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
5
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.
6
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
10
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
11
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
12
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
13
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%)
14
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
15
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)
17
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
19
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
21
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
24
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%
32
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