción, S.A.U., Alameda de Urquijo,
Tury Express, S.A., Alameda de Urquijo, n o 85, 1o -Dcha.,
no 85, 1o –Dcha., Bilbao- Vizcaya (48013)
Bilbao- Vizaya (48013)
Servicios VTC Tibus, S.L.U. C/ Alcalá, 478, Madrid (28027)
Ute Catamaranes Bahía Cadiz, Avda José León de Carranza, nº
Tibus, S.A., C/ Ali Bei, 80 (Estación de Autobuses), Barcelona (08013)
Voramar el Gaucho S.L.U., S’ Hort den Serral (San Agustín) Sant
Setra Ventas y Servicios, S.A.U., Pol. Ind. Las Fronteras.
C/ Límite, Torrejón de Ardoz (Madrid)
Sisalde Arrendamiento de vehículos con conductor, S.L.,
C/ Deyanira, 29 - Madrid
Sociedad Anónima Unipersonal Alsina Graells de A.T., C/ Ali Bei,
80 (Estación de Autobuses), Barcelona (08013)
Técnicas en Vehículos Automóviles, S.L.U., C/ Alcalá, 478,
Madrid (28027)
Tecnologías Formativas en Simuladores, S.L., Newton, 6,Edificio
6, Nave, 6.P, Leganés, Madrid (28914)
Terminal de Autobuses de Garellano, S.L., Alameda de
Mazarredo, 21, Bilbao
Tibus Berlines de Luxe, S.L.U., C/ Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Tibus Business Cars, S.L.U., C/ Ali Bei, 80 (Estación de
Autobuses) Barcelona, (08013)
Tibus Business Limousines, S.L.U., C/ Alcalá, 478, Madrid (28027)
Tibus Luxury Services, S.L.U., C/Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Transporte Colectivos, S.A.U., Gran Vía de D. Ingacio de Haro, 81,
Bilbao
Transportes Accesibles Peninsulares, S.L., C/Pepe Cosmen,
(Estación de Autobuses), Oviedo (33001)
Transportes Adaptados Andaluces, S.A.U., Plaza Coca Piñera,
s/n (Estación de Autobuses), Jaén
20, Cádiz
Ute Ea Cordoba, Glorieta de las Tres Culturas, Córdoba
Ute Extremadura, C/ Alcalá, 478, Madrid (28027)
Ute Guadalajara, C/ Miguel Fleta, 4, Madrid (28037)
Ute Mundiplan, C/ Ruiz Perelló, 15, Madrid
Ute Murcia City Tour, Magnus Blikstad 2, Gijón (33207)
Ute Ea Alicante, Muelle de Poniente, Alicante
Viajes ALSA, S.A.U., C/ Miguel Fleta, 4, Madrid (28037)
Viajes Por Carretera, S.A.U., Alameda de Urquijo, n o 85, 1o -
Dcha., Bilbao- Vizcaya (48013)
Vecolux Lleida, S.L., calle Ali Bei, nº 80 - Barcelona
Josep de sa Talaia, Illes Balears
Switzerland
AlpyBus S.a.r.l., 8 Chemin de Morglas, 1214, Genève
Eggmann Frey, Rue du Mont Blanc 14, 1201, Genève
GVA Transfers.com SARL, Chemin de Morglas, 8 - Vernier
Linien Abfertigung GmbH, Rue du Mont Blanc 14, 1201, Genève
Odier Excursions, S.A., Chemin Des Aulx 9 – Plan Les Ouates -
Switzerland
Bahrain
100
Germany
Bahrain Public Transport Company W.L.L., Garage 1087, Road
4025, Isa Town 840, Southern Governorate, Kingdom of Bahrain
50
Transportes Adaptados Regionales, S.L.U., Estación de
Autobuses, Av Ingeniero Sáenz de Miera, León (24009)
National Express Germany GmbH, Trakehner Strasse 7-9, 60487
100
Frankfurt am Main, Germany
Transportes Adaptados Cántabros, S.A., Avda Candina, 35-37,
National Express Holding GmbH, Vogelsanger Weg 38, 40470
Santander (39011)
98
Düsseldorf, Germany
Transportes Bacoma, S.A.U., C/ Ali Bei, 80 (Estación de
Autobuses), Barcelona (08013)
Transportes de Viajeros de Aragón, S.A., Avda de Navarra, 80
(Estación Central de Autobuses), Zaragoza (50011)
Transportes Santo Domingo, S.L.U. C/ Investigación. Nº 2 –
National Express Rail GmbH, Maximinenstrasse 6, 50668
100
Cologne, Germany
Süddeutsche Regionalbahn GmbH, Vogelsanger Weg 38, 40470
59
Düsseldorf, Germany
(Renamed: previously called National Express Südwest GmbH)
Transportes Unidos de Asturias, S.L., Pol. Ind. Espírtiu Santo,
Czech Republic
Transportes Terrestres Cantabros, S.A., Avda Candina, 35-37,
Getafe (Madrid)
Santander (39011)
Oviedo (33010)
Santander (39011)
Cartagena (Murcia)
Transportes Unidos, S.L.U., C/ Miguel Fleta, 4, Madrid (28037)
Transportes Urbanos de Cantabria, S.L.U., Avda Candina, 35-37,
Transportes Urbanos de Cartagena, S.A., Paraje de la Asomada,
Tranvía de Vélez, S.A.U., Avda Juan Carlos I, s/n. Ronda del
Ingeniero, Vélez Málaga (Málaga)
Netherlands
National Express Holdings LLC BV, Dr Willem Dreesweg 2, 1st Fl.
South Wing, 1185 VB Amstelveen, The Netherlands
National Express Cz s.r.o. (in liquidation), Seifertova 327/85, 130
00 Praha, Zizkov, Czech Republic
* These subsidiaries are exempt from the requirements of the UK companies Act
2006 relating to the audit of individual accounts by virtue of S479A of the Act.
Outstanding liabilities of the exempt companies at the Balance Sheet date are
guaranteed pursuant to Sections 479A-C of the Act.
100
100
100
100
100
60
100
100
50
41
60
100
100
100
100
100
100
100
93
100
100
100
97
100
100
100
100
23
50
100
100
17
50
50
100
100
60
100
100
100
100
80
100
95
100
100
100
100
100
Company Balance Sheet
Financial statements
At 31 December 2019
Company Balance Sheet
At 31 December 2019
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Derivative financial instruments
Deferred tax assets
Defined benefit pension asset
Total non-current assets
Current assets
Debtors
Derivative financial instruments
Cash at bank and in hand
Total current assets
Current liabilities
Creditors: amounts falling due within one year
Derivative financial instruments
Provisions for liabilities and charges
Total current liabilities
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Creditors: amounts falling due after more than one year
Derivative financial instruments
Provisions for liabilities and charges
Deferred tax liability
Total non-current liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Capital redemption reserve
Own shares
Hedging reserve
Retained earnings
Shareholders’ equity
Note
4
5
6
7
13
16
8
7
9
10
7
12
11
7
12
13
15
2019
£m
–
0.1
2018
£m
–
–
1,978.5
1,720.4
10.1
14.5
14.2
6.7
14.4
14.9
2,017.4
1,756.4
561.3
38.4
357.5
957.2
(903.3)
(35.5)
(2.0)
(940.8)
16.4
223.1
7.5
35.1
265.7
(299.3)
(10.5)
(3.8)
(313.6)
(47.9)
2,033.8
1,708.5
(788.5)
(926.1)
(6.5)
(1.2)
(2.4)
(798.6)
1,235.2
25.6
532.7
0.2
(6.0)
(5.8)
688.5
1,235.2
(4.4)
–
(2.6)
(933.1)
775.4
25.6
532.7
0.2
(7.0)
–
223.9
775.4
The Company reported a profit for the financial year ended 31 December 2019 of £546.8m (2018: loss of £0.8m).
D Finch
Group Chief Executive
27 February 2020
C Davies
Group Finance Director
Company Number 02590560
199
211
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
200
Financial Statements
Company Statement of Changes in Equity
Financial statements
For the year ended 31 December 2019
Company Statement of Changes in Equity
For the year ended 31 December 2019
At 1 January 2019
Change in accounting policies1
At 1 January 2019 (restated)
Profit for the year
Actuarial loss, net of tax
Revaluation through Other Comprehensive Income
Transfers to the Income Statement on cash flow hedges
Total comprehensive income for the year
Shares purchased
Own shares released to satisfy employee share schemes
Share-based payments
Dividends
At 31 December 2019
Share
capital
£m
Share
premium
£m
25.6
–
25.6
532.7
–
532.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Capital
redemption
reserve
£m
Own
shares
(note 15)
£m
Hedging
reserve
£m
Retained
earnings
£m
0.2
–
0.2
–
–
–
–
–
–
–
–
–
(7.0)
–
(7.0)
–
–
–
–
–
(6.2)
7.2
–
–
–
–
–
–
–
(7.7)
1.9
(5.8)
–
–
–
–
Total
£m
775.4
0.2
775.6
546.8
(0.9)
(7.7)
1.9
223.9
0.2
224.1
546.8
(0.9)
–
–
545.9
540.1
–
(7.2)
4.0
(78.3)
688.5
(6.2)
–
4.0
(78.3)
1,235.2
25.6
532.7
0.2
(6.0)
(5.8)
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’ (see note 1)
The Company reported a profit for the financial year ended 31 December 2019 of £546.8m (2018: loss of £0.8m), which included an
intercompany dividend arising on Group restructuring activities of £459.5m, which is non-distributable.
The Company’s retained earnings includes £219.0m (2018: £212.3m) that is available for distribution. Cumulative gains on the Company’s
defined benefit pension scheme, which is currently in a net surplus position, are deemed to be not distributable. In addition, own shares
have been purchased out of distributable profits and therefore reduce the reserves available for distribution. The share premium, capital
redemption and hedging reserves are not distributable.
Details of dividends paid, declared and proposed during the year are given in note 12 to the consolidated Group accounts.
At 1 January 2018
Loss for the year
Actuarial loss, net of tax
Total comprehensive income
Shares purchased
Own shares released to satisfy employee share schemes
Share-based payments
Dividends
At 31 December 2018
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Own
shares
(note 15)
£m
Retained
earnings
£m
25.6
532.7
0.2
(6.0)
326.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25.6
532.7
0.2
–
–
–
(9.7)
8.7
–
–
(7.0)
(0.8)
(27.0)
(27.8)
–
(8.7)
5.1
(70.8)
223.9
Total
£m
878.6
(0.8)
(27.0)
(27.8)
(9.7)
–
5.1
(70.8)
775.4
212
National Express Group PLC Annual Report 2019
200
Financial statements
Company Statement of Changes in Equity
For the year ended 31 December 2019
Financial Statements
Notes to the Company Accounts
For the year ended 31 December 2019
Notes to the Company Accounts
For the year ended 31 December 2019
At 1 January 2019
Change in accounting policies1
At 1 January 2019 (restated)
Profit for the year
Actuarial loss, net of tax
Revaluation through Other Comprehensive Income
Transfers to the Income Statement on cash flow hedges
Total comprehensive income for the year
Shares purchased
Own shares released to satisfy employee share schemes
Share-based payments
Dividends
At 31 December 2019
£m
25.6
£m
532.7
25.6
532.7
–
–
–
–
–
–
–
–
–
–
25.6
532.7
0.2
(6.0)
(5.8)
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’ (see note 1)
The Company reported a profit for the financial year ended 31 December 2019 of £546.8m (2018: loss of £0.8m), which included an
intercompany dividend arising on Group restructuring activities of £459.5m, which is non-distributable.
The Company’s retained earnings includes £219.0m (2018: £212.3m) that is available for distribution. Cumulative gains on the Company’s
defined benefit pension scheme, which is currently in a net surplus position, are deemed to be not distributable. In addition, own shares
have been purchased out of distributable profits and therefore reduce the reserves available for distribution. The share premium, capital
redemption and hedging reserves are not distributable.
Details of dividends paid, declared and proposed during the year are given in note 12 to the consolidated Group accounts.
Share
Share
redemption
capital
premium
reserve
(note 15)
Capital
Own
shares
Hedging
reserve
£m
Retained
earnings
£m
0.2
0.2
–
–
–
–
–
–
–
–
–
–
£m
532.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
(7.0)
(7.0)
–
–
–
–
–
–
–
–
(6.2)
7.2
£m
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.7)
1.9
(5.8)
£m
(6.0)
–
–
–
–
–
(9.7)
8.7
545.9
540.1
£m
223.9
0.2
224.1
546.8
(0.9)
–
–
–
(7.2)
4.0
(78.3)
688.5
£m
326.1
(0.8)
(27.0)
(27.8)
–
(8.7)
5.1
(70.8)
223.9
Total
£m
775.4
0.2
775.6
546.8
(0.9)
(7.7)
1.9
(6.2)
–
4.0
(78.3)
1,235.2
Total
£m
878.6
(0.8)
(27.0)
(27.8)
(9.7)
–
5.1
(70.8)
775.4
Capital
Share
redemption
Own
shares
premium
reserve
(note 15)
Retained
earnings
Share
capital
£m
25.6
25.6
532.7
0.2
(7.0)
At 1 January 2018
Loss for the year
Actuarial loss, net of tax
Total comprehensive income
Shares purchased
Share-based payments
Dividends
At 31 December 2018
Own shares released to satisfy employee share schemes
1 Accounting policies
Basis of preparation
The separate accounts of the parent Company are presented as required by the Companies Act 2006. The accounts have been prepared on the
going concern basis and under the historical cost convention, except for the recognition of derivative financial instruments and available-for-sale
investments detailed below, and in accordance with applicable accounting standards in the United Kingdom.
The Company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial
Reporting Council. Accordingly, these financial statements have been prepared in accordance with FRS 101 (Financial Reporting Standard
101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
The Company has taken advantage of the disclosure exemptions available under FRS 101 in relation to share-based payments, financial
instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow
statement, IFRS 16 ‘Leases’, standards not yet effective, impairment of assets and related party transactions. Where required, equivalent
disclosures are included within the consolidated accounts.
No Income Statement is presented by the Company as permitted by Section 408 of the Companies Act 2006. The profit or loss
attributable to the Company is disclosed in the footnote to the Company’s Balance Sheet.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Company’s accounts in conformity with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results
may ultimately differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision
affects both current and future periods.
No key sources of estimation uncertainty have been identified in the year; however, the following item is considered a critical
accounting judgement:
Pensions – defined benefit assets
Judgement is required regarding the application of IFRIC 14 and the extent to which the Company can recognise its defined benefit
pension asset. Changes in this judgement could significantly impact the value of the balance recognised.
Based on the terms and conditions of the scheme, and from consultation with independent advisers, the Company determined that an
ultimate future economic benefit exists in the form of a refund or a reduction in future contributions. The surplus has therefore been
recognised in full.
Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment. They are depreciated on
a straight-line basis over their estimated useful lives as follows:
Land and buildings
Plant and equipment
– 10 years
– 3 to 5 years
The carrying value is reviewed for impairment if events or changes in circumstances indicate that the current carrying value may not be
recoverable. Repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred.
Investments in subsidiaries
Investments are held at historical cost less any provision for impairment.
201
213
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
202
Financial Statements
Notes to the Company Accounts
For the year ended 31 December 2019
Financial statements
Notes to the Company Accounts
For the year ended 31 December 2019
1 Accounting policies continued
Interest-bearing loans and borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of issue costs. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Hedge accounting is adopted where derivatives such as fixed to floating interest rate swaps are held as fair value hedges against fixed
interest rate borrowings. Under fair value hedge accounting, fixed interest rate borrowings are revalued at each balance sheet date by
the change in fair value attributable to the interest rate being hedged.
Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
Retirement benefits
The Company has both the National Express Group Staff Pension Fund (a defined benefit scheme) and a defined contribution scheme.
For the defined benefit scheme, the Balance Sheet position comprises the net of the present value of the relevant defined benefit
obligation at the Balance Sheet date and the fair value of plan assets. The trustees complete a full actuarial valuation triennially but
the obligation is updated annually for financial reporting purposes by independent actuaries, using the projected unit credit method.
The present value of the obligation is determined by the estimated future cash outflows discounted using interest rates of high quality
corporate bonds which have terms to maturity equivalent to the terms of the related liability.
The current service cost and gains and losses on settlements and curtailments are recognised as operating costs. Past service gains
and losses are also recognised within operating costs and in the period in which the related plan amendment or curtailment occurs.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset and is recognised within finance costs.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the
Statement of Comprehensive Income in the period in which they arise.
For the defined contribution scheme, the amount charged to the Income Statement is the contributions payable in the year. Differences
between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Balance Sheet.
Share-based payments
The Company awards equity-settled share-based payments to certain employees, under which the Company receives services from
employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of
the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the Company over a specified time period). Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period,
which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Company revises
its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
Foreign currencies
Foreign currency assets and liabilities are translated into Sterling at the rates of exchange ruling at the year end. 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 arising are recorded in the Income Statement.
214
National Express Group PLC Annual Report 2019
202
Financial statements
Notes to the Company Accounts
For the year ended 31 December 2019
1 Accounting policies continued
Interest-bearing loans and borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of issue costs. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Hedge accounting is adopted where derivatives such as fixed to floating interest rate swaps are held as fair value hedges against fixed
interest rate borrowings. Under fair value hedge accounting, fixed interest rate borrowings are revalued at each balance sheet date by
the change in fair value attributable to the interest rate being hedged.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
Provisions
Retirement benefits
The Company has both the National Express Group Staff Pension Fund (a defined benefit scheme) and a defined contribution scheme.
For the defined benefit scheme, the Balance Sheet position comprises the net of the present value of the relevant defined benefit
obligation at the Balance Sheet date and the fair value of plan assets. The trustees complete a full actuarial valuation triennially but
the obligation is updated annually for financial reporting purposes by independent actuaries, using the projected unit credit method.
The present value of the obligation is determined by the estimated future cash outflows discounted using interest rates of high quality
corporate bonds which have terms to maturity equivalent to the terms of the related liability.
The current service cost and gains and losses on settlements and curtailments are recognised as operating costs. Past service gains
and losses are also recognised within operating costs and in the period in which the related plan amendment or curtailment occurs.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset and is recognised within finance costs.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the
Statement of Comprehensive Income in the period in which they arise.
For the defined contribution scheme, the amount charged to the Income Statement is the contributions payable in the year. Differences
between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Balance Sheet.
Share-based payments
The Company awards equity-settled share-based payments to certain employees, under which the Company receives services from
employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of
the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the Company over a specified time period). Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period,
which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Company revises
its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
Foreign currencies
Foreign currency assets and liabilities are translated into Sterling at the rates of exchange ruling at the year end. 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 arising are recorded in the Income Statement.
1 Accounting policies continued
Deferred tax
Deferred tax is provided in full in respect of all material temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes, apart from where the Company is able to control the reversal of
the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on a non-discounted basis at tax rates that are expected to apply in the periods in which the temporary
differences reverse based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that it is considered more likely than not that future taxable profits will be available against which
the underlying temporary differences can be deducted. Their carrying amount is reviewed at each balance sheet date on the same basis.
Derivative financial instruments
The Company uses derivative financial instruments such as interest rate derivatives, foreign currency forward exchange contracts and
cross currency swaps to hedge its risks associated with interest rate fluctuations and foreign currency. Such derivative financial
instruments are initially recognised at fair value and subsequently re-measured to fair value for the reported Balance Sheet. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The fair value of the
derivatives are calculated by reference to market exchange rates and interest rates at the period end.
The Company’s interest rate derivatives are designated as either cash flow hedges or fair value hedges.
For fair value hedges, the gain or loss on the hedging instrument is recognised immediately in the Income Statement. The carrying amount
of the hedged item is adjusted through the Income Statement for the gain or loss on the hedged item attributable to the hedged risk, in
this case movements in the risk free interest rate. Hedge accounting is discontinued when the hedging instrument expires, is sold,
terminated, exercised, or no longer qualifies for hedge accounting.
For cash flow hedges, the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in equity. The
gains or losses deferred in equity in this way are recycled through the Income Statement in the same period in which the hedged
underlying transaction or firm commitment is recognised in the Income Statement.
Foreign currency derivatives and cross currency swaps are used to hedge the Group’s net investment in foreign currency denominated
operations. For the Company, gains and losses are recognised immediately in the Income Statement. For the Group, to the extent that the
derivatives are designated and effective as net investment hedges, they are transferred to equity on consolidation to match against
foreign exchange exposure in the related assets and liabilities.
The Group also uses foreign currency forward contracts to hedge certain transactional exposures. These contracts are not hedge
accounted and all gains and losses are taken directly to the Income Statement.
Adoption of new standards
IFRS 16 ‘Leases’
IFRS 16 supersedes IAS 17 ‘Leases’ and IFRIC 4 ‘Determining Whether an Arrangement Contains a Lease’. IFRS 16 introduces a single,
on-balance sheet accounting model for leases. As a result, the Company, as a lessee, has recognised a right-of-use asset representing its
right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.
The Company has applied IFRS 16 using the modified retrospective approach. Therefore the cumulative effect of adopting IFRS 16 has
been recognised as an adjustment to opening retained earnings.
The Company has one lease contract for an item of property. Before the adoption of IFRS 16, the lease was classified as an operating
lease. Payments made under the operating lease were charged to profit or loss on a straight-line basis over the period of the lease. Upon
adoption of IFRS 16, the Company recognised a right-of-use asset and lease liability for the lease previously classified as an operating
lease. The right-of-use asset was recognised based on the carrying amount as if the standard had always been applied. Lease liabilities
were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the
date of initial application.
The weighted average incremental borrowing rate used to measure lease liabilities at the date of initial application was 2.63%.
203
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
204
Financial Statements
Notes to the Company Accounts
For the year ended 31 December 2019
Financial statements
Notes to the Company Accounts
For the year ended 31 December 2019
1 Accounting policies continued
The effect of adoption IFRS 16 as at 1 January 2019 is as follows:
Property, plant and equipment
Net assets
Shareholders’ equity
Retained earnings
Total equity
31 December
2018
Re-
measurements
£m
–
775.4
223.9
775.4
0.2
0.2
0.2
0.2
1 January
2019
0.2
775.6
224.1
775.6
The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:
Operating lease commitments at 31 December 2018
Discounted using incremental borrowing rates
Lease liabilities recognised at 1 January 2019
2 Exchange rates
The most significant exchange rates to UK Sterling for the Company are as follows:
£m
0.2
–
0.2
US Dollar
Canadian Dollar
Euro
2019
Closing rate Average rate
2018
Closing rate
Average rate
1.33
1.72
1.18
1.28
1.69
1.14
1.28
1.74
1.11
1.34
1.73
1.13
3 Directors’ emoluments
Detailed information concerning Directors’ emoluments, shareholdings and options is shown in the Directors’ Remuneration Report.
4 Intangible assets
Cost:
At 1 January 2019
Disposals
At 31 December 2019
Amortisation:
At 1 January 2019
Disposals
At 31 December 2019
Net book value:
At 31 December 2019
At 1 January 2019
216
Software
£m
0.4
(0.4)
–
0.4
(0.4)
–
–
–
National Express Group PLC Annual Report 2019
204
Financial statements
Notes to the Company Accounts
For the year ended 31 December 2019
31 December
measurements
1 January
2018
–
775.4
223.9
775.4
Re-
£m
0.2
0.2
0.2
0.2
The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:
Operating lease commitments at 31 December 2018
Discounted using incremental borrowing rates
Lease liabilities recognised at 1 January 2019
2 Exchange rates
The most significant exchange rates to UK Sterling for the Company are as follows:
Detailed information concerning Directors’ emoluments, shareholdings and options is shown in the Directors’ Remuneration Report.
Property, plant and equipment
Net assets
Shareholders’ equity
Retained earnings
Total equity
US Dollar
Canadian Dollar
Euro
3 Directors’ emoluments
4 Intangible assets
Cost:
At 1 January 2019
Disposals
At 31 December 2019
Amortisation:
At 1 January 2019
Disposals
At 31 December 2019
Net book value:
At 31 December 2019
At 1 January 2019
2019
0.2
775.6
224.1
775.6
£m
0.2
–
0.2
Software
£m
0.4
(0.4)
–
0.4
(0.4)
–
–
–
1 Accounting policies continued
The effect of adoption IFRS 16 as at 1 January 2019 is as follows:
5 Property, plant and equipment
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Cost:
At 1 January 2019
Change in accounting policies1
At 1 January 2019 (restated)
Disposals
At 31 December 2019
Depreciation:
At 1 January 2019
Change in accounting policies1
At 1 January 2019 (restated)
Charge
Disposals
At 31 December 2019
Net book value:
At 31 December 2019
At 1 January 2019 (restated)
–
1.4
1.4
–
1.4
–
1.2
1.2
0.1
–
1.3
0.1
0.2
0.3
–
0.3
(0.3)
–
0.3
–
0.3
–
(0.3)
–
–
–
2019
2018
Closing rate Average rate
Closing rate
Average rate
1.33
1.72
1.18
1.28
1.69
1.14
1.28
1.74
1.11
1.34
1.73
1.13
1 Opening balances have been restated for the adoption of IFRS 16 ‘Leases’
The net book value of land and buildings as at 31 December 2019 includes £0.1m right-of-use asset for the lease under IFRS 16.
Depreciation for the year included £0.1m relating to depreciation of this asset.
6 Investments in subsidiaries
Cost or valuation:
At 1 January 2019
Additions
Disposals
At 31 December 2019
Provisions:
At 1 January 2019
Provided in the year
Disposals
At 31 December 2019
Net carrying amount:
At 31 December 2019
At 1 January 2019
0.3
1.4
1.7
(0.3)
1.4
0.3
1.2
1.5
0.1
(0.3)
1.3
0.1
0.2
£m
2,252.3
258.1
–
2,510.4
531.9
–
–
531.9
1,978.5
1,720.4
The net carrying amount of investments in subsidiaries is not in excess of the Group’s market capitalisation value as at the date of
approval of these financial statements, so no impairment indicators have been identified in relation to these investments.
The addition in the year represents an investment in National Express Financing LP, made via a distribution in specie from National
Express Intermediate Holdings Limited.
The information provided below is given for the Company’s principal subsidiaries. A full list of subsidiaries and investments can be found
in note 40 to the consolidated Group accounts. The principal country of operation in respect of the companies below is the country in
which they are incorporated and all holdings are 100% held directly by the Company:
Incorporated in England and Wales
National Express Intermediate Holdings Limited
Holding company for the majority of the Group’s operating companies
National Express Finance Company Limited
Finance company for Group fuel derivative arrangements
National Express Financing LP
UK incorporated limited partnership
205
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206
Financial Statements
Notes to the Company Accounts
Financial statements
For the year ended 31 December 2019
Notes to the Company Accounts continued
For the year ended 31 December 2019
7 Derivative financial instruments
Interest rate derivatives
Cross currency swaps
Derivative financial assets due over one year
Interest rate derivatives
Cross currency swaps
Foreign exchange forward contracts
Derivative financial assets due under one year
Cross currency swaps
Derivative financial liabilities due over one year
Interest rate derivatives
Foreign exchange forward contracts
Derivative financial liabilities due under one year
2019
£m
2.1
8.0
10.1
7.9
3.5
27.0
38.4
(6.5)
(6.5)
(3.7)
(31.8)
(35.5)
2018
£m
6.7
–
6.7
3.9
–
3.6
7.5
(4.4)
(4.4)
–
(10.5)
(10.5)
Full details of the Group’s financial risk management objectives and policies can be found in note 30 to the Consolidated Group accounts.
As the holding company for the Group, the Company faces similar risks over foreign currency and interest rate movements.
8 Debtors
Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Corporation tax recoverable
Other debtors
Prepayments
2019
£m
546.3
11.2
0.8
3.0
561.3
Expected credit losses in respect of amounts owed by subsidiary undertakings were £nil (2018: £nil) at the reporting date.
9 Cash at bank and in hand
Cash at bank
Short-term deposits
2019
£m
0.1
357.4
357.5
2018
£m
214.6
3.0
2.5
3.0
223.1
2018
£m
0.1
35.0
35.1
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months depending on the immediate cash requirements of the Company, and earn interest at the
respective short-term deposit rates. The fair value of cash equals the carrying value.
218
National Express Group PLC Annual Report 2019
Financial statements
206
Notes to the Company Accounts continued
For the year ended 31 December 2019
Derivative financial assets due over one year
Interest rate derivatives
Cross currency swaps
Interest rate derivatives
Cross currency swaps
Foreign exchange forward contracts
Derivative financial assets due under one year
Cross currency swaps
Derivative financial liabilities due over one year
Interest rate derivatives
Foreign exchange forward contracts
Derivative financial liabilities due under one year
8 Debtors
Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Corporation tax recoverable
Other debtors
Prepayments
9 Cash at bank and in hand
Cash at bank
Short-term deposits
7 Derivative financial instruments
10 Creditors: amounts falling due within one year
Bank overdraft
Bank loans
Bonds
Lease liability
Trade creditors
Amounts owed to subsidiary undertakings
Accruals and deferred income
Accrued interest on borrowings
Other debt payable
207
2019
£m
79.3
100.0
437.1
0.2
12.1
150.0
111.8
12.8
–
903.3
2018
£m
84.7
–
–
–
23.4
136.6
43.2
10.9
0.5
299.3
Full details of the Group’s financial risk management objectives and policies can be found in note 30 to the Consolidated Group accounts.
As the holding company for the Group, the Company faces similar risks over foreign currency and interest rate movements.
Trade creditors are non-interest bearing and are normally settled on 30 day terms and other creditors are non-interest bearing and have
an average term of six months.
Lease liabilities arose on the adoption of IFRS 16 ‘Leases’ (see note 1).
11 Creditors: amounts falling due after more than one year
Expected credit losses in respect of amounts owed by subsidiary undertakings were £nil (2018: £nil) at the reporting date.
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months depending on the immediate cash requirements of the Company, and earn interest at the
respective short-term deposit rates. The fair value of cash equals the carrying value.
Bank loans
Bonds
Other debt payable
12 Provisions for liabilities and charges
At 1 January 2019
Released in the year
At 31 December 2019
Current 31 December 2019
Non-current 31 December 2019
Current 31 December 2018
Non-current 31 December 2018
2019
£m
75.4
644.8
68.3
788.5
2018
£m
–
852.4
73.7
926.1
Total
£m
3.8
(0.6)
3.2
2.0
1.2
3.2
3.8
–
3.8
Provisions for liabilities and charges relates to restructuring activities and is expected to be utilised within the next five years.
2019
£m
2.1
8.0
10.1
7.9
3.5
27.0
38.4
(6.5)
(6.5)
(3.7)
(31.8)
(35.5)
2019
£m
546.3
11.2
0.8
3.0
561.3
2019
£m
0.1
357.4
357.5
2018
£m
6.7
–
6.7
3.9
–
3.6
7.5
(4.4)
(4.4)
–
(10.5)
(10.5)
2018
£m
214.6
3.0
2.5
3.0
223.1
2018
£m
0.1
35.0
35.1
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
208
Financial Statements
Notes to the Company Accounts
Financial statements
For the year ended 31 December 2019
Notes to the Company Accounts continued
For the year ended 31 December 2019
13 Deferred tax
Deferred tax included in the Balance Sheet is as follows:
Deferred tax assets
Deferred tax liability
Net deferred tax asset
The major components of the provision for deferred taxation are as follows:
Accelerated capital allowances
Other timing differences
Losses carried forward
Defined benefit pension
Net deferred tax asset
A reconciliation of the deferred tax balances is as follows:
Deferred tax at 1 January 2019
Credit to Income Statement
Credit to Other Comprehensive Income
Deferred tax at 31 December 2019
2019
£m
14.5
(2.4)
12.1
2019
£m
0.1
0.1
14.3
(2.4)
12.1
2018
£m
14.4
(2.6)
11.8
2018
£m
0.1
–
14.3
(2.6)
11.8
Deferred tax
assets
£m
Deferred tax
liability
£m
14.4
0.1
–
14.5
(2.6)
0.1
0.1
(2.4)
Timing differences associated with Group investments
No deferred tax (2018: £nil) is recognised on the unremitted earnings of subsidiaries and associates, as no dividends have been accrued
as receivable and no binding agreement to distribute the past earnings in the future has been entered into by the subsidiaries.
Unrecognised tax losses
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit
against future taxable profits is probable. Deferred tax assets that the Company has not recognised in the accounts amount to £nil
(2018: £nil).
220
National Express Group PLC Annual Report 2019
Financial statements
208
Notes to the Company Accounts continued
For the year ended 31 December 2019
The major components of the provision for deferred taxation are as follows:
Deferred tax assets
Deferred tax liability
Net deferred tax asset
Accelerated capital allowances
Other timing differences
Losses carried forward
Defined benefit pension
Net deferred tax asset
Deferred tax at 1 January 2019
Credit to Income Statement
Credit to Other Comprehensive Income
Deferred tax at 31 December 2019
A reconciliation of the deferred tax balances is as follows:
2019
£m
14.5
(2.4)
12.1
2019
£m
0.1
0.1
14.3
(2.4)
12.1
£m
14.4
0.1
–
14.5
2018
£m
14.4
(2.6)
11.8
2018
£m
0.1
–
14.3
(2.6)
11.8
£m
(2.6)
0.1
0.1
(2.4)
Deferred tax
Deferred tax
assets
liability
Timing differences associated with Group investments
No deferred tax (2018: £nil) is recognised on the unremitted earnings of subsidiaries and associates, as no dividends have been accrued
as receivable and no binding agreement to distribute the past earnings in the future has been entered into by the subsidiaries.
Unrecognised tax losses
(2018: £nil).
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit
against future taxable profits is probable. Deferred tax assets that the Company has not recognised in the accounts amount to £nil
13 Deferred tax
Deferred tax included in the Balance Sheet is as follows:
14 Interest-bearing loans and borrowings
The effective interest rates at the Balance Sheet date were as follows:
Current
Bank overdraft
Bank loans
10-year Sterling bond
2.5-year Euro floating rate note
Lease liability
Accrued interest on borrowings
Total current
Non-current
Bank loans
10-year Sterling bond
7-year Sterling bond
9-year Sterling bond
2.5-year Euro floating rate note
Euro Private Placement
Total non-current
Maturity
Effective
interest rate
2018
£m
Maturity
Effective
interest rate
2019
£m
79.3
100.0
225.8
211.3
0.2
12.8
629.4
75.4
–
–
2020
June 2020
October 2020
–
2021
–
400.2
November 2023
244.6
November 2028
–
68.3
788.5
–
August 2021
May 2020
EURIBOR + 0.4%
–
84.7
–
–
–
–
10.9
95.6
–
Various
6.85%
2.63%
–
Various
–
2.54%
2.38%
–
4.55%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
227.9
June 2020
400.3 November 2023
–
–
6.85%
2.54%
–
224.2
May 2020
EURIBOR + 0.4%
73.7
August 2021
4.55%
926.1
The Company currently has £557.0m of unsecured committed revolving credit facilities, which mature between 2020 and 2023. At 31
December 2019, there was £nil (2018: £nil) drawn down on the facilities, with £2.7m of capitalised deal fees remaining.
In October 2019, the Company issued a series of private placements totalling £414m denominated in USD, Sterling and Euros with
maturities ranging from 2027 to 2032 with an effective interest rate of 1.92%, to be drawn from May 2020.
The cash flow on the lease liability in 2019 was £0.2m, with an interest charge in the year of less than £0.1m.
Details of the Company’s interest rate management strategy and interest rate swaps are included in notes 30 and 31 to the
consolidated Group accounts.
15 Called-up share capital
At 31 December:
Authorised:
800,000,000 (2018: 800,000,000) ordinary shares of 5p each
Issued called-up and fully paid:
511,738,648 (2018: 511,738,648) ordinary shares of 5p each
2019
£m
2018
£m
40.0
25.6
40.0
25.6
The total number of share options exercised in the year by employees of the Group was 1,825,123 (2018: 2,248,309) of which all
(2018: 1,910,086) exercises were satisfied by transferring shares from the National Express Employee Benefit Trust. The remaining
exercises in 2018 were settled via a direct purchase of shares from the open market.
Own shares
Own shares comprises 1,404,751 (2018: 1,758,660) ordinary shares in the Company that have been purchased by the trustees of
the National Express Employee Benefit Trust (the Trust). During the year, the Trust purchased 1,471,214 (2018: 2,025,000) shares
and 1,825,123 (2018: 1,910,086) shares were used to satisfy options granted under a number of the Company’s share schemes.
No shares (2018: nil) were sold during the year to the open market.
The market value of the shares held by the Trust at 31 December 2019 was £6.6m (2018: £6.6m). The dividends payable on 972,605 of
these shares have been waived (2018: 3,551,284).
209
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National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
210
Financial Statements
Notes to the Company Accounts
Financial statements
For the year ended 31 December 2019
Notes to the Company Accounts continued
For the year ended 31 December 2019
16 Retirement benefits
The Company participates in both the National Express Group Staff Pension Fund (a defined benefit scheme) and a defined contribution scheme.
Defined benefit scheme
The defined benefit scheme is now closed to all future accrual.
On 11 October 2018, the trustees of the defined benefit scheme completed a buy-in transaction whereby the assets of the scheme were
invested in a bulk annuity policy with the insurer Rothesay Life, under which the benefits payable to defined benefit members became fully
insured. The insurance policy was purchased using the existing assets of the plan. As the buy-in transaction has resulted in the defined
benefit obligations being fully insured, the Company has no obligation to make any further payments into the scheme.
The assets of the scheme are held separately from those of the Company.
The valuation as at 31 December 2019 is based on the results of the 5 April 2016 actuarial valuation, which has been updated by independent
professionally qualified actuaries to take account of the requirements of IAS 19. The assumptions used by the actuary are the best estimates
chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
Details of the latest actuarial valuation are included in note 34 to the consolidated Group accounts.
The relevant assumptions used are as follows:
Rate of increase of pensions
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Post-retirement mortality in years:
Current pensioners at 65 – male
Future pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 – female
2019
£m
2.9%
2.1%
2.9%
2.0%
22.3
23.6
24.9
26.4
2018
£m
3.2%
2.9%
3.2%
2.2%
22.7
24.1
25.4
26.9
Sensitivities regarding key assumptions are disclosed in note 34 to the consolidated Group accounts.
The amounts charged to the Income Statement and comprehensive income for the years ended 31 December 2019 and 2018 are set out
in the following tables:
Income Statement
Past service cost
Net interest income
Total credit to the Income Statement
During the year £0.3m (2018: £0.2m) of administrative expenses were incurred.
Comprehensive income
Actuarial (loss)/gain during the period from obligations
Expected return on plan assets greater/less than discount rate
Net actuarial loss
2019
£m
–
0.4
0.4
2019
£m
(11.5)
10.8
(0.7)
2018
£m
(0.9)
1.1
0.2
2018
£m
7.3
(35.6)
(28.3)
The actuarial loss in the prior year of £35.6m includes £26.5m representing the difference between the costs of the insurance policy and
the accounting value of the liabilities secured through the buy-in transaction described above.
In addition to the above actuarial movements, the Statement of Changes in Equity included a £0.3m loss (2018: £0.6m loss) for
investment advice that was incurred directly by the Company, primarily in relation to the buy-in transaction.
222
National Express Group PLC Annual Report 2019
Financial statements
210
Notes to the Company Accounts continued
For the year ended 31 December 2019
Financial statements
Notes to the Company Accounts continued
For the year ended 31 December 2019
211
16 Retirement benefits
The Company participates in both the National Express Group Staff Pension Fund (a defined benefit scheme) and a defined contribution scheme.
16 Retirement benefits continued
The amounts recognised in the Balance Sheet at 31 December are as follows:
Defined benefit scheme
The defined benefit scheme is now closed to all future accrual.
On 11 October 2018, the trustees of the defined benefit scheme completed a buy-in transaction whereby the assets of the scheme were
invested in a bulk annuity policy with the insurer Rothesay Life, under which the benefits payable to defined benefit members became fully
insured. The insurance policy was purchased using the existing assets of the plan. As the buy-in transaction has resulted in the defined
benefit obligations being fully insured, the Company has no obligation to make any further payments into the scheme.
The assets of the scheme are held separately from those of the Company.
The valuation as at 31 December 2019 is based on the results of the 5 April 2016 actuarial valuation, which has been updated by independent
professionally qualified actuaries to take account of the requirements of IAS 19. The assumptions used by the actuary are the best estimates
chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
Details of the latest actuarial valuation are included in note 34 to the consolidated Group accounts.
The relevant assumptions used are as follows:
Rate of increase of pensions
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Post-retirement mortality in years:
Current pensioners at 65 – male
Future pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 – female
in the following tables:
Income Statement
Past service cost
Net interest income
Total credit to the Income Statement
Sensitivities regarding key assumptions are disclosed in note 34 to the consolidated Group accounts.
The amounts charged to the Income Statement and comprehensive income for the years ended 31 December 2019 and 2018 are set out
During the year £0.3m (2018: £0.2m) of administrative expenses were incurred.
Comprehensive income
Actuarial (loss)/gain during the period from obligations
Expected return on plan assets greater/less than discount rate
Net actuarial loss
The actuarial loss in the prior year of £35.6m includes £26.5m representing the difference between the costs of the insurance policy and
the accounting value of the liabilities secured through the buy-in transaction described above.
In addition to the above actuarial movements, the Statement of Changes in Equity included a £0.3m loss (2018: £0.6m loss) for
investment advice that was incurred directly by the Company, primarily in relation to the buy-in transaction.
2019
£m
2.9%
2.1%
2.9%
2.0%
22.3
23.6
24.9
26.4
2019
£m
–
0.4
0.4
2019
£m
(11.5)
10.8
(0.7)
2018
£m
3.2%
2.9%
3.2%
2.2%
22.7
24.1
25.4
26.9
2018
£m
(0.9)
1.1
0.2
2018
£m
7.3
(35.6)
(28.3)
Insurance policy
Other
Fair value of scheme assets
Present value of scheme liabilities and defined benefit obligation
Defined benefit pension surplus
The movement in the present value of the defined benefit obligation in the year is as stated below:
Defined benefit obligation at 1 January
Past service cost
Benefits paid
Finance charge
Actuarial loss arising from changes in financial assumptions
Actuarial gain arising from changes in demographics
Actuarial loss arising from experience adjustments
Defined benefit obligation at 31 December
The movement in the fair value of scheme assets is as follows:
Fair value of scheme assets at 1 January
Expected return on plan assets
Expected return on plan assets greater/(less) than discount rate
Administrative expenses
Benefits paid
Fair value of scheme assets at 31 December
History of experience gains and losses:
Fair value of scheme assets
Present value of defined benefit obligation
Surplus in the scheme
Experience adjustments arising on liabilities
Experience adjustments arising on assets
2019
£m
109.3
(95.1)
14.2
0.3
10.8
2018
£m
98.6
(83.7)
14.9
(2.3)
(35.6)
2017
£m
134.0
(90.8)
43.2
–
(0.4)
2019
£m
95.1
14.2
109.3
(95.1)
14.2
2019
£m
(83.7)
–
2.5
(2.4)
(13.8)
2.0
0.3
(95.1)
2019
£m
98.6
2.8
10.8
(0.4)
(2.5)
109.3
2016
£m
134.2
(89.7)
44.5
(0.3)
28.1
2018
£m
83.7
14.9
98.6
(83.7)
14.9
2018
£m
(90.8)
(0.9)
2.9
(2.2)
7.4
2.2
(2.3)
(83.7)
2018
£m
134.0
3.3
(35.6)
(0.2)
(2.9)
98.6
2015
£m
105.1
(70.2)
34.9
–
(2.2)
17 Share-based payment
During the year ended 31 December 2019, the Company had a number of share-based payment arrangements, which are described in
note 7(b) to the Consolidated Group accounts.
The options have a weighted average contractual life of one year (2018: one year). Options were exercised throughout the year and the
weighted average share price at exercise was 417p (2018: 388p).
223
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Company Accounts
For the year ended 31 December 2019
212
18 Commitments and contingencies
Contingent liabilities
Guarantees
The Company has guaranteed credit facilities totalling £42.9m (2018: £211m) of certain subsidiaries. The Company has also guaranteed
certain liabilities of a number of its subsidiaries under Section 479C of the Companies Act 2006. These subsidiaries are highlighted in the
full subsidiaries listing in note 40 to the consolidated accounts.
Bonds and letters of credit
In the ordinary course of business, the Company is required to issue counter-indemnities in support of its operations. Letters of credit
have been issued to support insurance retentions of £112.4m (2018: £118.2m).
224
National Express Group PLC Annual Report 2019
212
18 Commitments and contingencies
Contingent liabilities
Guarantees
The Company has guaranteed credit facilities totalling £42.9m (2018: £211m) of certain subsidiaries. The Company has also guaranteed
certain liabilities of a number of its subsidiaries under Section 479C of the Companies Act 2006. These subsidiaries are highlighted in the
full subsidiaries listing in note 40 to the consolidated accounts.
Bonds and letters of credit
In the ordinary course of business, the Company is required to issue counter-indemnities in support of its operations. Letters of credit
have been issued to support insurance retentions of £112.4m (2018: £118.2m).
Additional Information
Five Year Summary
Five Year Summary
Group normalised
Revenue
Normalised operating profit
Return on capital
Basic EPS
IFRS
Revenue
Operating profit
PBT
Basic EPS
Dividends per share
Net (debt)/funds
Cash
Other debt receivable
Bonds
Bank loans1
Fair value of derivatives included in financing activities
Lease liabilties2
Other debt payable
Net debt
Gearing ratio
2019
2018
2017
2016
2015
2,744.4
295.3
12.4%
34.5
2,450.7
257.7
12.4%
32.9
2,321.2
241.5
11.9%
29.1
2,093.7
217.5
11.9%
26.3
1,745.4
190.6
11.7%
23.4
2,744.4
2,450.7
2,321.2
2,093.7
1,745.4
242.3
187.0
27.6
16.4
478.3
2.4
(1,081.9)
(184.5)
15.0
(402.5)
(68.3)
(1,241.5)
2.40
215.4
177.7
26.6
14.9
117.7
2.1
(852.4)
(9.0)
6.4
(142.6)
(73.7)
(951.5)
2.30
197.9
156.4
25.7
13.5
314.3
0.7
(851.9)
(115.6)
11.3
(173.1)
(73.6)
(887.9)
2.30
183.7
134.8
23.0
12.3
324.4
0.5
(983.2)
(13.3)
25.5
(159.5)
(72.4)
(878.0)
2.50
164.9
120.6
20.9
11.3
60.4
0.8
(583.5)
(45.3)
14.3
(127.6)
(64.6)
(745.5)
2.45
1 Net of arrangement fees totalling £2.7m on bank and other loans
2 Lease liabilities are reported net of finance lease receivables that are reported separately from borrowings on the face of the Group’s balance sheet
213
225
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Additional Information
Shareholder information
Annual Dividend Confirmation
The Company issues Annual Dividend
Confirmations (ADC) to private
shareholders. An ADC in respect of
dividends paid by the Company during
the tax year 2019/20 has been issued
at the same time as this report.
Share dealing service
Equiniti provides both existing and
prospective UK shareholders with an easy
to access and simple to use share dealing
facility for buying and selling shares in the
Company by telephone, online or by post.
The telephone and online dealing service
allows shareholders to trade ‘real-time’ at
a known price that will be given to them at
the time they give their instruction.
For telephone dealing, call 0345 603 7037
between 8.00am and 4.30pm, Monday to
Friday (excluding public holidays). Calls are
charged at the standard geographical rate
and will vary by provider. Calls from outside
the UK will be charged at the applicable
international rate. For online dealing, log
on to www.shareview.co.uk/dealing. For
postal dealing, call 0371 384 2248 for full
details and a dealing instruction form.
Existing shareholders will need to provide
the account/shareholder reference number
shown on their share certificate.
Other brokers, banks and building societies
offer similar share dealing facilities.
Ordinary shares
The Company’s ordinary shares, each of
nominal value 5 pence, are traded on the
main market for listed securities on the
London Stock Exchange (LON:NEX).
Company website:
www.nationalexpressgroup.com
The Company website contains information
about the Company, including results
announcements, annual reports, general
meeting notices and other corporate
communication and shareholder materials
which are available to view and download.
Information can also be found there about
the Company share price and dividends,
the Group and its operations, and links to
further information.
Registrar: Equiniti
For assistance and enquiries relating to
the administration of shareholdings in
National Express Group PLC, such as lost
share certificates, dividend payments or
a change of address, please contact the
Company’s Registrar:
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone from UK:
0371 384 2152*
Telephone from overseas:
+44 (0) 121 415 0804*
Textel (for the hard of hearing):
0371 384 2255*
If you are registered for online shareholder
communications, you can contact
the Registrar and access details of
your shareholdings electronically via
www.shareview.co.uk.
* Lines are open from 8.30am to 5.30pm,
Monday to Friday, excluding public holidays.
e-Communication
We encourage shareholders to receive
communications from the Company
electronically as this will enable you
to receive them more quickly and
securely. It also allows the Company to
communicate in a more environmentally
friendly and cost effective manner.
To register for this service, you should
go to www.shareview.co.uk.
Payment of dividends to UK
resident shareholders
Shareholders whose dividends are currently
sent to their registered address may wish to
consider having their dividends paid directly
into their personal bank or building society
account. This has a number of advantages,
including the crediting of cleared funds on
the actual dividend payment date. If you
would like your future dividends paid in
this way, you should contact the Registrar
on 0371 384 2152 or complete a mandate
instruction available at www.shareview.
co.uk and return it to the Registrar at
the address given above. Under this
arrangement, dividend confirmations
are still sent to your registered address.
Payment of dividends to non-UK
resident shareholders
Instead of waiting for a Sterling cheque to
arrive by post, shareholders can request
that their dividends be paid directly to a
personal bank account overseas. This is a
service which the Registrar can arrange in
over 30 different countries worldwide, and
in local currencies, and it normally costs
less than paying in a Sterling cheque. For
more information, you should contact
the Registrar on +44 (0)121 415 7049 or
download an application form online at
www.shareview.co.uk. Alternatively, you
can contact the Registrar at the address
given above.
226
National Express Group PLC Annual Report 2019
Additional Information
Shareholder information continued
ShareGift
ShareGift is an independent charity share
donation scheme administered by the Orr
Mackintosh Foundation (registered charity
number 1052686). Those shareholders
who hold only a small number of shares,
the value of which makes it uneconomic
to sell them, can donate their shares to
ShareGift which will sell them and donate
the proceeds to a wide range of charities.
For further information, contact:
ShareGift
PO Box 72253
London
SW1P 9LQ
Telephone:
Email:
Website:
020 7930 3737
help@sharegift.org
www.sharegift.org
Unclaimed Assets Register
The Company participates in the
Unclaimed Assets Register (UAR)
programme which provides a search
facility for shareholdings and other
financial assets that may have been
forgotten. For further information, contact:
Telephone:
Email:
Website:
0333 000 0182
uarenquiries@uk.experian.com
www.uar.co.uk
Unsolicited mail
The Company is legally obliged to make its
share register available on request, subject
to a proper purpose test, and this may
result in shareholders receiving unsolicited
mail. To limit the receipt of such unsolicited
mail, contact:
MPS Complaint Department
The Mailing Preference Service
DMA House
70 Margaret Street
London
W1W 8SS
Telephone:
Website:
020 7291 3310
www.mpsonline.org.uk
Shareholder security
Share fraud includes scams where
Shareholders receive unsolicited calls or
correspondence concerning investment
matters from organisations or persons
claiming or implying that they have some
connection with the Company. These are
typically from purported ‘brokers’ who offer
to buy shares at a price often far in excess
of their market value. These operations
are commonly known as ‘boiler rooms’.
Shareholders are advised to be very wary of
any offers of unsolicited advice, discounted
shares, premium prices for shares they
own or free reports into the Company.
If you receive any such unsolicited calls,
correspondence or investment advice:
− ensure you get the correct name of the
individual and firm;
− check that the individual and/or firm
appear on the Financial Conduct Authority
(FCA) Register to ensure they are
authorised at https://register.fca.org.uk/;
− use the details on the FCA Register
to contact the firm, if you want to call
them back;
− call the FCA Consumer Helpline (0800
111 6768) if there are no contact details
for the firm on the FCA Register or you
are told they are out of date;
− if you are approached by an
unauthorised individual or firm, you
should inform the FCA via its website;
− if you do buy or sell shares from an
unauthorised individual or firm, you
may not have access to the Financial
Ombudsman Service of the Financial
Services Compensation Scheme; and
− if you have already paid money to share
fraudsters you should contact Action
Fraud on 0300 123 2040.
REMEMBER: if it sounds too good to be
true, it probably is, and if you are contacted
by telephone and feel uncomfortable with
the call or the calls persist, simply hang up
and/or block the caller’s number.
Personal data
The Company processes personal data
about its shareholders in compliance
with applicable laws. A copy of the
Shareholder Privacy Notice explaining
how the Company processes your
personal data and your rights in
respect of that processing can be found
at www.nationalexpressgroup.com/
investors/shareholder-centre/shareholder-
privacy-notice.
227
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Additional Information
Financial Calendar 2020
2019 final dividend1
Ex-dividend date
Record date
Payment date
2020 AGM
Annual General Meeting2
2020 interim dividend
Ex-dividend date
Record date
Payment date
2020 reporting timetable
Trading update
Half year results
Trading update
2021
Full year results3
23
APR
24
APR
12
MAY
7
MAY
27
AUG
28
AUG
18
SEP
7
MAY
30
JULY
22
OCT
25
FEB
1 The Board has recommended a final dividend of 11.19 pence per ordinary share, subject to
shareholders’ approval at the forthcoming Annual General Meeting
2 The Annual General Meeting will be held at 2.30pm on Thursday, 7 May 2020 in the Banqueting
Hall at Glaziers Hall, 9 Montague Cl, London SE1 9DD. A separate circular, comprising a letter from
the Chairman, Notice of Meeting and explanatory notes in respect of the resolutions proposed,
accompanies this Annual Report. Copies of this document can also be found on the Company’s website
at www.nationalexpressgroup.com
3 Provisional date
228
National Express Group PLC Annual Report 2019 The Board of Directors of the Company
Listing Rules
The Listing Rules of the FCA
Additional Information
Definitions and Supporting Information
2018 Code
The UK Corporate Governance Code
published by the FRC in 2018
AFV
AI
FRC
Board
Bps
BRT
BSOG
CDP
Alternative fuel vehicle
Artificial intelligence
The Financial Reporting Council
Basis points
Bus Rapid Transit
Bus Service Operators Grant
Carbon Disclosure Project
Company
National Express Group PLC
Consolidated
Financial
Statements
Constant
Currency
CPI
CRM
CTV
Directors
Dividend
DTRs
EFQM
ESOS
EURIBOR
Executive
Directors
EV
FRC
FWI
GDP
GHG
Group
HMRC
IAS
The Financial Statements for the Group for the
year ended 31 December 2019
Compares current period’s results with the
prior period’s results translated at the current
period’s exchange rates.
Consumer Price Index
Customer relationship management
Consolidated tax voucher
The Directors of the Company
Dividend amount payable per ordinary share
Disclosure, Guidance and Transparency Rules
European Foundation for Quality Management
Energy Savings Opportunity Scheme
Euro Interbank Offered Rate
The Executive Directors of the Company
Electric vehicle
The Financial Reporting Council
Fatalities and Weighted Injuries Index
Gross Domestic Product – used to determine
the economic performance of a whole country
or region
Greenhouse gas emissions
The Company and its subsidiaries and
associates
Her Majesty’s Revenue and Customs
International Accounting Standards
IFRIC
IFRS
KPIs
LIBOR
International Financial Reporting
Interpretations Committee
International Financial Reporting Standards
Key performance indicators
London Interbank Offered Rate
LTIP
MAA
Maas
Net interest
expense
Non-Executive
Directors
NPV
OEMs
Long-Term Incentive Plan
Moving annual average
Mobility as a service
Finance costs less finance income
The Non-Executive Directors of the Company
Net present value
Original equipment manufacturers
Operating margin
or ‘margin’
Ratio of normalised operating profit to
revenue.
Ordinary shares Ordinary shares of nominal value 5 pence
each in the Company
PBT
RCF
RIA
RME
RMS
RPI
RRX
SPAD
TfL
TfWM
TSR
TUPE
Profit before tax
Revolving credit facility
Recruitment Incentive Awards granted under
the LTIP
Rhine-Münster Express
Revenue Management System
Retail Prices Index
Rhine-Ruhr Express
Signal passed at danger
Transport for London
Transport for West Midlands
Total shareholder return – the growth in value
of a shareholding over a specified period
assuming that dividends are reinvested to
purchase additional shares
Transfer of Undertakings (Protection of
Employment) Regulations 2006
ULSD
Ultra low sulphur diesel
229
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Additional Information
Alternative performance measures
In the reporting of financial information, the Group has adopted various Alternative Performance Measures (“APMs”). APMs should
be considered in addition to IFRS measurements. The Directors believe that these APMs assist in providing useful information on the
underlying performance of the Group, enhance the comparability of information between reporting periods, and are used internally by the
Directors to measure the Group’s performance. The key APMs that the Group focuses on are as follows:
Measure
EBITDA
Closest IFRS
measure
Operating
profit1
Definition and reconciliation
Purpose
Earnings before interest and tax plus depreciation and
amortisation. It is calculated by taking normalised operating
profit and adding back depreciation, fixed asset grant
amortisation, and share-based payments.
EBITDA is used as a key measure to understand profit and
cash generation before the impact of investments (such as
capital expenditure and working capital). It is also used to
derive the Group’s gearing ratio.
Gearing ratio
No direct
equivalent
Net cash
generated
from
operating
activities
No direct
equivalent
Free cash flow
(FCF)
Net
maintenance
capital
expenditure
A reconciliation of normalised operating profit to EBITDA is
included on page 23.
The ratio of net debt to EBITDA over the last 12-months,
including any pre-acquisition EBITDA generated in that
12-month period by businesses acquired by the Group during
that period. For the purposes of this calculation, net debt is
translated using average exchange rates.
The cash flow equivalent of normalised profit after tax.
A reconciliation of normalised operating profit and net cash
flow from operating activities to free cash flow is included on
page 24.
The gearing ratio is considered a key measure of balance
sheet strength and financial stability by which the Group and
interested stakeholders assesses its financial position.
Free cash flow allows us and external parties to evaluate the
cash generated by the Group’s operations and is also a key
performance measure for the Executive Directors’ annual
bonus structure and management remuneration.
Comprises the purchase of property, plant and equipment
and intangible assets, other than growth capital expenditure,
less proceeds from their disposal. It excludes capital
expenditure arising from discontinued operations.
Net maintenance capital expenditure is a measure by which
the Group and interested stakeholders assesses the level
of investment in new/existing capital assets to maintain the
Group’s profit.
Growth capital
expenditure
No direct
equivalent
Growth capital expenditure represents the cash investment in
new or nascent parts of the business, including new contracts
and concessions, which drive enhanced profit growth.
Growth capital expenditure is a measure by which the Group
and interested stakeholders assesses the level of capital
investment in new capital assets to drive profit growth.
Net debt
Borrowings
less cash
and related
hedges
Cash and cash equivalents (cash overnight deposits, other
short-term deposits) and other debt receivables, offset
by borrowings (loan notes, bank loans and finance lease
obligations) and other debt payable (excluding accrued interest).
Net debt is the measure by which the Group and interested
stakeholders assesses its level of overall indebtedness.
The components of net debt as they reconcile to the primary
Financial Statements and notes to the accounts is disclosed
in note 39.
Normalised
earnings
Profit after
tax
Is the normalised profit attributable to equity shareholders for
the period, and can be found on the face of the Group Income
Statement in the first column.
Normalised
earnings per
share (EPS)
Basic
earnings per
share
Is normalised earnings divided by the weighted average
number of shares in issue, excluding those held in the
Employee Benefit Trust which are treated as cancelled.
Normalised earnings is a key measure used in the calculation
of normalised earnings per share.
Normalised earnings per share is widely used by external
stakeholders, particularly in the investment community.
A reconciliation of statutory profit to normalised profit for the
purpose of this calculation is provided within note 13 of the
Financial Statements.
Normalised
operating
profit
Operating
profit1
Statutory operating profit excluding separately disclosed
items, and can be found on the face of the Group Income
Statement in the first column.
Normalised operating profit is a key performance measure
for the Executive Directors’ annual bonus structure and
management remuneration.
Organic
revenue and
profit growth
Revenue
and operating
profit1
Year on year movement in revenue or profit derived from the
Group’s continuing businesses in existence at the start of the
current period.
It also allows for ongoing trends and performance of the
Group to be measured by the Directors, management and
interested stakeholders.
This measure illustrates the year-on-year growth in revenue
and profit, excluding the impact of in-year acquisitions.
Return on
capital
employed
(ROCE)
Operating
profit1 and
net assets
Normalised operating profit divided by average capital
employed. Capital employed is net assets excluding net debt
and derivative financial instruments, and for the purposes of
this calculation is translated using average exchange rates.
ROCE gives an indication of the Group’s capital efficiency
and is a key performance measure for the Executive
Directors‘ annual bonus structure and management
remuneration.
The calculation of ROCE is included on page 23.
1 Operating profit is presented on the Group Income Statement. It is not defined per IFRS, however is a generally accepted profit measure.
230
National Express Group PLC Annual Report 2019 Additional Information
Key Contacts and Advisers
Group Company Secretary
Jennifer Myram
companysecretarial@nationalexpress.com
Registered office
National Express Group PLC
National Express House
Birmingham Coach Station
Mill Lane
Birmingham
B5 6DD
Tel: +44 (0) 8450 130 130
www.nationalexpressgroup.com
Registered in England and Wales
No. 2590560
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0371 384 2152*
International: +44 (0) 121 415 0804
Textel: 0371 384 2255
www.shareview.co.uk
Auditor
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Tel: +44 (0) 20 7583 1198
www.deloitte.com
Corporate solicitors
Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London
E1 6PW
Financial advisers
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
Joint corporate brokers
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
HSBC Bank plc
8 Canada Square
London
E14 5HA
* Lines are open 8.30am to 5.30pm (UK time), Monday to Friday excluding
public holidays. Calls are charged at the standard geographical rate and will
vary by provider. Calls from outside the UK will be charged at the applicable
international rate.
231
National Express Group PLC Annual Report 2019Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Additional Information
Cautionary statement and disclaimer
Disclaimer
The purpose of this Annual Report is to
provide information to the members of the
Company and it has been prepared for, and
only for, such members as a body, and no
other persons. The Company, its Directors
and employees, agents and advisers do
not accept or assume responsibility to any
other person to whom this document is
shown or into whose hands it may come
and any such responsibility or liability is
expressly disclaimed.
Cautionary statement
This Annual Report and the Company’s
website may contain certain ‘forward-
looking statements’ with respect to
the Company and its Group and their
financial condition, results of operations
and business, strategy, plans, objectives,
goals and expectations with respect to
such matters and/or with respect to the
economies, markets and legal frameworks
within which the Group operates.
Forward-looking statements are
sometimes, but not always, identified by
their use of a date in the future or such
words as ‘anticipates’, ‘aims’, ‘due’,
‘could’, ‘may’, ‘should’, ‘will’, ‘would’,
‘expects’, ‘believes’, ‘intends’, ‘plans’,
‘targets’, ‘goal’ or ‘estimates’ or, in each
case, their negative or other variations
or comparable terminology. Forward-
looking statements are not guarantees of
future performance. By their very nature,
forward-looking statements are inherently
unpredictable, speculative and involve
risk and uncertainty because they relate
to events and depend on circumstances
that will occur in the future. Many of these
risks and uncertainties relate to factors that
are beyond the Group’s ability to control
or estimate precisely. There are a number
of factors that could cause actual results
and circumstances to differ materially
from those expressed or implied by these
forward-looking statements. These factors
include, but are not limited to, changes in
the political conditions, economies and
markets in which the Group operates
(including the outcome of the negotiations
to leave the EU); changes in the legal,
regulatory and competition frameworks
in which the Group operates; changes
in the markets from which the Group
raises finance; the impact of legal or other
proceedings brought by or against or
which otherwise affect the Group; changes
in accounting practices and interpretation
of accounting standards under IFRS; and
changes in interest and exchange rates.
Any forward-looking statements made in
this Annual Report or on the Company’s
website, or made subsequently, which are
attributable to the Company or any other
member of the Group, or persons acting
on their behalf, are expressly qualified
in their entirety by the factors referred to
above. Each forward-looking statement
speaks only as of the date it is made.
Except as required by its legal or statutory
obligations, the Company does not intend
to update any forward-looking statements
whether as a result of new information,
future events or otherwise.
Nothing in this Annual Report or on the
Company’s website should be construed
as a profit forecast or an invitation to deal
in the securities of the Company.
232
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National Express Group PLC
National Express House
Mill Lane
Digbeth
Birmingham B5 6DD
Tel: +44 (0) 8450 130130
www.nationalexpressgroup.com