Our strategy

Our strategy will develop the unique attributes of our business portfolio in four stages:

1. Delivering operational excellence

Operational excellence is crucial to our goal of achieving best-in-class margins. We outperformed our competitors in 2012 in North America School Bus, Spain, UK Coach and Rail. IN UK Bus we have almost doubled the margin over three years and have plans to match the best industry performer. Our operational excellence initiatives create more sustainable, efficient businesses for the longer term. This requires

• Consistent service performance for our customers;
• Continuous cost efficiency improvement; and
• Living our core values every day.

2. Driving organic growth 

We operate in highly competitive markets and our customers are affected by austerity. We will target volume growth in our existing markets by improving further the value we offer, the service we deliver and by ensuring that we are always competitive. We believe we can grow the UK Coach and UK Bus business by managing fare increases that remain affordable for our customers. We will continue to drive growth through investment in technology and through initiatives to manage better fleet utilisation.

The Group continues to build a strong pipeline of contracted revenues. In Spain and North America in particular we are also able to win new contract bid opportunities.  We will seek to participate in profitable future UK Rail operations under the new franchising regime;

3. Generating superior cash and returns

Long term cash generation is a key tenet for us, driving shareholder value creation and supporting future returns to shareholders. Through successful implementation of our strategy we

• continue to drive excellent cash generation;
• underpin our operations with a sound debt and dividend policy; and
• grow non-rail return on capital through disciplined capital deployment across the Group

Our target is to generate £125m to £150m per annum in free cash flow over the next two years. We plan to reduce our gearing to 2.0x net debt to EBITDA by the end of 2014, enablish further choices over future investment and return of capital to shareholders.

We will continue to deploy capital carefully, combining it with a further improvement in margins to enhance ROCE and releasing capital where appropriate. Our range of new market opportunities are capital-light, allowing ROCE to improve over time, a key measure of shareholder value creation for us.

4. Delivering new opportunities from capital-light markets

National Express is unique amongst its peers in owning a diversified portfolio of assets that provides a platform for growth in attractive markets. We will continue to expand the Group's capability to secure contracts to operate public transportation services. As the leading public transport operator by profitability in Europe, we are currently looking at a number of opportunities where we can use National Express's intellectual capital and reputation to explore new markets. Our strategy is also to target geographies which have, or are, liberalising their public transport markets. This is:

• Creating a pipeline of long term, sustainable public transport operations;
• Leveraging the Group's expertise running passenger transport services in adjacent markets; operating in the same or similar modes of transport; and building scale in selected geographies; and
• Representing primarily capital-light opportunities which will not require significant asset investment.