Transcript Document
Annual Results
Year ended 30 April 2010 23 June 2010
Preliminary Results 2010 1
Cautionary statement
This document is solely for use in connection with a briefing on Stagecoach Group plc (“the Group”).
This document contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward looking statements in this presentation will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation.
This document is not a full record of the presentation because it does not include comments made verbally by Stagecoach Group management or by others.
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Robert Speirs Chairman
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Highlights
Successful management of business through economic cycle
Further revenue growth
Tight cost control
Continued investment
Robust financial position Adjusted EPS 18.7p (2009: 22.9p) 8.3% increase in full year dividend per share Positive outlook for 2010/11
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Martin Griffiths Finance Director
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Summary income statement
UK Bus operating profit North America operating profit North America joint ventures’ profit after tax UK Rail operating profit Virgin Rail Group profit after tax Restructuring costs, group overheads and other items
Operating profit
Finance charges (net) Tax
Profit excluding intangibles and exceptionals
Intangibles and exceptionals, net of tax
Reported profit from continuing operations Year to 30 April 10 £m
126.1
9.1
7.6
41.6
19.2
(11.6) 192.0
(30.7) (27.2) 134.1
(26.3) 107.8
Year to 30 April 09 £m
125.6
25.2
0.3
55.7
34.0
(13.0) 227.8
(31.4) (33.0) 163.4
(29.9) 133.5
Change £m
0.5
(16.1) 7.3
(14.1) (14.8) 1.4
(35.8) 0.7
5.8
(29.3) 3.6
(25.7) 6
UK Bus
Revenue (£m) Like-for like revenue (£m) Operating profit (£m) Operating margin (%) Estimated like-for-like passenger journeys (m) Like-for-like vehicle miles operated (m)
Year to 30 April 10
875.4
839.5
126.1
14.4% 650.1
314.7
Year to 30 April 09
830.8
805.9
125.6
15.1% 653.0
319.2
Change
5.4% 4.2% 0.4% (0.7)% (0.4)% (1.4)%
2009/10 performance
Robust financial performance despite weak UK economy and some severe weather Flexible services and cost base Revenue growth: Spring 2009 fare increases; concessions £28.1m more fuel and pensions costs but profit maintained
Outlook
Slowing revenue growth as Spring 2009 fare increases now in base revenue Relatively modest 2010/11 fare & revenue growth Significant fuel cost reduction in 2010/11 Fuel costs likely to rise in 2011/12 Well placed for 2010/11 profit growth 7
North America
Revenue – wholly owned (US$m) Revenue – joint ventures (US$m) Revenue - total (US$m) Operating profit – wholly owned (US$m) Operating profit – joint ventures (US$m) Operating profit – total (US$m) Operating margin (%)
Year to 30 April 10
426.3
64.1
490.4
14.6
12.8
27.4
5.6%
Year to 30 April 09
499.5
9.6
509.1
42.3
0.5
42.8
8.4%
Change
(3.7)% (36.0)% (2.8)%
2009/10 performance Outlook
Weaker revenue and profit – weak North American economy, some severe weather, and higher fuel costs Strong growth at megabus.com – full-year profit Positive performance from Twin America Signs of improving revenue trends but patchy by geography and product type Significant fuel cost reduction in 2010/11 Fuel costs likely to rise in 2011/12 Evaluating megabus expansion potential 2010/11 profit recovery potential * Includes US$60.0m for business transferred to Twin America from 31 March 2009 8
UK Rail
Revenue (£m) Like-for like revenue, excluding tram (£m) Operating profit (£m) Operating margin (%) Estimated passenger miles – S Western (m) Estimated passenger miles – E Midlands (m)
Year to 30 April 10
1,026.7
968.9
41.6
4.1% 3,262.0
1,214.9
Year to 30 April 09
977.7
932.4
55.7
5.7% 3,298.4
1,219.6
Change
5.0% 3.9% (25.3)% (1.6)% (1.1)% (0.4)%
2009/10 performance
Central London employment levels better than feared Cost reduction programme – over £70m annualised savings – protected profit Positive resolution of open items with Department for Transport – e.g. revenue support, smartcards Improved customer satisfaction
Outlook
Improving revenue trends in recent months East Midlands Trains likely to be loss making in 2010/11 and 2011/12 – revenue support period begins November 2011 South Western Trains revenue support now confirmed from April 2010 Well positioned to deliver another year of good UK Rail profitability in 2010/11 9
Virgin Rail Group
Revenue – 49% share (£m) Operating profit 49% share (£m) Operating margin (%) Dividends received (£m) Estimated passenger miles
Year to 30 April 10
355.3
25.5
7.2% 25.1
3,318.8
Year to 30 April 09
322.3
42.7
13.2% 43.9
2,757.4
Change
10.2% (40.3)% (6.0)% (42.8)% 20.4%
2009/10 performance
Strong revenue growth - January 2009 capacity increases; improved Network Rail performance; investment in marketing Significantly improved punctuality 90% customer satisfaction
Outlook
Already benefiting from revenue support Exploring franchise extension and re tendering opportunities 10
Rail revenue risk sharing
Target revenue – year to 31 March 2010 (£m) Actual revenue – year to 31 March 2010 (£m) Revenue shortfall (£m) Theoretical revenue support (£m) Actual revenue support (£m)
South Western
785.9
703.8
(82.1) 43.7
Nil
East Midlands
303.8
257.3
(46.5) 28.7
Nil
West Coast
795.6
671.0
(124.6) 77.4
77.4
Revenue support bands
Up to 2% below target revenue – no revenue support Between 2% and 6% below target revenue – 50% revenue support Over 6% below target revenue – 80% revenue support
Notes
“Revenue” for this purpose includes items other than reported revenue such as Network Rail performance regime payments, commissions payable and commissions receivable Target revenue figures include the effects of indexation and other required adjustments Theoretical revenue support shows the amounts that would have been receivable for the year to 31 March 2010 if the train company were contractually entitled to revenue support 11
Miscellaneous income statement items
Citylink joint venture (£m) Group overheads (£m) Restructuring costs (non exceptional) (£m) Intangible asset expenses (£m) Post tax exceptional items (£m) Year to 30 April 10 1.2
(11.6) (1.2) (11.6) (11.1) (13.0) Year to 30 April 09 1.0
(11.5) (2.5) (13.0) (13.4) (18.7) Change 0.2
(0.1) 1.3
1.4
2.3
5.7
Exceptional items include £20.5m of ineffective interest rate derivatives arising in connection with December 2009 bond issue 12
Finance charges and credit ratios
Net Group finance charges* (£m) EBITDA from continuing operations and joint ventures* (£m) Year end net debt (£m) Net Debt/EBITDA* EBITDA*/Net finance charges* Year to 30 April 10 (30.7) 283.9
(296.7) 1.0x
9.2x
Year to 30 April 09 (31.4) 300.1
(340.1) 1.1x
9.6x
Change (2.2)% (5.4)% (12.8)% (0.1)x (0.4)x 13 * excluding exceptional items
Taxation
Excluding intangible asset expenses and exceptional items Intangible asset expenses Exceptional items Reclassify joint venture taxation for reporting purposes Reported in income statement Cash tax paid (net) Year to 30 April 2010 Pre-tax Profit £m Tax £m Rate % 168.7
(11.1) (24.3) 133.3
(7.4) (34.6) 1.7
7.4
(25.5) 7.4
20.5% 15.3% 30.5% 19.1% n/a 125.9
(18.1) (0.7) 14.4% 14
Movement in net debt
EBITDA from Group companies before exceptional items Operating exceptional items Loss on disposal of plant and equipment 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 and finance leases Acquisitions /disposals of businesses, intangibles and investments Token sales and redemptions/others
Cash generation
Foreign exchange/income statement movements Equity dividends Share capital movements Decrease in net debt Opening net debt
Closing net debt
Year to 30 April 2010 £m 255.9
(1.8) 2.0
6.3
35.7
(17.2) (10.7) (53.1) (0.7) 216.4
(101.9) (1.4) (0.2) 112.9
6.3
(76.7) 0.9
43.4
(340.1) (296.7) 15
UK Bus North America UK Rail
Capital expenditure
Cash spent on capex* £m (32.5) (10.6) (46.1) (89.2) New hire purchase and finance leases £m (63.8) (1.9) Nil (65.7) Impact of capex on net debt £m (96.3) (12.5) (46.1) (154.9) Disposal proceeds** £m 4.1
Nil 48.9
53.0
Net 2009/10 Actual £m (92.2) (12.5) 2.8
(101.9) * Excludes capitalised intangible assets and assets acquired through business combinations ** Excludes proceeds from selling businesses 16
Funding
Net Debt (£m) Undrawn, committed bank facilities (£m) Average debt maturity (years) Net Debt / pre-exceptional EBITDA Pre-exceptional EBITDA / Finance charges
30 April 10
296.7
345.9
6.3
1.0x
9.2x
30 April 09
340.1
508.0
2.3
1.1x
9.6x
Change
(12.8)% (31.9)% 4.0
(0.1)x (0.4)x
2009/10 performance
Robust financial position Debt maturity extended Reliance on bank debt reduced £400m 5.75% bonds issued, due Dec 2016 c.£180m new / extended bonding facilities £285m facilities cancelled by Group
Outlook
Commitment to investment grade credit rating Re-financing of bank facilities expiring 2012 Investment through the economic cycle Capital discipline 17
Robust funding & cash conversion
Track record of relatively low leverage Year 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 Net debt/EBITDA 0.3
1.0
0.7
(0.8) 1.2
1.1
1.0
Investment grade credit ratings of new bonds Agency S&P Fitch Moody’s Rating BBB BBB Baa2 Strong conversion of profits to cash
Net cash flows from operating activities after tax Profit after tax
Exclude: Depreciation Amortisation Non-cash net gains on disposals of businesses and fixed assets
Profit after tax excluding significant non-cash items
5 years to 30 Apr 10 £m 1,155.5
887.0
361.2
72.7
(145.0) 1,175.9
Conversion ratio
98% 18
Pensions
UK Bus/Central North America UK Rail 2010 Pension expense £m 22.0
1.7
21.1* 44.8
2009 Pension expense £m 15.3
1.0
12.4
28.7
2010 Cash contributions £m 33.8
1.0
27.2* 62.0
2009 Cash contributions £m 37.3
1.0
22.4
60.7
* Includes £5.7m increase from salary sacrifice Post tax deficit of £145.7m (2009: £57.7m) Accounting value of pension assets, liabilities and costs will continue to vary with market fluctuations and assumptions Rail – risks mitigated with obligations limited to contributions payable over duration of franchises Bus – schemes closed to new entrants and contributions have stabilised 19
Summary
Results significantly ahead of original expectations Positive management action underpins profitability Strong financial position and reduced leverage Track record of strong cash conversion Positive outlook for 2010/11 Encouraging start to the new financial year
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Brian Souter Chief Executive
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The Stagecoach difference
22 Comparative fares data extracted from TAS National Fares Survey 2009. The tables compare urban single fare levels by bus operator ownership.
The Stagecoach difference
Operational performance Customer service
23 Figures used refer to the measure of train punctuality – also known as PPM (public performance measure) – which is commonly used throughout Europe. For long distance operators, such as East Midlands Trains, this shows the percentage of trains arriving within ten minutes of timetabled arrival at final destination.
London and south east operators (including South Western Trains), and regional operators show the percentage arriving within five minutes of the timetabled arrival. data covers the period 3 May 2009 to 1 May 2010. National Rail average is for all franchised train operating companies.
Data extracted from National Passenger Survey, Spring Wave 2010. Percentages are for overall satisfaction The National Passenger Survey (NPS) is conducted twice a year from a representative sample of passenger journeys across the UK. It surveys passengers’ overall satisfaction and satisfaction with 30 individual aspects of service for each individual train operating company (TOC). Passenger ratings are totalled for all TOCs across the country to provide a National Rail average.
Growing the megabus brand - 1
megabus.com revenue UK and North America 70 60 50 40 30 20 10 03/04
2003: first pilot routes in UK 2005: megatrain launch; Scottish Citylink JV
04/05 05/06 06/07 07/08
2006: first routes in North America 2007: UK megabus network in profit
08/09 09/10
2009: North America megabus network in profit
10/11
2009: megabus launched in Canada 24
Growing the megabus brand - 2
UK
North America
25
42 locations in United States and Canada 50 locations in UK, plus 28 destinations with megatrain.com and 10 on megabusplus.com
Sector-leading returns
26 The graph compares the performance of the Stagecoach Group Total Shareholder Return (‘TSR’) (share value movement plus reinvested dividends) over the 5 years to 30 April 2010 compared with that of Arriva, First Group, Go-Ahead, National Express, the FTSE Transport and Leisure All-Share Index, and the FTSE 250 Index.
Outlook
Improving trends, consistent with economic recovery UK Bus less sensitive to economic cycle Cautious on bus fares: organic volume growth as economy recovers Lower fuel costs in 2010/11 with increase in 2011/12 Revenue support at South Western Trains and West Coast Trains Well placed to increase earnings in 2010/11
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Annual Results
Year ended 30 April 2010 23 June 2010
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Appendices
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Divisional income statements Year ended 30 April 2010
Revenue Rail revenue support Rail franchise support Other operating income Staff costs Fuel costs (i.e. diesel) Insurance and claims costs Depreciation Rolling stock costs – lease & maintenance Other operating leases Network Rail Electricity for trains Commissions payable Materials & consumables Other costs Operating profit UK Bus £m 875.4
16.6
(437.5) (122.2) (30.9) (54.8) (11.4) (35.6) (73.5) 126.1
North America £m 266.1
2.8
(117.8) (38.7) (19.4) (20.1) (6.8) (19.2) (37.8) 9.1
UK Rail £m 1,026.7
7.8
(148.7) 67.7
(264.0) (31.7) (6.4) (16.7) (186.8) (2.9) (181.3) (41.4) (24.0) (52.6) (104.1) 41.6
Virgin Rail Group (100%) £m 725.1
72.1
(95.1) 43.8
(134.1) (18.2) (3.7) (1.9) (211.7) (154.8) (41.6) (44.0) (0.7) (83.1) 52.1
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UK Bus revenue
Like-for-like
Acquisitions:
Highland excluding Inverness depot (acquired May 2008) Inverness depot (integrated Highland and Bluebird business) Preston Bus (acquired January 2009) Eastbourne / Cavendish (acquired December 2008) Islwyn (acquired January 2010) Year to 30 April 2010 £m 839.5
9.3
8.5
7.7
5.9
0.7
Start-ups:
Rail replacement (started May 2008) Total reported 3.8
875.4
Year to 30 April 2009 £m 805.9
9.3
8.6
2.3
1.9
2.8
830.8
Change % 4.2% 5.4% 31
North America revenue breakdown
Scheduled service/line run/commuter School bus & contract Charter Megabus Sightseeing & tour Like-for-like revenue “Disposed” & closed operations and Canada fx Total North America Year to 30 April 2010 US$m 182.9
86.7
83.9
45.1
19.1
417.7
8.6
426.3
Year to 30 April 2009 US$m 196.9
90.4
91.5
32.8
20.7
432.3
67.2
499.5
% Growth (7.1)% (4.1)% (8.3)% 37.5% (7.7)% (3.4)% (87.2)% (14.7)% 32
Rail subsidy/(premium) profiles
Year to 31 March: 2010 2011 2012 2013 2014 2015 2016 2017 South Western £m (41.7) (99.8) (166.6) (242.0) (313.7) (387.3) (462.7) (454.2) East Midlands £m 96.9
61.2
17.6
(14.2) (33.8) (91.5) West Coast £m (100.6) (147.2) (200.2) The above amounts are subject to adjustment for: (1) various inflation measures (2) risks borne by the Department for Transport (3) called options and (4) changes in Regulated Network Rail charges. The amounts shown above are based on estimated inflation and options called to date.
The amounts shown above for South Western and East Midlands do not reflect changes to subsidy/(premium) amounts arising from changes to Network Rail charges for Control Period 4, which began on 1 April 2009, because these changes are not yet finalised.
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Fuel Hedging
2009/10 - average effective price (per litre) UK Bus 45.4p
North America 76.6 cents 2010/11 - % of forecast consumption hedged - average hedge price (per litre) 2011/12 - % of forecast consumption hedged - average hedge price (per litre) 98% 36.0p
60% 40.6p
83% 50.5 cents 77% 57.7 cents Market price (per litre) 38.9p
54.9 cents UK Rail 32.5p
77% 31.3p
50% 41.1p
38.4p
Market prices are as at 16 June 2010 Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant 34
UK Bus, excluding BSOG* UK Bus, BSOG* UK Bus, including BSOG* North America South Western Trains East Midlands Trains Total
Fuel costs Latest forecasts
Fuel costs Volumes 2008/09 Actual £m (175.4) 75.9
(99.5) (32.8) (5.4) (20.0) (157.7) 2009/10 Actual £m (201.2) 80.0
(121.2) (38.7) (5.0) (21.3) 2010/11 Forecast £m (184.5) 77.4
(107.1) (30.7) (6.2) (21.5) 2011/12 Forecast £m (195.1) 76.2
(118.9) (33.4) (6.2) (25.6) (186.2) (165.5) (184.1) 2010/11 Forecast Litres m 193.1
69.1
12.4
49.2
323.8
Market prices are as at 16 June 2010, when Brent Crude was US$76 per barrel Forecast costs for the unhedged element of fuel are based on 16 June 2010 spot prices Above costs include delivery margins, duty and taxes (duty forecast at current levels) but exclude 3 rd party fuel costs * Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus services 35
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.
Gross debt
is borrowings as reported on the consolidated balance sheet, adjusted to exclude accrued interest, deferred gains on derivatives and the effect of fair value hedges on the carrying value of borrowings, and to include the effect of foreign exchange derivatives that synthetically convert an element of borrowings from one currency to another.
Net debt
(or net funds) is the net of cash and gross debt. 36
Annual Results
Year ended 30 April 2010 23 June 2010
37