06/12/2006

Stagecoach Group plc (“the Group”) is pleased to announce its intention to return value of not less than £400m to its shareholders.

The Group’s Board of Directors (“the Board”) has reviewed the Group’s capital structure in light of a number of factors, including:

• the disposal by the Group of its New Zealand business in November 2005 and its London bus business in August 2006;
• continued strong cash generation by the Group and;
• a significant reduction in the Group’s net debt, partly as a result of the above factors. The Group has reported consolidated net funds (i.e. cash in excess of borrowings as defined by UK GAAP) of £140.9m as at 31 October 2006.

As a result of this review, the Board believes that in order to ensure the Group has an efficient and appropriate capital structure, a return of value should be made to shareholders.

In deciding the amount of value to be returned to shareholders, the Board has taken account of:

• the Group’s strategy to focus on organic growth and potential bolt-on acquisitions in its UK and North American bus operations, and to target opportunities to expand its rail portfolio;
• the ongoing capital requirements of the Group and;
• the Group’s progressive dividend policy.

Working in close consultation with our employees, trade union representatives and pension scheme trustees, the Group has already made substantive progress in reducing the pension deficit and to secure the accrued benefits for the current members of the Group’s main pension scheme, the Stagecoach Group Pension Scheme (“the Pension Scheme”). The Group has also reached agreement in principle with the trustees of the Pension Scheme for plans to make a further one-off cash contribution of up to £50m to the scheme as part of an agreed funding plan.

Subject to shareholder and other approvals, the Board expects the proposed return of value and contribution to the Pension Scheme to occur by 30 June 2007. Funding for the proposed return of value and contribution to the Pension Scheme is expected to come from the Group’s existing cash resources and bank facilities.

The return of value is likely to be structured such that shareholders will participate pro-rata to their ordinary shareholdings. It is also expected that the ordinary shares would be consolidated such that the number of ordinary shares held by each shareholder would be reduced to reflect the significant return of value on those shares.

The Board does not intend that the return of value will affect the level of dividends per ordinary share or the Group’s progressive dividend policy.

Stagecoach Group Chairman, Robert Speirs, said: “The Group’s strong financial position and positive outlook has enabled us to announce plans to return significant value to our shareholders. As well as optimising our capital structure and enhancing value to investors, our plans should ensure we continue to invest in the business, maintain our progressive dividend policy and have the flexibility to take advantage of future growth opportunities.

"The Board will continue to monitor the Group’s capital structure and consider opportunities to enhance shareholder value on an ongoing basis.”

Further details of the proposed return of value will be announced in due course.

The Group has separately announced today its interim results for the six months ended 31 October 2006.

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