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Interim Results 5 th December 2007

Interim Results 5 th December 2007. Definitions.

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Interim Results 5 th December 2007

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  1. Interim Results5th December 2007

  2. Definitions • Like-for-like amounts are derived, on a constant currency basis, by comparing the relevant year-to-date amount with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods. • Operating profit for a particular business unit or division within the Group refers to profit before net finance income/charges, taxation, intangible asset expenses, exceptional items and restructuring costs. • Operating margin for a particular business unit or division within the Group means operating profit as a percentage of revenue. • Exceptional items means items which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their nature, size or incidence in order to allow a proper understanding of the underlying financial performance of the Group.

  3. Robert SpeirsChairman

  4. Highlights • Good underlying revenue growth in all core divisions • Interim dividend of 1.35p, up 12.5% • Adjusted earnings per ordinary share up 62.1% • Operating profit growth • Earnings-enhancing return of value in May/June 2007 • Strong start to new South Western rail franchise and Manchester Metrolink tram contract • East Midlands rail franchise from November 2007

  5. Martin GriffithsFinance Director

  6. Financial summary 31 Oct 07 31 Oct 06 Change Revenue - continuing operations Operating profit* - continuing operations Adjusted earnings per ordinary share* Basic earnings per ordinary share Net (debt)/funds Dividend per ordinary share £820.8m £100.0m 9.4p 9.0p £(494.7)m 1.35p £752.1m £80.7m 5.8p 18.9p £140.9m 1.20p 9.1% 23.9% 62.1% (52.4%) 12.5% * Excluding exceptional items and intangible asset expenses

  7. Summary income statement 31 Oct 07 £m 31 Oct 06 £m Change £m UK Bus operating profit North America operating profit excl Megabus Megabus North America operating loss UK Rail operating profit Share of joint ventures’ profit after tax Restructuring and group overheads Finance charges (net) Tax Profit excluding intangibles and exceptionals Intangibles and exceptionals, net of tax Reported profit from continuing operations 52.5 18.0 (1.1) 25.3 13.2 (7.9) (15.4) (15.7) 68.9 (3.1) 65.8 34.1 17.2 (0.5) 31.4 4.4 (5.9) (3.3) (18.5) 58.9 15.0 73.9 18.4 0.8 (0.6) (6.1) 8.8 (2.0) (12.1) 2.8 10.0 (18.1) (8.1)

  8. UK Bus 31 Oct 07 31 Oct 06 Change Revenue (£m) Like-for-like revenue (£m) Operating profit (£m) Operating margin Estimated passenger journeys (m) Total vehicle miles operated (m) 367.1 364.5 52.5 14.3% 316.0 157.3 339.6 338.0 34.1 10.0% 304.2 157.4 8.1% 7.8% 54.0% 4.3% 3.9% (0.1)% • Revenue and journeys benefiting from marketing campaigns, investment in fleet and excellent value fares • Continued underlying revenue and volume growth • Stable year-on-year fuel costs • Reduced pension costs

  9. UK Bus - Revenue • Maintaining revenue growth momentum • Focus on non-London operations delivering growth

  10. UK Bus – Operating Profit • Strong UK Bus profit progression • c. £270m for London bus sale in 2006/07

  11. North America (excluding Megabus) 31 Oct 07 31 Oct 06 Change Revenue (US$m) Like-for-like revenue (US$m) Operating profit (US$m) Operating margin 258.9 255.6 36.2 14.0% 251.3 247.0 32.2 12.8% 3.0% 3.5% 12.4% 1.2% • Further margin improvement from optimising asset deployment • 10% annualised operating margin targeted by 30 April 2009 (12 months to 31 Oct 07: 8.7%) • Reduction in dedicated charter fleet • Some signs of economic weakness resulting in a reduced rate of revenue growth

  12. North America revenue breakdown 31 Oct 07 US$m 31 Oct 06 US$m % Growth 99.0 62.5 53.4 40.7 255.6 3.3 258.9 4.8 263.7 93.9 55.9 53.3 43.9 247.0 4.3 251.3 2.2 253.5 5.4% 11.8% 0.2% (7.3)% 3.5% (23.3)% 3.0% 118.2% 4.0% Scheduled service/line run/commuter Sightseeing & tour Charter School bus & contract Like-for-like revenue excl Megabus Closed operations and foreign exchange movements Total North America excl. Megabus Megabus Total North America

  13. UK Rail (wholly-owned) 31 Oct 07 31 Oct 06 Change Revenue (£m) Like-for-like revenue (£m) Operating profit (£m) Operating margin South Western estimated passenger miles (000’s) 322.7 318.8 25.3 7.8% 1,619.0 276.8 276.8 31.4 11.3% 1,513.1 16.6% 15.2% (19.4)% (3.5)% 7.0% • Strong start to new South Western franchise • South Western revenue growth 15.3% • Timing of revenue initiatives may result in profit variability • Manchester Metrolink from July 2007 • East Midlands from November 2007

  14. Virgin Rail Group 31 Oct 07 31 Oct 06 Change Revenue - 49% share (£m) • West Coast Operating profit - 49% share (£m) Operating margin Dividends received (£m) Estimated Passenger miles (000’s) - West Coast 225.8 149.1 16.3 7.2% 11.0 1,284.7 202.4 131.3 3.9 1.9% 7.7 1,172.8 11.6% 13.6% 317.9% 5.3% 42.9% 9.5% • Re-negotiated West Coast franchise performing well • Winning market share from airlines • Network expansion - 21 Super Voyager Trains • CrossCountry franchise ended November 2007

  15. Scottish Citylink/Megabus JV 31 Oct 07 31 Oct 06 Change Revenue - 35% share (£m) Operating profit - 35% share (£m) Operating margin 4.8 0.9 18.8% 4.3 1.1 25.6% 11.6% (18.2)% (6.8)% • JV has delivered significant passenger benefits • Better value-for-money • More sensible co-ordination of routes, timetables, etc. • More services • Strong support from passengers, politicians and other stakeholders • Resolution of Competition Commission issues

  16. Miscellaneous income statement items 31 Oct 07 31 Oct 06 Change Intangible asset expenses (£m) Group overheads (£m) Restructuring costs (£m) Pre-tax exceptional net gains (£m) (6.2) (6.2) (1.7) 2.0 (7.5) (5.2) (0.7) 155.9 17.3% (19.2)% (142.9)% (98.7)% • £2.0m gain on sale of Darlington bus operations • Prior year exceptional gains include London bus sale and past service pensions credit

  17. Finance charges and credit ratios 31 Oct 07 31 Oct 06 Net finance charges (£m) EBITDA from continuing operations and joint ventures excl exceptional items (£m) Ratio of EBITDA from continuing operations and joint ventures excl exceptional items to net finance charges 15.4 135.1 8.8 times 3.3 113.5 34.4 times • Efficient capital structure • Good credit ratios

  18. Liquidity & interest rate risk • Excellent liquidity • Over £280m of undrawn bank facilities (through to 2012) • Over £100m of other undrawn available credit lines • Cash generative £494.7m 31 October 2007 net debt £329.2m 66.5% Fixed Rate at 6.0% blended* £165.5m 33.5% Floating Rate * Taking account of interest rate derivatives and amortisation of deferred gains on early settlement of derivatives (cash rate 7.3%)

  19. Taxation 31 Oct 2007 Pre-tax Profit £m Tax £m Rate % Pre-tax profit excluding intangible asset expenses and exceptional items - Before joint ventures - Joint ventures Intangible asset expenses Exceptional items Joint venture tax Reported in income statement Cash tax paid (net) 71.4 18.7 90.1 (6.2) 2.0 85.9 (5.5) 80.4 (15.7) (5.5) (21.2) 1.1 - (20.1) 5.5 (14.6) 22.0% 29.4% 23.5% 23.4% 18.2% 4.9

  20. Movement in net debt 31 Oct 07 £m EBITDA from Group companies before exceptionals Equity-settled share based payment Dividends from joint ventures Movement in retirement benefit obligations Working capital movements Net interest paid Tax paid Net cash from operating activities Net capital expenditure including new hire purchase Acquisitions of businesses, intangibles and investments Disposals of businesses and investments Movement in loans to joint ventures Token sales and redemptions Foreign exchange/other Reduction in net debt before cash flows with shareholders Return of value, including related costs Equity dividends Other share capital movements Increase in net debt Opening net funds Closing net debt 118.2 1.6 11.0 (47.0) 7.1 (12.7) (4.9) 73.3 (41.6) (2.6) 3.3 (0.2) (2.0) 5.4 35.6 (693.0) (20.5) (3.2) (681.1) 186.4 (494.7)

  21. 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 North America UK Rail Group 29.9 2.2 - - 32.1 33.7 6.6 3.4 0.2 43.9 (1.9) (0.4) - - (2.3) 31.8 6.2 3.4 0.2 41.6 3.8 4.4 3.4 0.2 11.8 • Significant capital expenditure planned for second half of year to 30 April 2008 * Excludes capitalised intangible assets of £1.1m (2006: £0.1m) and assets acquired through business combinations ** Excludes proceeds from selling businesses

  22. Brian SouterChief Executive

  23. The Stagecoach Equity Story • ** Like-for-like  Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions of major UK-listed Groups •  London & South East train operating companies revenue growth for six months to 31 October 2007 • * Before intangible asset expenses and exceptional items • For last full financial year

  24. Well balanced portfolioExcellentpotential for further growth • Drivers of bus and rail growth • Supportive government policy: e.g. concessionary fare schemes; road pricing • Increasing environmental awareness • Rising road congestion • Inward immigration • Stagecoach factors • Innovative and entrepreneurial management with short chains of command • New products • Good operational delivery • Strong stakeholder partnerships Delivering above-industry growth

  25. UK Bus A Continuing Growth Story • Revenue growth* 7.8% (1.1% higher than average market revenue growth of 6.7%**) • Underlying estimated full fare passenger volume growth of approximately 2.4% • Operating profit up 54.0% from £34.1m to £52.5m • New products, marketing and branding • TV Campaign • Goldline • Environmental initiatives • Building long-term stakeholder partnerships * Like-for-like ** Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions of major UK-listed Groups

  26. North America Continuing Margin Improvement • “Sweating” the assets; segment profitability; cost control • revenue growth* 4.5% • further underlying margin** improvement from 12.8% to 14.0% • Product developments • Splash Tours • megabus.com • Internet selling • Environmental initiatives • Still targeting 10% annualised operating margin on core business by April 2009 * Like-for-like constant currency including megabus ** Excluding megabus

  27. UK Rail Consolidated Market Share • Now have excellent portfolio of high growth franchises on long term contracts • Continued excellent operational performance • Revenue growth above the industry average • Integrating recent wins • East Midlands • Manchester Metrolink • Maximising shareholder value from existing rail contracts

  28. Current trading and outlook • Strong earnings momentum • good operational delivery • efficient capital structure • Current trading in line with our upgraded expectations • Continued focus on organic growth and bolt-on acquisitions • Increased fuel costs in 2008/9 but outlook remains positive and good potential for further growth

  29. Interim Results5th December 2007

  30. Appendices

  31. Fuel Hedging UK Bus North America UK Rail Product Approximate annual usage % hedged 2007/08 2008/09 2009/10 Average hedge price 2007/08 2008/09 2009/10 ULSD 10ppm 188m litres 86% 95% N/A 25.0p/litre 33.6p/litre N/A Heating Oil No 2 72m litres 93% 76% N/A 45.5 cents/litre 56.8 cents/litre N/A Gasoil 0.1% 62m litres 56% 77% 77% 30.5p/litre 30.5p/litre 30.5p/litre

  32. Finance charges Finance income/ (charges) £m (12.6) (1.0) (0.3) (1.6) 0.1 (15.4) Interest on cash & debt Non-utilisation/commitment/arrangement fees Insurance letters of credit Discount on insurance provisions Interest on notes receivable

  33. Exchange rates October 2007 October 2006 Closing rate Average rate Closing rate Average rate US$ C$ 2.0774 1.9731 2.0133 2.1034 1.9073 2.1370 1.8687 2.0914

  34. Interim Results5th December 2007

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