Management review

Borrowing facilities

In early August, we took advantage of market conditions to sign a new £615 million, five-year, revolving credit facility agreement, on improved terms, with a group of leading European banks. This replaces the £310 million facility arranged in 2004, providing stability, flexibility and additional financial capacity for the medium-term development of the group in the UK and mainland Europe.

Much of the group’s bus fleet is financed on medium-term hire purchase or finance lease arrangements, typically three to five years in length. As part of the UK rail franchising arrangements, the group has provided guarantees of £46 million. The rolling stock of the UK, Netherlands, Danish and German rail businesses that is provided through operating leases have annual commitments of approximately £113 million. All material commitments will cease on expiry of the franchises. Bonds amounting to £25 million have been provided in respect of the Netherlands, Danish and German rail businesses. Letters of credit amounting to £16 million are provided as part of the group’s UK insurance arrangements.

There is a net cash position in sterling and a borrowing position in euros as a result of the group’s policy of reducing exposure to foreign exchange currency fluctuations to insignificant levels, as described previously.

The group’s working capital and ancillary requirements are mainly provided by our principal bankers and reviewed annually.