House of Commons - Transport - Minutes of Evidence

Select Committee on Transport Minutes of Evidence

Supplementary memorandum submitted by National Express Group plc

In response to your enquiry of 29 June 2006, I have set out below the answers to your questions.

1. RETURN ON CAPITAL

In 2005 the bus business earned a post tax return of 14.5% although it should be noted that 2005 profits did benefit from historic fuel hedging arrangements. Based on 2006 Budget expectations the return is projected to reduce to around 13%, due in part to rising fuel prices.

These calculations divide company operating profits by tangible fixed assets. Tangible fixed assets combine an estimate of the market value of the properties with the book value of the fleet and other plant and equipment.

No adjustment has been made for assets acquired using operating lease financing techniques. The use of such leases tends to overstate the return as no tangible fixed assets are included in the balance sheet but this is in accordance with UK Generally Accepted Accounting Practice.

2. PROFITABILITY

The operating margins earned in our West Midlands business as per our 2005 statutory accounts were just over 15%; our London operations returned an operating margin of just under 6% but it should be noted that our London businesses were only acquired in 2004 and 2005 and there is still some restructuring and expansion to take place. In the longer term we aim to achieve an operating margin in London of at least 10%.

Our London operations are likely to earn a lower return as a number of our assets are subject to fixed term, operating leases which seek to match hire periods with the life of individual TfL route contracts.

3. LOW FLOOR FLEET

— 79% of operational fleet in the West Midlands is accessible/low floor;

— 100% of operational fleet in Dundee is accessible/low floor; and

— 100% of operational fleet in London/Surrey is accessible/low floor.

4. AVERAGE AGE OF THE FLEET

— 8 years in West Midlands/Dundee; and

— 4.5 years in London/Surrey.

5. CCTV

— 70% of operational fleet in West Midlands is fitted with CCTV;

— 100% of operational fleet in Dundee is fitted with CCTV; and

— 90% of operational fleet in London/Surrey.

All systems are recorded.