Transcript Document
Annual Results
23rd June 2004
1
Annual Results 2004
Robert Speirs
Chairman
2
Annual Results 2004
Highlights
Strong year of growth and delivery of strategic objectives
Turnover from continuing operations up 4.9%
Strong financial and operational performances at UK
Bus and South West Trains
Restructuring of North American business successfully
delivered
Net debt reduced to £67.6m from £560.0m last year
Final dividend of 2.0p per share (giving full year dividend of
2.9p (2003 - 2.6p)) – up 11.5%
Return of capital to shareholders – 18p per share
3
Annual Results 2004
Martin Griffiths
Finance Director
4
Annual Results 2004
Financial Highlights
Turnover from continuing businesses up 4.9%
£1,659.4m (2003 - £1,581.4m)
Up 5.9% at constant exchange rates
Operating margin enhancement in continuing divisions*
2004
%
2003
%
Before goodwill amortisation
and restructuring costs
8.4%
6.6%
Including goodwill amortisation
and restructuring costs
7.0%
4.7%
* Excluding disposed Citybus, Road King and Trainline businesses but including all of North America;
before exceptional items
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Annual Results 2004
Financial Summary
Turnover
2004
£m
2003
£m
1,792.3
2,076.6
Total operating profit/(loss)*
129.7
(466.2)
- pre goodwill & exceptionals* (after restructuring costs)
147.5
146.4
95.8
(500.2)
- pre goodwill & exceptionals
120.2
112.9
Free cash flow**
209.5
217.8
Profit/(loss) before tax
Adjusted earnings per share
6.7p
6.4p
Dividend per share
2.9p
2.6p
* After restructuring costs of £7.2m (2003 - £6.3m)
** Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and
associates, net cash inflow/(outflow) from returns on investments and servicing of finance, and taxation.
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Annual Results 2004
Profit Reconciliation
2002/2003 Profit before tax
Operating profit of retained businesses:
- UK Bus
- New Zealand
- North America
- Rail – underlying
- Virgin Rail Group
- Other JVs and associates
Overheads
Reduction in underlying finance charges
Exceptionals & goodwill
Rail – non-recurring liquidated damages
Citybus (disposed)
Road King (disposed)
Trainline (disposed)
Restructuring costs
2002/2003 gain on repurchase of bonds
2003/2004 Profit before tax
7
Pre goodwill &
exceptionals
£m
112.9
Exceptionals &
Goodwill
£m
(613.1)
Reported
£m
(500.2)
7.8
(0.5)
0.8
14.4
6.3
0.4
1.0
21.3
164.4
(8.5)
(18.1)
(3.5)
1.9
(0.9)
(15.1)
120.2
582.1
(31.0)
6.6
(24.4)
7.8
(0.5)
0.8
14.4
6.3
0.4
1.0
21.3
582.1
133.4
(8.5)
(11.5)
(3.5)
1.9
(0.9)
(15.1)
95.8
Annual Results 2004
EBITDA
UK Bus
North America (Coach USA)
Overseas Bus
Rail
Virgin Rail Group
thetrainline
Road King
Others
Overheads & restructuring
EBITDA before exceptionals
8
2004
£m
2003
£m
117.6
30.1
18.3
46.4
13.5
(2.4)
7.0
(0.4)
230.1
(15.4)
214.7
112.0
49.5
51.8
40.9
7.2
(4.3)
10.5
(0.8)
266.8
(15.1)
251.7
Annual Results 2004
Movement in Net Debt
£m
Opening net debt
Cash flows from operations
Road King dividends
Net interest received
Tax paid
Dividends paid
Net capital expenditure and new hire purchase finance
Acquisitions/disposals
Foreign exchange and other movements
Closing net debt
9
(560.0)
214.3
4.1
0.5
(9.4)
(35.6)
(78.8)
364.2
33.1
(67.6)
Annual Results 2004
UK Bus Trading Results
Turnover growth 8.7% to £650.2m
Underlying passenger growth 1.4% outside London
Strong contribution from London companies
19.1% turnover growth
Improved operating margin
11.5% versus 11.2% in 2003
12.2% versus 11.3% excluding operating lease impact
and business development costs
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Annual Results 2004
UK Bus Profit Analysis
30 April 2004
£m
30 April 2003
£m
650.2
79.6
12.2%
(5.0)
598.4
67.6
11.3%
(1.1)
Margin
Deduct Megabus & Taxibus start-ups
Operating profit as reported
2.0
76.6
11.8%
(1.8)
74.8*
0.5
67.0
11.2%
67.0
Margin as reported
11.5%
11.2%
Turnover
Underlying profit
Margin
Deduct increased operating lease costs
Add saving in depreciation arising from
operating leases
*After £9.9m increase in pensions/NI costs
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Annual Results 2004
North America Trading Results
Turnover £336.8m (2003 - £603.0m)
5.1% like for like turnover increase in second half*
0.3% like for like turnover increase for year*
Operating profit** £14.8m (2003 - £14.0m)
US$25.4m (2003 – US$21.8m)
strict cost control
overhead reduction
*
Like for like turnover increase is measured as the change in turnover from residual
businesses excluding the impact of foreign exchange movements
** Pre restructuring costs, exceptional items and goodwill amortisation
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Annual Results 2004
North America Turnover Breakdown
30 April 2004
Turnover
$m
30 April 2003
Turnover
$m
Residual taxi businesses to be disposed of
Discontinued
Total
213.9
109.6
41.8
365.3
17.3
193.8
576.4
211.7
110.2
38.4
360.3
17.0
561.7
939.0
£ equivalent
£m
336.8
£m
603.0
Residual businesses
- North East
- North Central
- Canada
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Annual Results 2004
New Zealand Trading Results
Turnover £58.3m (2003 - £51.0m)
1.6% turnover growth (excluding currency movements)
2003 revenue base includes impact of America’s Cup
Operating profit £10.7m (2003 - £11.2m)
NZ$29.5m (2003 – NZ$34.8m)
Operating margin 18.4% (2003 – 22.0%)
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Annual Results 2004
Rail Trading Results
Rail Subsidiaries
Turnover £438.9m (2003 - £413.6m)
Operating profit £44.1m (2003 - £38.2m*)
Passenger volumes up 3.2% at SWT
Operating profit stated after franchise bid costs
*Included £8.5m of non-recurring liquidated damages
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Annual Results 2004
Rail Profit Analysis
30 April
2004
£m
SWT operating profit per bid
25.2
Passenger income
15.3
Net Sch 7/Sch 8 performance payments
4.7
Electric current for trains
5.9
Staff costs
2.5
Other Costs
18.5
Revenue/Profit share to the SRA
(27.6)
Actual SWT operating profit
44.5
Other
(0.4)
Total Rail operating profit
44.1
16
Annual Results 2004
Joint Ventures and Associates
Virgin Rail Group
Share of turnover £288.4m (2003 - £276.1m)
Share of operating profit £13.5m (2003 - £7.2m)
Out-performed budget set by SRA
Trainline
Disposed February 2004
Share of turnover £8.1m (2003 - £11.0m)
Share of operating loss £2.4m (2003 – loss of £4.3m)
Road King
Disposed January/February 2004
Share of operating profit £7.0m (2003 - £10.5m)
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Annual Results 2004
Taxation
2004
Pre-tax
£m
120.2
(6.6)
(17.8)
95.8
95.8
Pre goodwill and exceptionals
Exceptional items
Goodwill amortisation
Result for the year
One-off exceptional tax credit
Cash tax paid (net)
18
Tax
£m
(32.3)
(0.2)
0.3
(32.2)
41.0
8.8
9.4
%
26.9%
3.0%
1.7%
33.6%
N/A
(9.2)%
Annual Results 2004
Fuel Hedging
% of group fuel hedged
Average hedge price $/barrel
Average US$/£ rate
Average unhedged floating price $/barrel
Variable fuel costs of continuing
businesses
2003/04
2004/05
2005/06
2006/07
100%
40%
4%
0%
$24
$24
$24
N/A
1.7115
1.84
1.84
1.84
$32
$38
$38
$38
£31m
£37m
£42m
£43m
Continuing businesses use 1.81m barrels of fuel a year (288m litres)
Each $5 per barrel movement in crude oil price impacts variable fuel costs by
approximately £5m if no hedging in place
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Annual Results 2004
Pensions
Increased employer and employee contributions
£32.9m total pension costs (2003 - £31.2m)
£36.2m cash paid (2003 - £26.9m)
FRS17 post-tax deficit of £115.8m for UK Bus/Group
Down £40.4m from £156.2m
Financial support in new SWT franchise allows for cost of
funding the deficit for SWT
Managed as part of overall cost base
20
Annual Results 2004
Balance Sheet & Financing
Net debt down to £67.6m (2003 - £560.0m)
EBITDA*/Interest cover 7.9 times
Net Debt/EBITDA* 0.3 times
Progressive dividend policy
Evaluation completed of optimum balance sheet structure
Return of capital of approximately £250m
Investment grade rating confirmed after return of capital
New £440m 5 year bank facilities
* Before exceptional items
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Annual Results 2004
Proposed Return of Capital
“B” Share Scheme
Shareholders receive for every 24 ordinary shares:
19 consolidated ordinary shares
24 “B” shares redeemable at 18p each
All shareholders treated equally
2004 final dividend payable per existing ordinary share
Approval at AGM – 27 August 2004
“B” shares issued – September 2004
Total return of approximately £250m
22
Annual Results 2004
Return of Capital - Example
Shareholder “A” holds 1,000 ordinary shares
Share price 87p
1,000 existing ordinary shares
(share price 87p)
1,000 “B” shares
redeemable at 18p each
VALUE = £870
791 ordinary shares
(share price 87p)
VALUE = £868
Redeemed for cash
of £180
% shareholding unchanged
23
Annual Results 2004
Current Trading & Outlook
Group trading in line with our expectations
Expected revenue and profit growth in UK Bus and North
America
SWT trading under the terms of the new three year
franchise
New Zealand trading in line with expectations
Virgin Rail Group
SRA budget 2004/05
Franchise negotiations progressing well
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Annual Results 2004
Brian Souter
Chief Executive
25
Annual Results 2004
Group Strategy (1)
UK Bus – Margin Development Programme
Solid foundations
Kickstart
Commercial
Government assisted
New Products
Megabus
Oxford Tube re-launch
Envirox fuel additive
Electric bus
What next?
Commercial Park and Ride
Optical Guidance
26
Annual Results 2004
Group Strategy (2)
North America
Restructured business – robust business model with more predictable
earnings
Small add-on acquisitions
Leisure upturn
$939m
School Bus &
Contract
14%
$365m
School Bus and
Contract
18%
Charter
23%
Charter
20%
Taxi
15%
Sightseeing & Tours
(incl New York)
9%
Scheduled
service/Line
run/Commuter
28%
Sightseeing & Tours
(incl New York)
16%
Transit
11%
Scheduled
service/Line
run/Commuter
46%
Year ended 30 April 2003
Residual businesses 2004
27
Annual Results 2004
Group Strategy (3)
UK Rail
Return to high volume growth
Maximise potential from VRG
Five year extension at SWT
New franchise opportunities
Commuter
Inter-city
28
Annual Results 2004
Summary
Strong trading performance across the Group with
focused management
Strengthened balance sheet allowing return of capital and
dividend growth
Current trading in line with our expectations
29
Annual Results 2004
Annual Results
23rd June 2004
30
Annual Results 2004
Appendices
31
Annual Results 2004
UK Bus Revenue Development
London
£m
2002/03 turnover
Passenger volumes
Tender wins/
contract amendments
Fare increases
2003/04 turnover
Outwith London
%
£m
144.2
%
454.2
-
UK Bus
£m
%
598.4
6.4
1.4%
6.4
1.1%
-
24.3
4.1%
24.3
16.9%
-
3.2
2.2%
17.9
3.9%
21.1
3.5%
171.7
19.1%
478.5
5.4%
650.2
8.7%
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Annual Results 2004
UK Bus - London/Other
2003
2004
Turnover
£m
Operating
Profit
£m
Operating
Margin
%
Operating
Turnover
£m
Operating
Profit
£m
Margin
%
London
171.7
16.7
9.7% 144.2
15.1
10.5%
Other
478.5
58.1
12.1% 454.2
51.9
11.4%
650.2
74.8
11.5% 598.4
67.0
11.2%
33
Annual Results 2004
Overseas Bus Revenue Development
2002/03 Turnover
Disposal of Citybus and Australia
Currency movements
Volumes
Fares/Business mix
2003/04 Turnover
34
Citybus
£m
New
Zealand
£m
132.3
(107.5)
(4.5)
(2.5)
17.8
51.0
6.4
1.6
(0.7)
58.3
Australia
£m
0.4
(0.4)
-
Total
£m
183.7
(107.9)
1.9
(0.9)
(0.7)
76.1
Annual Results 2004
Overseas Bus
Segmental results
2004
Turnover
£m
2003
Operating Operating
Profit
Margin
£m
%
Turnover
£m
Operating
Profit
£m
Operating
Margin
%
Citybus
17.8
1.0
5.6%
132.3
19.1
14.4%
New Zealand
58.3
10.7
18.4%
51.0
11.2
22.0%
-
-
0.4
-
-
76.1
11.7
30.3
16.5%
Australia
Total
15.4%
35
183.7
Annual Results 2004
North America
Revenue Development
2002/03 Turnover
Underlying growth – second half
Core
continuing*
US$m
Other
US$m
Total
US$m
360.3
578.7
939.0
8.2
-
8.2
(7.0)
-
(7.0)
US$/C$ currency impact
3.8
-
3.8
Impact of disposals and
other movements on non-core
-
(367.6)
(367.6)
365.3
211.1
576.4
Underlying decline – first half
2003/04 Turnover
* North East, North Central & Canada
36
Annual Results 2004
Turnover of residual
North American business
North
East
$m
126.1
21.1
24.1
42.6
213.9
Scheduled service/Line run/Commuter
Charter
School Bus & Contract
Sightseeing & Tours (incl New York)
2003/04 Turnover
37
North
Central
$m
18.3
35.4
40.5
15.4
109.6
Canada
$m
19.4
18.2
2.7
1.5
41.8
Total
$m
163.8
74.7
67.3
59.5
365.3
Annual Results 2004
Rail Revenue Development
£m
2002/03 Turnover
%
413.6
SWT Passenger volumes
12.9
3.1%
SWT Fares
13.5
3.3%
Passenger Charter
(2.5)
(0.6)%
1.4
0.3%
438.9
6.1%
Other
2003/04 Turnover
38
Annual Results 2004
Interest/Debt Ratios
2004
£m
2003
£m
27.3
33.5
EBITDA pre-exceptionals
214.7
251.7
EBITDA pre-exceptionals/Finance charges
7.9 times
7.5 times
Net Debt/EBITDA
0.3 times
2.2 times
Finance charges* (net)
* 2003 includes £15.1m net gain on early redemption of bonds
39
Annual Results 2004
Finance Charges
Average
balance*
£m
584
(301)
283
Gross debt & related derivatives
Cash on deposit
Joint ventures & associates
Non-utilisation/commitment fees
Amortisation of bond issue costs/bank charges
Insurance letters of credit
Discount on insurance provisions
Interest received on Corporation Tax refund
Other
*Average of month end debt/interest earning £
and $ cash balances
40
Finance
charges
£m
36.8
(10.6)
26.2
(1.2)
0.4
0.6
1.3
2.8
(2.1)
(0.7)
27.3
Annual
Effective rate
%
6.3%
3.5%
9.3%
Annual Results 2004
Capital Expenditure
Cash
spent on
capex
£m
UK Bus
North America
New Zealand
Discontinued - Citybus
Rail
Capex on
new hire
purchase
£m
Impact of
capex on
net debt
£m
27.0
27.0
45.3
23.1
6.9
4.4
3.3
83.0
18.3
23.1
6.9
4.4
3.3
56.0
Disposal
proceeds*
£m
(2.7)
(0.9)
(0.6)
(4.2)
Net
£m
42.6
22.2
6.3
4.4
3.3
78.8
*Excludes proceeds from selling businesses
Note: In addition to the above, vehicles with a capital value of £16.6m were acquired by UK
Bus during the year on operating leases (2003 - £19.6m)
41
Annual Results 2004
Fuel Usage and Impact of Crude Price
US$ variable
costs based
on $38
a barrel
Usage litres
Usage
barrels
190m
1.2m
$45.6m
North America
76m
0.47m
$17.9m
New Zealand
22m
0.14m
$5.3m
288m
1.81m
$68.8m
UK Bus
Each $5 per barrel movement in oil price impacts fuel cost by
approximately $9m
42
Annual Results 2004
Exchange Rates
April 2004
US$
HK$*
NZ$
C$
April 2003
Closing rate
Average rate
Closing rate
Average rate
1.7734
13.8317
2.8350
2.4388
1.7115
13.3188
2.7600
2.2985
1.5982
12.4648
2.8573
2.2929
1.5574
12.1464
3.1031
2.3985
* Average rate used for Citybus up to date of disposal – 12.7803
43
Annual Results 2004
Annual Results
23rd June 2004
44
Annual Results 2004