SGC.L Regulatory News (SGC)

Proposed return of cash of approximately £340m

19 August 2011

1. Highlights

Stagecoach Group plc ("the Company" or "Stagecoach") is today announcing proposals to return approximately £340m to its shareholders (the "Return of Cash"). The highlights of the proposals are:

·; Proposed one-off Return of Cash of approximately £340m to shareholders (equivalent to approximately 20% of current market capitalisation)

·; Return of 47 pence per Existing Ordinary Share

·; Return to be effected by D Share structure

·; Shareholders to have a choice between "income" or "capital" (subject to the restrictions explained herein)

·; Existing Ordinary Shares to be ultimately consolidated into New Ordinary Shares (the "Share Capital Consolidation")

·; Return of Cash is conditional upon shareholder approval

·; Return of Cash is intended to establish a more appropriate and efficient capital structure

The group of companies of which the Company is the ultimate parent company is referred to in this announcement as "the Group".

2. Background

In its announcement of the Group's preliminary results on 29 June 2011, the Company confirmed that it was completing a review of its capital structure and that it expected to announce the conclusions of that review at or before the Annual General Meeting at the end of August 2011.

The Group's review of its capital structure has now been completed and it is proposed to return approximately £340m to shareholders.

3. Rationale for the proposed Return of Cash

Stagecoach is a leading international transportation group with a strong portfolio of cash generative businesses. The Group's strategy is now directed towards delivering value from organic growth in revenues and profits from bus and rail businesses in the UK and North America, complementary acquisitions and evaluating new rail franchise opportunities.

The Group's last major return of cash to shareholders was in 2007 when it returned approximately £700m. Following this return of cash, the Group's consolidated net debt as at 31 October 2007 was £495m. By 30 April 2011, the Group's consolidated net debt had reduced to £281m while the Group's profit (excluding intangible asset expenses and exceptional items) had increased. The reduction in net debt reflects the Group's strong cash generation over the period. This led the board of directors of the Company (the "Board") to review the Group's capital structure and the Board has concluded that it is appropriate to return approximately £340m to shareholders.

The aim of the Return of Cash is to establish a more appropriate and efficient capital structure for the Group and thereby reduce its overall cost of capital and generate further shareholder value. The Board has taken full account of the Group's development plans and access to funding in reaching its decision that this was an appropriate amount to return to shareholders.

4. Proposed Return of Cash

Overview

Under the Return of Cash, shareholders will receive 47 pence in cash in respect of each Existing Ordinary Share in issue at the Record Time (which is expected to be 5.30 p.m. on 7 October 2011) by a structure involving the sub-division of the Company's Existing Ordinary Shares into Intermediate Ordinary Shares and D Shares followed by a proportional consolidation of the Intermediate Ordinary Shares into New Ordinary Shares. This method of returning cash to shareholders has been chosen because it allows all shareholders to be treated equally pro-rata to the size of their existing shareholdings in Stagecoach, and gives all shareholders (with the exception of shareholders in the United States, Australia, New Zealand, Canada, Japan and the Republic of South Africa ("Restricted Shareholders") and shareholders who come onto the share register after 4.30 p.m. on 19 September 2011) choices as to the form in which they receive their proceeds from the Return of Cash. In addition, it gives clarity as to the quantum and the financial effects of the Return of Cash when compared to certain alternative methods of returning cash.

The Return of Cash would be funded from a combination of surplus cash and existing, committed bank facilities.

A circular (the "Circular") will be sent to shareholders next week, and will set out details of the Return of Cash and explain why the Board considers the Return of Cash to be in the best interests of the Company and its shareholders as a whole.

The Return of Cash (together with certain other matters) requires the approval of shareholders. These approvals will be sought at a general meeting of the Company, which is expected to be held at the Company's registered office at 10 Dunkeld Road, Perth, PH1 5TW at 9.30 a.m. on 7 October 2011. The Notice of the General Meeting will be set out in the Circular.

Shareholders should read the whole of the Circular and not just rely on the summarised information set out in this or other announcements.

A timetable of expected principal events is set out at the end of this announcement.

Terms of the Return of Cash

The key terms of the proposed Return of Cash are:

·; Existing Ordinary Shares to be sub-divided into Intermediate Ordinary Shares and D Shares at a ratio of 1 Intermediate Ordinary Share and 1 D Share for each Existing Ordinary Share held at the Record Time (expected to be 5.30 p.m. on 7 October 2011)

·; Intermediate Ordinary Shares to be consolidated into New Ordinary Shares at a ratio of 4 New Ordinary Shares for every 5 Intermediate Ordinary Shares

·; The share consolidation ratio reflects the mid-market closing price of Existing Ordinary Shares on 18 August 2011

·; Shareholders (with the exception of Restricted Shareholders and shareholders who come onto the share register after 4.30 p.m. on 19 September 2011) can choose to receive the Return of Cash in income or capital form by electing for Alternatives 1 or 2 as set out in more detail in "Shareholders' Choices" below

·; Shareholders who do not elect to receive the Single D Share Dividend in respect of all their D Shares will be deemed to have elected for Alternative 1 (Capital Option) and to have their D Shares acquired off-market by the Company for 47 pence each in cash (the "Purchase Offer") with shareholders expected to be sent the proceeds on 21 October 2011

·; Shareholders electing for Alternative 2 (Income Option) will receive a Single D Share Dividend on their D Shares of 47 pence each in cash (expected to be sent to Shareholders on 21 October 2011)

·; Shareholders have the opportunity to elect for a combination of both Alternatives

No application will be made to the UK Listing Authority or to the London Stock Exchange for any of the D Shares to be admitted to the Official List or to trading on the London Stock Exchange's market for listed securities, nor will the D Shares be admitted to trading on any other recognised investment exchange. The D Shares are transferable although, in the absence of a formal market, shareholders' ability to sell the D Shares is likely to be extremely limited. The D Shares will have limited rights.

Share Capital Consolidation

As part of the Return of Cash, Existing Ordinary Shares will ultimately be replaced by New Ordinary Shares in order to reduce the number of Existing Ordinary Shares in

issue to reflect the Return of Cash.

Every 5 Existing Ordinary Shares held at the Record Time will ultimately be consolidated into 4 New Ordinary Shares.

Subject to normal market movements, the Share Capital Consolidation is intended

to:

·; Make the share price directly comparable before and after the Return of Cash;

·; Maintain the comparability of future earnings and dividend per share amounts with previously reported figures; and

·; Maintain the intrinsic value of awards that have been made under Stagecoach Share Schemes, such as the grant of share options to employees.

The New Ordinary Shares will have in all material respects the same rights as

the Existing Ordinary Shares and are expected to be admitted to the Official

List and to trading on the London Stock Exchange's market for listed securities

at 8.00 a.m. on 10 October 2011.

Fractional entitlements to New Ordinary Shares will be rounded down to the nearest whole New Ordinary Share. Any fractional entitlements so arising will be aggregated and sold in the market. To the extent a shareholder's fractional entitlements are less than £3.00 the proceeds will be retained by the Company. The Company estimates that all such fractional entitlements under the Return of Cash will be less than £3.00.

Full details of the Return of Cash and Share Capital Consolidation will be contained in the Circular.

Shareholders' choices

Shareholders (subject to certain exceptions) will be able to choose between the following alternatives:

Alternative 1 (Capital Option)

For shareholders that are deemed to have elected for Alternative 1 (Capital Option) in respect of some or all of their D Shares, the Company will buy those D Shares for 47 pence in cash per D Share. All D Shares bought back will subsequently be cancelled by the Company. The cash is expected to be sent to shareholders on 21 October 2011.

The cash received under Alternative 1 (Capital Option) should be taxed as capital for the recipient shareholder. Part 6 of the Circular provides further details on UK taxation in relation to the Return of Cash.

Shareholders who wish to elect for Alternative 1 (Capital Option) in respect of all of their D Shares need not make any election.

Alternative 2 (Income Option)

Shareholders who elect for Alternative 2 (Income Option) in respect of some or all of their D Shares, will receive a single dividend of 47 pence in cash per D Share so elected. The Single D Share Dividend is expected to be sent to shareholders on 21 October 2011. Following the Single D Share Dividend being declared and paid, the D Shares will automatically convert into Deferred Shares with very limited economic and other rights.

The cash received under Alternative 2 (Income Option) should be taxed as income for the recipient shareholder. Part 6 of the Circular provides further details on UK taxation in relation to the Return of Cash.

Form of Election

Details of how to complete and return your Form of Election or send a valid TTE Instruction through CREST are set out in the Circular.

Shareholders, who hold their Ordinary Shares in certificated form and who do not properly complete and return a Form of Election, or are CREST holders and do not send a valid TTE Instruction, will be deemed to have elected for Alternative 1 (Capital Option).

Non-UK Shareholders

Alternative 1 (Capital Option) is not being offered to Restricted Shareholders who will therefore be deemed to have elected for, and will receive their entire proceeds from the Return of Cash as described under, Alternative 2 (Income Option).

Restricted Shareholders and other non-UK shareholders may be taxed differently from shareholders resident in the UK and all shareholders are advised to read the Circular.

Persons who become shareholders after the Election Time

Alternative 1 (Capital Option) is not being offered to persons who become shareholders after the Election Time. Such shareholders will be deemed to have elected for, and will receive their entire proceeds from the Return of Cash as described under, Alternative 2 (Income Option).

5. Interim Management Statement

The Company has separately published an Interim Management Statement today.

For further information, please contact:

Stagecoach Group plc www.stagecoachgroup.com

Analysts

Martin Griffiths, Finance Director 01738 442111

Ross Paterson, Director of Finance & Company Secretary 01738 442111

Media

Steven Stewart, Director of Corporate Communications 07764 774680

John Kiely / Will Swan, Smithfield 020 7360 4900

EXPECTED TIMETABLE OF PRINCIPAL EVENTS