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Interim Results 10 December 2003

Interim Results 10 December 2003. Robert Speirs Chairman. Highlights. Delivery of strategic objectives in 6 months to 31 October 2003 New South West Trains and Island Line franchises agreed Coach USA restructuring largely completed Innovative growth ideas in UK Bus introduced

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Interim Results 10 December 2003

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  1. Interim Results10 December 2003

  2. Robert SpeirsChairman

  3. Highlights • Delivery of strategic objectives in 6 months to 31 October 2003 • New South West Trains and Island Line franchises agreed • Coach USA restructuring largely completed • Innovative growth ideas in UK Bus introduced • Strong trading performance across the Group • Disposal of Citybus • Net debt down from £560.0m to £210.9m • Interim dividend up 12.5% to 0.9p per share

  4. Martin GriffithsFinance Director

  5. Financial Performance • Strong financial results • Operating profit growth in all four retained divisions • Operating margin improvement • Actively managing cost pressures • Revenue growth initiatives to offset cost increases • Reduction in central overhead • Risk sharing with Strategic Rail Authority • Asset utilisation • Targeting investment in growth areas

  6. Financial Highlights October 2003 £m October 2002 £m Turnover Total operating profit/(loss)* - pre exceptionals & goodwill*(after restructuring costs) Profit/(loss) before tax - pre exceptionals & goodwill Free cash flow ** Adjusted EPS Dividend per share 963.8 67.3 76.9 44.8 60.3 100.3 3.2p 0.9p 1,067.7 (512.4) 86.9 (524.1) 75.2 100.2 4.4p 0.8p * After restructuring costs of £4.1m (2002 - £2.9m) ** Free cash flow comprises net cash inflow from operating activities, dividends from associates, net cash inflow/(outflow) from returns on investments and servicing of finance, and taxation

  7. Profit Reconciliation Pre goodwill & exceptionals £m Exceptionals & Goodwill £m Reported £m 2002 PBT Operating profit of retained businesses • UK Bus • New Zealand • Coach USA • Rail – underlying • Overheads • Reduction in underlying finance charges • Exceptionals & goodwill • Citybus disposal • Rail – non-recurring liquidated damages • Restructuring • JVs & associates • Gain on repurchase of bonds in 2002 • 2003 PBT (599.3) - - 575.0 - - - 8.8 (15.5) - - - - - (15.5) 75.2 3.2 0.5 0.1 9.8 0.3 10.1 - 99.2 (11.6) (7.2) (1.2) (3.9) (15.0) 60.3 (524.1) 3.2 0.5 575.1 9.8 0.3 10.1 8.8 83.7 (11.6) (7.2) (1.2) (3.9) (15.0) 44.8

  8. 1.4% 9.6% 8.2% 2002 2003 Operating margin excl goodwill & exceptionals Six months to 31 Oct 2002 2003 Turnover £m Op profit £m Turnover £m Op profit £m UK Bus New Zealand Coach USA Rail 293.8 21.5 334.2 206.0 855.5 31.1 4.4 15.8 18.9 70.2 8.2% UK Bus New Zealand Coach USA Rail 317.9 26.4 234.0 216.7 795.0 34.3 4.9 15.9 21.5 76.6 9.6% Margin Improvement Retained Divisions

  9. EBITDA 2002 £m 2003 £m UK Bus (£2.2m lower due to impact of operating leases) Coach USA Overseas Bus - New Zealand - Discontinued Rail VRG thetrainline Road King Others Overheads & restructuring EBITDA before exceptionals 54.0 25.3 6.8 3.5 22.5 5.0 (1.7) 5.0 (0.7) 119.7 (8.3) 111.4 50.4 37.1 5.9 20.6 20.2 7.7 (1.4) 5.8 (0.6) 145.7 (7.2) 138.5

  10. Exceptionals and Restructuring Costs 2002 £m 2003 £m Exceptional Items • - Loss on sale of Coach USA divisions • Loss on sale of Chongqing investment • Gain on sale of Citybus • - Coach USA exceptional items • Redundancy/restructuring costs* • £4.1m (2002 - £2.9m) (5.1) (1.1) 0.3 Nil (5.9) Nil Nil Nil (575.0) (575.0) * Charged against operating profits

  11. Movement in Net Debt £m Opening net debt Cash flows from operations Net interest received Dividends paid Net capital expenditure and new hire purchase/finance leases Acquisition of businesses and net debt assumed Sale of businesses and net debt eliminated Foreign exchange, tax and other movements Closing net debt (560.0) 111.4 1.0 (23.8) (35.5) (6.5) 305.7 (3.2) (210.9)

  12. UK Bus Trading Results • Turnover growth 8.2% to £317.9m • Underlying passenger growth outwith London 1.3% • Strong contribution from London companies • 19.8% revenue growth • Improved operating margin • 10.8% versus 10.6% in 2002 • 11.3% versus 10.7% excluding operating lease impact

  13. UK Bus Profit Analysis October 2003 £m October 2002 £m 317.9 34.3* 10.8% 2.6 (0.9) 36.0 11.3% 0.3 (0.4) 35.9 11.3% 293.8 31.1 10.6% 0.4 (0.2) 31.3 10.7% - (1.6) 29.7 10.1% Turnover Operating profit Add back increased operating lease costs Deduct saving in depreciation arising from operating leases Add back Megabus & Taxibus R&D Exclude Devon Adjusted margin *after £3.5m increase in pensions/NI costs and £3.3m increase in insurance costs

  14. Coach USA Trading Results • Turnover £234.0m (2002- £334.2m) • 3.1% like for like revenue decline* • Operating profit** £15.9m (2002 - £15.8m) • strong cost control • profit levels maintained on reduced revenue • Operating margin up from 4.7% to 6.8% * Like for like revenue decline is measured as the change in revenue excluding the impact of acquisitions, disposals and foreign exchange ** Pre exceptional items and goodwill amortisation throughout presentation

  15. October 2003 October 2002 Turnover $m Turnover $m 113.7 57.5 22.5 193.7 156.0 32.3 382.0 115.7 59.7 23.1 198.5 276.4 34.9 509.8 Coach USA Turnover Breakdown Residual businesses • North East • North Central • Canada • Discontinued Remaining taxi operations (to be sold)

  16. New Zealand Trading Results • Turnover £26.4m (2002 - £21.5m) • Underlying 6.1% revenue growth (excluding currency movements) • Operating profit £4.9m (2002 - £4.4m) • Operating margin 18.6% (2002 – 20.5%) • Passenger volumes up 5.5%

  17. Rail Trading Results Rail Subsidiaries • Turnover £216.7m (2002 - £206.0m) • Operating profit £21.5m (2002 - £18.9m*) • Operating margin 9.9% (2002 – 9.2%) • Passenger volumes up 3.1% at SWT • Sustained improvement in SWT-caused delay minutes * Included £7.2m of non-recurring liquidated damages

  18. Rail Profit Analysis October 2003 £m Operating Profit per Bid Passenger income Net Sch 7/Sch 8 EC4T Other Costs Revenue/Profit share to the SRA Actual SWT operating profit Other Total Rail operating profit 12.7 8.8 1.7 5.2 5.3 (11.7) 22.0 (0.5) 21.5

  19. Joint Ventures & Associates Virgin Rail Group • Share of revenue £149.5m (2002 - £140.6m) • Share of operating profit £5.0m (2002 – £7.7m) thetrainline • Share of revenue £5.4m (2002 - £5.1m) • Share of operating loss £1.7m (2002 - £1.4m) Road King • Share of operating profit £5.0m (2002 - £5.8m)

  20. Disposals Reduction in net debt £m Net cash proceeds £m (Loss)/gain before tax £m Completed in six months to 31 Oct 2003: - Coach USA - Citybus - Chongqing associates Non-core: - Road King - Remaining US taxi businesses 133.0 171.8 0.9 305.7 133.0 128.7 0.9 262.6 (5.1) 0.3 (1.1) (5.9)

  21. Balance Sheet & Financing • Net debt down to £210.9m (April 2003 - £560.0m) • EBITDA*/Interest cover 6.7 times • Progressive dividend policy • Evaluate optimum balance sheet structure in conjunction with 2004 re-financing of Eurobond and bank facilities * pre exceptionals

  22. Current Trading & Outlook • Maintaining Coach USA profit on lower revenue base • H1 is seasonally stronger • Sustainable SWT profits at upper end of original expectations • Operating profit growth in UK Bus and New Zealand • H2 to date in line with expectations

  23. Brian Souter Chief Executive

  24. Group Strategy (1) • Objectives in the last 12 months STATUS • Seek new SWT franchise Done • Restructure Coach USA Largely complete • Seek substantial improvement in SWT’s own train performance Ongoing • Get the basics right at UK Bus Ongoing • Fares • Driver recruitment • Engineering • Core networks

  25. Group Strategy (2) Where next for Stagecoach? • UK Bus • Continue to get the basics right • Research and development • Challenge is the delivery of organic growth • Rail • Priority to renegotiate XC and WC franchises • Other franchise opportunities • Integrated Kent • Manchester Metrolink • UK Intercity • North America • Deliver profitable growth • Small bolt on acquisitions • Fleet improvement • New Zealand • Sustain revenue and profit growth

  26. Summary • Delivery of strategic objectives • Strong trading performance across the Group • Focused management • Strengthened balance sheet • Increased dividend • Current trading in line with expectations

  27. Interim Results10 December 2003

  28. Appendices

  29. UK Bus Revenue Development London £m Provincial £m Total UK Bus £m 2002 Turnover Passenger volumes outside London London contract changes Fares/tender prices 2003 Turnover 69.2 - 11.7 2.0 82.9 224.6 2.9 - 7.5 235.0 293.8 2.9 11.7 9.5 317.9

  30. UK Bus - London/Other October 2003 Operating Operating Turnover Profit Margin £m £m % October 2002 Operating Operating Turnover Profit Margin £m £m % London Other 82.9 235.0 317.9 7.5 26.8 34.3 9.0% 11.4% 10.8% 69.2 224.6 293.8 6.8 24.3 31.1 9.8% 10.8% 10.6%

  31. Rail Revenue Development £m % 2002 Turnover SWT Passenger volumes SWT Fares Other 2003 Turnover 206.0 6.3 4.1 0.3 216.7 3.1% 2.0% 0.1% 5.2%

  32. Overseas Bus Revenue Development Citybus £m New Zealand £m Other £m Total £m 2002 Turnover Disposal of Citybus and Australia Currency movements Volumes Fares 2003 Turnover 70.3 (45.5) (4.5) (2.5) - 17.8 21.5 - 3.4 1.3 0.2 26.4 0.5 (0.5) - - - - 92.3 (46.0) (1.1) (1.2) 0.2 44.2

  33. Overseas BusSegmental results October 2003 Operating Operating Turnover Profit Margin £m £m % October 2002 Operating Operating Turnover Profit Margin £m £m % Citybus* New Zealand Other Total 17.8 26.4 - 44.2 1.0 4.9 - 5.9 5.6% 18.6% 0.0% 13.3% 70.3 21.5 0.5 92.3 12.6 4.4 - 17.0 17.9% 20.5% 0.0% 18.4% *Disposal completed June 2003

  34. Coach USA Revenue Development £m % 2002 Turnover Disposals Currency movement Underlying decline 2003 Turnover 334.2 (76.2) (16.4) (7.6) 234.0 (22.8)% (4.9)% (2.3)% (30.0)%

  35. Finance Charges Average balance* £m Finance charges £m Annual Effective rate % 607.0 (237.0) 370.0 16.9 (3.0) 13.9 (0.6) 0.3 0.4 0.8 1.5 0.3 16.6 5.6% 2.5% 7.5% Gross debt & related derivatives Cash Joint ventures & associates Non-utilisation/commitment fees Amortisation of bond issue costs/bank charges Insurance letters of credit Discount on insurance provisions Other *Average of month end debt/cash balances

  36. Interest/Debt Ratios 2003 £m 2002 £m Finance charges* (net) EBITDA pre-exceptionals EBITDA pre-exceptionals/Finance charges 16.6 111.4 6.7 times 11.7* 138.5 11.8 times * 2002 includes £15.0m gain on repurchase of bonds

  37. Taxation 2003 Pre-tax £m Tax £m % Pre-goodwill and exceptionals Exceptional items Goodwill amortisation 60.3 (5.9) (9.6) 44.8 (17.9) 2.0 0.8 (15.1) 29.7% 33.9% 8.3% 33.7%

  38. Capital Expenditure Capex on new hire purchase £m Impact of capex on net debt £m Disposal proceeds £m Net £m Cash spent on capex £m UK Bus Coach USA Overseas Bus Rail 10.9 - - - 10.9 21.9 9.3 5.9 1.1 38.2 (1.8) (0.8) (0.1) - (2.7) 20.1 8.5 5.8 1.1 35.5 11.0 9.3 5.9 1.1 27.3

  39. Fuel Hedging FY2004 FY2003 FY2002 % of group fuel usage hedged Average hedge price $/barrel* Average floating price $/barrel* Variable fuel costs 100% $24 $30 c.£40m 63% $24 $20 c.£50m 90%** $24 $23 c.£53m * Based on blended comparable crude oil price for the year ** 6 months to April 2002

  40. Exchange Rates October 2003 October 2002 Closing rate Average rate Closing rate Average rate US$ HK$ NZ$ 1.6970 13.1780 2.7617 1.6324 12.7120 2.7875 1.5645 12.2017 3.2177 1.5252 11.8957 3.2177

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