Transcript Document

Interim Results
7 December 2005
Interim Results 2005
Robert Speirs
Chairman
1
Interim Results 2005
Highlights



Strong set of results for 6 months ended 31 October 2005
 Increased operating profits* at continuing UK Bus, despite
ongoing cost pressures
 Growth in operating margins in North American bus
 Revenue growth at South West Trains, despite London
terrorist attacks
Interim dividend up 10% to 1.1p per share (2004: 1.0p)
Disposal of New Zealand in November 2005 for NZ$250.5m
* References to the operating profit (or operating margin) of a particular business throughout this
presentation mean operating profit (or operating margin) before intangible asset amortisation,
exceptional items and restructuring costs.
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Interim Results 2005
Martin Griffiths
Finance Director
3
Interim Results 2005
Financial Highlights

Revenue+ from continuing businesses up 7.8%
- £786.2m (2004: £729.1m)
- Up 7.1% at constant exchange rates

Operating profit pre intangibles and exceptionals £82.7m (2004:
£80.7m)

EBITDA (pre exceptionals and JVs) up 3.9% at £112.5m

Adjusted EPS up 28.6% to 5.4p
+
excluding acquisition of Glenvale and disposed operations
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Interim Results 2005
Financial Summary
October
2005
£m
October
2004
£m
Revenue
793.0
735.7
- continuing operations, excluding Glenvale
786.2
729.1
Total operating profit*
69.5
74.1
- pre intangibles & exceptionals
82.7
80.7
Profit before tax
54.9
59.3
- pre intangibles & exceptionals
72.1
70.6
106.2
128.8
Net cash from operating activities
Adjusted earnings per share
5.4p
4.2p
Dividend per share
1.1p
1.0p
* After restructuring costs of £0.7m (2004: £0.3m)
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Interim Results 2005
EBITDA
UK Bus - excluding Glenvale
- Glenvale
North America
New Zealand
Rail
Group overheads & restructuring costs
EBITDA from Group companies before exceptionals
Virgin Rail Group
Other joint ventures and associates
Total EBITDA before exceptionals
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October
2005
£m
October
2004
£m
62.2
(0.5)
23.5
6.0
27.0
(5.7)
112.5
4.5
Nil
117.0
61.5
Nil
21.7
5.9
23.8
(4.6)
108.3
4.1
(0.2)
112.2
Interim Results 2005
Movement in Net Debt
Net cash inflow from operating activities
Net interest paid
Taxation
Net cash from operating activities
Net capital expenditure including new hire purchase finance
Acquisitions of businesses and other investments
Sale of businesses and other investments
Token sales and redemptions
Foreign exchange
Reduction in net debt before cashflows with shareholders
Repurchase of ‘B’ shares
Equity dividends
Other share capital movements
Reduction in net debt
Opening net debt
Closing net debt
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October
2005
£m
132.7
(12.5)
(14.0)
106.2
(42.0)
(13.9)
4.6
(3.6)
(11.1)
40.2
(13.9)
(24.6)
4.0
5.7
(214.6)
(208.9)
Interim Results 2005
UK Bus Trading Results

Revenue growth 10.5% to £387.9m (2004: £351.1m)
 revenue growth 8.5%, excluding acquisition of Glenvale

Strong contribution from London companies
 revenue growth 9.7%

Underlying passenger growth of 1.5% outside London
 revenue growth 8.1%, excluding acquisition of Glenvale

Operating margin 10.8% (2004: 11.5%), excluding acquisition of
Glenvale
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Interim Results 2005
UK Bus Revenue Development
London
£m
2004 Revenue
Outwith London
%
£m
101.2
%
249.9
UK Bus
£m
%
351.1
Glenvale
Nil
n/a
6.8
2.7%
6.8
1.9%
Passenger volumes
Nil
n/a
3.7
1.5%
3.7
1.1%
Tender wins/
contract amendments
5.9
5.8%
3.0
1.2%
8.9
2.5%
Fare increases
3.5
3.5%
12.0
4.8%
15.5
4.4%
megabus.com
0.4
0.4%
1.5
0.6%
1.9
0.5%
2005 Revenue
111.0
9.7%
276.9
10.8%
387.9
10.5%
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Interim Results 2005
North America Trading Results

Revenue £130.8m (2004: £123.6m)
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
11.0% increase in US$ revenue from continuing operations
Operating margin up from 11.8% to 12.0%

Operating profit £15.7m (2004: £14.6m)
 US$28.3m (2004: US$26.5m)
 excellent revenue growth
 strict cost control
 overhead reduction: consolidation of US regions
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Interim Results 2005
North America Continuing
Revenue Breakdown
By Product
Scheduled service/Line run/Commuter
Charter
Sightseeing & Tour
School Bus & Contract
Total
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October
2005
US$m
October
2004
US$m
% Growth
89.0
55.7
55.0
35.7
235.4
82.4
50.6
47.6
31.5
212.1
8.0%
10.1%
15.5%
13.3%
11.0%
Interim Results 2005
New Zealand Trading Results
 Revenue £28.7m (2004: £26.2m)
 Underlying revenue similar to last year (excluding
currency movements)
 Operating profit £3.5m (2004: £3.9m)
- NZ$9.1m (2004: NZ$10.9m)
 Operating margin 12.2% (2004: 14.9%)
 Disposal completed at NZ$250.5m enterprise value
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Interim Results 2005
Rail Trading Results
Rail Subsidiaries
 Revenue £245.6m (2004: £234.8m), up 4.6%
 Operating profit £24.4m (2004: £22.5m)
 Passenger volumes up 0.8% at SWT, adversely affected
by terrorist attacks
 Revenue and profit share to SRA £27.8m (2004: £20.5m)
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Interim Results 2005
Virgin Rail Group
 Share of profit after tax £4.5m (2004: £4.1m)
 New long-term commercial arrangements on West Coast –
discussions with DfT ongoing
 CrossCountry – current franchise terminates on 10
November 2007
 Share of operating profit includes £29.8m for additional
subsidy claims
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Interim Results 2005
Taxation
October 2005
Pre-tax
£m
74.5
(4.0)
(13.2)
57.3
Pre intangibles and exceptionals*
Exceptional items
Intangible asset amortisation
Result for the period*
Cash tax paid (net)
Tax
£m
(16.5)
1.7
1.1
(13.7)
%
22.1%
42.5%
8.3%
23.9%
14.0
* Adjusted for our share of VRG’s tax, classified within operating profit under IFRS
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Interim Results 2005
Balance Sheet & Financing
 Net debt+ £208.9m (2004: £214.6m)
 EBITDA*/Interest cover 11.0 times
 Further debt reduction from New Zealand disposal
 Progressive dividend policy
+ UK
GAAP definition
* Before exceptional items
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Interim Results 2005
Brian Souter
Chief Executive
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Interim Results 2005
Group Strategy
Quality operations driving strong results
Excellent
operational
performance




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Bus operator of the Year
Train operator of the Year
South West Trains punctuality now over 90%
Improved punctuality at Virgin Rail Group
UK Bus reliability 99.3%
Strong
financial
results

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Adjusted EPS up 28.6%
Revenue from continuing operations up 7.8%
Absorbing increased fuel costs
UK Bus margins bucking peer group trend
Dividend up 10.0%
↓
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Interim Results 2005
Group Strategy – UK Bus
 Kickstart wins
– Stagecoach schemes secured £8.1m of DfT
funding for 2005/06 out of total awards budget of
£19.9m
 Organic growth in Southern companies
 Business Development opportunities
– megabus.com/Citylink joint venture in Scotland
– megabus.com
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Interim Results 2005
Group Strategy
UK Bus Passenger Growth
Passenger growth by operating company
– excluding London
October 2005 v October 2004
Overall passenger growth 1.5%
3% +
0-3%
<0%
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Interim Results 2005
Group Strategy – Rail
 Good results and management credentials
 Awaiting DfT decisions on Greater Western and
Thameslink/Great Northern
 Strong and experienced bid team focused on South
Western franchise
 Renegotiation of West Coast Mainline franchise
 New franchise opportunities in next 18 months
– East Midlands
– West Midlands
– CrossCountry
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Interim Results 2005
Group Strategy – North America
 Revenue and margin growth
– Contract wins in Canada
– Strong leisure bounce-back continues
• Charter: revenue up 10.1%
• Sightseeing & tour: revenue up 15.5%
– Steady growth in line run and contract
• Underpins North American business
• Park and ride in New York
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Interim Results 2005
Current Trading and Outlook
 Current trading in line with our expectations
 Continued focus on organic growth and bolt-on
acquisitions
 Good potential for further growth
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Interim Results 2005
Interim Results
7 December 2005
Interim Results 2005
Appendices
25
Interim Results 2005
North America Revenue Development
2004 Revenue
Impact of disposals and other
movements on discontinued turnover
US$/C$ currency impact
Underlying growth
2005 Revenue
26
Continuing
US$m
Discontinued
US$m
Total
US$m
212.1
12.0
224.1
Nil
(12.0)
(12.0)
2.9
Nil
2.9
20.4
Nil
20.4
235.4
Nil
235.4
Interim Results 2005
Rail Revenue Development
£m
2004 Revenue
%
234.8
SWT Passenger volumes
1.9
0.8%
SWT Fares/yield
10.0
4.3%
SWT Other
(1.3)
(0.6)%
0.2
0.1%
245.6
4.6%
Island Line/Supertram
2005 Revenue
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Interim Results 2005
Finance charges ratios
October
2004
£m
Finance charges (net)
October
2005
£m
10.6
EBITDA pre-exceptionals
117.0
112.2
EBITDA pre-exceptionals/finance charges
28
11.0 times
10.1
11.1 times
Interim Results 2005
Finance Charges
Average
balance*
£m
Finance
charges
£m
363.0
118.0
11.3
(2.7)
8.6
0.5
0.2
0.4
1.5
(0.6)
10.6
Gross debt & related derivatives
Interest bearing cash balances
Non-utilisation/commitment fees
Amortisation of bond issue costs/bank charges
Insurance letters of credit
Discount on insurance provisions
Other
Annual
Effective rate
%
6.2%
4.6%
*Average of month end debt and cash balances
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Interim Results 2005
Fuel Hedging
Actual
2004/05
Forecast
2005/06
Forecast
2006/07
97%
89%
15%
US$35
US$48
US$57
1.85
1.75
1.75
Average unhedged crude price US$/barrel
US$50
US$60
US$57
Crude oil fuel costs of continuing businesses
(total volume times crude price)
£35m
£52m
£60m
Total fuel cost
(includes cap premiums/diesel margin/
tax/delivery)
£72m
£91m
£99m
% of Group fuel hedged/capped at present
Average hedge price US$/barrel
Average US$/£ rate
Continuing bus divisions use 1.8m barrels of fuel a year (276m litres)
Each US$10 per barrel movement in crude oil price impacts variable fuel costs by
approximately US$18m if no hedging in place
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Interim Results 2005
Fuel Usage and Impact of Crude Price
Annual
Usage
litres
UK Bus
North America
Annual
Usage
Barrels (m)
US$ variable
costs based
on $57
a barrel
200m
1.30
$80m
76m
0.45
$25m
276m
1.75
$105m
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Interim Results 2005
Capital Expenditure
Cash
spent on
capex
£m
UK Bus
North America
New Zealand
Rail
Capex on
new hire
purchase
£m
Impact of
capex on
net debt
£m
Disposal
proceeds*
£m
Net
£m
28.4
4.4
3.3
3.0
5.7
Nil
Nil
Nil
34.1
4.4
3.3
3.0
(2.4)
(0.2)
(0.2)
Nil
31.7
4.2
3.1
3.0
39.1
5.7
44.8
(2.8)
42.0
*Excludes proceeds from selling businesses
Note: No new vehicles were acquired by UK Bus during the six months on operating leases
(2004:capital value of £23.5m).
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Interim Results 2005
Exchange Rates
October 2005
Closing rate
US$
NZ$
C$
Average rate
1.7703
2.5295
2.0881
1.7989
2.5706
2.1836
33
October 2004
Closing rate
1.8323
2.6784
2.2350
Average rate
1.8131
2.7985
2.4114
Interim Results 2005
Interim Results
7 December 2005
Interim Results 2005