Transcript Document

Interim Results
8 December 2004
Interim Results 2004
Robert Speirs
Chairman
2
Interim Results 2004
Highlights
 Strong set of results for 6 months ended 31 October 2004
 Organic growth in bus and rail operations in UK and
overseas
 Innovative growth ideas fuelling good underlying
performance at UK Bus
 Strong revenue and passenger growth at South West
Trains
 £241.4m of capital returned to shareholders
 Shortlisted bids for InterCity East Coast and Integrated
Kent rail franchises
 Interim dividend up 11.1% to 1.0p per share
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Interim Results 2004
Martin Griffiths
Finance Director
4
Interim Results 2004
Financial Highlights
 Turnover from continuing businesses up 6.7%
- £882.0m (2003 - £826.8m)
- Up 8.3% at constant exchange rates

Operating margin enhancement in continuing divisions*
Before goodwill amortisation
Including goodwill amortisation
Oct 2004
%
8.9%
Oct 2003
%
7.7%
8.0%
6.8%
* Excluding disposed Citybus, Road King and Trainline businesses but including all of North America;
before exceptional items
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Interim Results 2004
Financial Summary
October
2004
£m
October
2003
£m
Turnover
886.4
963.8
- continuing operations
882.0
826.8
Total operating profit
69.9
67.3
- pre exceptionals & goodwill*(after restructuring costs)
78.5
76.9
Profit before tax
57.2
44.8
- pre exceptionals & goodwill
69.2
60.3
128.8
100.3
Free cash flow **
Adjusted EPS
4.0p
3.2p
Dividend per share
1.0p
0.9p
* After restructuring costs of £0.3m (2003 - £4.1m)
** Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and associates,
net cash (outflow)/inflow from returns on investments and servicing of finance, and taxation
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Interim Results 2004
EBITDA
UK Bus
North America
Overseas Bus - New Zealand
- Discontinued
Rail
VRG
thetrainline
Road King
Others
Group overheads & restructuring costs
EBITDA before exceptionals
7
October
2004
£m
October
2003
£m
59.3
21.7
5.9
22.9
5.1
(0.2)
114.7
(4.5)
110.2
54.0
25.3
6.8
3.5
22.5
5.0
(1.7)
5.0
(0.7)
119.7
(8.3)
111.4
Interim Results 2004
Movement in Net Debt
October
2004
£m
Opening net debt
Cash flows from operations
Net interest paid
Dividends paid
Net capital expenditure and new hire purchase/finance leases
Acquisition of businesses and net debt assumed
Sale of businesses and net debt eliminated
First redemption of “B” shares
Foreign exchange, tax and other movements
Closing net debt
8
(67.6)
127.7
(1.0)
(26.6)
(53.6)
(2.4)
14.4
(220.4)
15.1
(214.4)
Interim Results 2004
UK Bus Trading Results
 Divisional turnover growth 10.4% to £351.1m (2003 £317.9m)
 Passenger growth of 1.3% outwith London
 6.3% revenue growth
 Strong contribution from London companies
 22.1% revenue growth
 Improved operating margin
 Divisional margin, 10.9% versus 10.8% in 2003
 Outside London, 11.8% versus 11.4% in 2003
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Interim Results 2004
UK Bus Profit Analysis
October 2004
£m
October 2003
£m
351.1
42.6
12.1%
(4.3)
1.7
40.0
11.4%
(1.8)
317.9
36.3
11.4%
(2.6)
0.9
34.6
10.9%
(0.3)
Reported operating profit
38.2
34.3
Reported operating margin
10.9%
10.8%
Turnover
Operating profit before lease costs, megabus.com & Taxibus
Margin
Operating lease costs
Saving in depreciation arising from operating leases
Operating profit before megabus.com & Taxibus
Margin
Megabus.com & Taxibus
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Interim Results 2004
North America Trading Results

Turnover £123.6m (2003- £234.0m)

13.8% increase in US$ turnover from continuing operations

 like for like increase* 12.7%
Operating margin up from 6.8% to 11.7%

Operating profit** £14.4m (2003 - £15.9m)
 US$26.1m (2003 – US$26.0m)
 excellent revenue growth
 strict cost control
 overhead reduction
*
**
Like for like turnover increase is measured as the change in turnover from the residual businesses excluding
the impact of foreign exchange movements
Pre restructuring costs, exceptional items and goodwill amortisation
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Interim Results 2004
North America Turnover Breakdown
By Region
October 2004
October 2003
Turnover
US$m
Turnover
US$m
Growth
%
105.8
57.5
22.5
185.8
192.1
4.1
382.0
12.1%
9.6%
35.6%
14.2%
Discontinued
Residual taxi business to be disposed of
Total
118.6
63.0
30.5
212.1
8.0
4.0
224.1
£ equivalent
£m
123.6
£m
234.0
Residual businesses
- North East
- North Central
- Canada
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Interim Results 2004
North America Turnover Breakdown
By Product
Scheduled service/Line run/Commuter
Charter
Sightseeing & Tour
School Bus & Contract
Total
13
October
2004
US$m
October
2003
US$m
% Growth
80.9
52.1
47.6
31.5
212.1
76.7
42.0
36.9
30.2
185.8
5.5%
24.0%
29.0%
4.3%
14.2%
Interim Results 2004
New Zealand Trading Results
 Turnover £26.2m (2003 - £26.4m)
 Underlying revenue similar to last year (excluding
currency movements)
 Operating profit £3.9m (2003 - £4.9m)
- NZ$10.9m (2003 – NZ$13.7m)
 Operating margin 14.9% (2003 – 18.6%)
 Increased rail competition
 More sustainable level of profitability
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Interim Results 2004
Rail Trading Results
Rail Subsidiaries
 First full six months of new South West Trains franchise
 Turnover £234.8m (2003 - £216.7m), up 8.4%
 Operating profit £21.6m (2003 - £21.5m)
 ahead of original expectations
 Passenger volumes up 4.2% at SWT
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Interim Results 2004
Rail Profit Analysis
October
2004
£m
Operating Profit per Bid
12.4
Passenger income
19.4
Miscellaneous income
2.5
Net Sch 7/Sch 8 performance payments
(1.8)
Overhaul work on behalf of ROSCOs
0.3
Staff costs
4.0
Other costs
5.5
Revenue/Profit share to the SRA
(19.8)
Actual SWT operating profit
22.5
Other, including franchise bid costs
(0.9)
Total Rail operating profit
21.6
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Interim Results 2004
Virgin Rail Group
 Share of turnover £150.7m (2003 - £149.5m)
 Share of operating profit £5.1m (2003 – £5.0m)
 Committed to agreeing new long-term commercial
arrangements on West Coast
 Awaiting decision on SRA’s plans for future of CrossCountry
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Interim Results 2004
Taxation
October 2004
Pre-tax
£m
69.2
(4.0)
(8.0)
57.2
Pre goodwill and exceptionals
Exceptional items
Goodwill amortisation
Result for the period
Cash tax paid (net)
Tax
£m
(18.8)
1.3
0.6
(16.9)
%
27.2%
32.5%
7.5%
29.5%
(12.6)
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Interim Results 2004
Balance Sheet & Financing
 Net debt £214.4m (April 2004 - £67.6m)
 Outstanding “B” Shares £21.0m
 More efficient capital structure following completion of £241.4m
return of capital to shareholders
 EBITDA*/Interest cover 11.8 times (2003 – 6.7 times)
 Progressive dividend policy
* Before exceptional items
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Interim Results 2004
International Financial
Reporting Standards (“IFRS”)

First IFRS results: six months to 31 October 2005, with comparatives

Most significant adjustments will be:
- Financial instruments
- Pensions
- Goodwill
- Share-based payment
- Dividends
- “B” Shares

Many other less significant areas
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Interim Results 2004
Brian Souter
Chief Executive
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Interim Results 2004
Group Strategy
Delivering shareholder value through:
 Focus on local transport operations with critical mass
 Organic growth in UK and overseas bus businesses
 Complementary bolt-on acquisitions
 Targeted opportunities in UK Rail market
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Interim Results 2004
Growth in UK Bus
 Core route development
 UK-wide telemarketing campaign
 Kickstart projects – Stagecoach initiatives and
partnerships with local authorities
 Bolt-on acquisitions
 Optical guidance development with Siemens
 Investment in megabus.com
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Interim Results 2004
Growth in overseas bus
North America
 Bolt-on acquisitions
 Product development – investment in New York
Sightseeing
 Margin development
New Zealand
 Deploy successful telemarketing programme trialled in
UK
 Wellington Trolley Bus Contract expansion
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Interim Results 2004
Growth in UK rail
 New commercial deal on Virgin West Coast on
acceptable risk profile
 Target five year extension at SWT
 Bids for commuter (Integrated Kent, Greater Northern /
Thameslink) and inter-city (Inter-City East Coast,
Greater Western) franchises
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Interim Results 2004
Current Trading and Outlook
 Strong trading performance across the Group
 Current trading in line with our expectations
 Progressive dividend growth
 Group’s portfolio offers good potential for further
growth
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Interim Results 2004
Interim Results
8 December 2004
Interim Results 2004
Appendices
28
Interim Results 2004
UK Bus Revenue Development
London
Outwith London
£m
2003 Turnover
Passenger volumes
Tender wins/
contract amendments
%
£m
82.9
-
%
235.0
-
UK Bus
£m
%
317.9
3.1
1.3%
3.1
1.0%
15.6
18.8%
1.7
0.7%
17.3
5.4%
Fare increases
2.4
2.9%
8.1
3.4%
10.5
3.3%
Megabus.com
0.3
0.4%
2.0
0.9%
2.3
0.7%
2004 Turnover
101.2
22.1%
249.9
6.3%
351.1
10.4%
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Interim Results 2004
UK Bus - London/Other
October 2004
October 2003
Operating
Profit
£m
Turnover
£m
Operating
Profit
£m
82.9
7.5
9.0%
Turnover
£m
Operating
Margin
%
8.6%
Operating
Margin
%
London
101.2
8.7
Other
249.9
29.5
11.8% 235.0
26.8
11.4%
351.1
38.2
10.9% 317.9
34.3
10.8%
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Interim Results 2004
North America Revenue Development
Core
continuing
US$m
2003 Turnover
Impact of disposals and other
movements in non-core
US$/C$ currency impact
Underlying growth
Acquisitions
2004 Turnover
31
Other
US$m
Total
US$m
185.8
196.2
382.0
0.8
23.9
1.6
212.1
(184.2)
12.0
(184.2)
0.8
23.9
1.6
224.1
Interim Results 2004
Turnover of North American
business by Region and Product
2004
North
East
US$m
2003
North
East
US$m
2004
North
Central
US$m
2003
North
2004
2003
Central Canada Canada
US$m US$m
US$m
2004
Total
US$m
2003
Total
US$m
Scheduled service/
Line run/Commuter
58.2
57.6
11.3
9.2
11.4
9.9
80.9
76.7
Charter
13.1
11.9
23.0
19.8
16.0
10.3
52.1
42.0
Sightseeing & Tour
34.1
25.5
11.6
10.2
1.9
1.2
47.6
36.9
School Bus & Contract
13.2
10.8
17.1
18.3
1.2
1.1
31.5
30.2
118.6
105.8
63.0
57.5
30.5
22.5
212.1
185.8
Total Turnover
Note: The above figures relate to turnover from the continuing elements of the three core
regions of North America
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Interim Results 2004
Overseas Bus Revenue Development
2003 Turnover
Disposal of Citybus
Currency movements
Volumes
2004 Turnover
33
Citybus
£m
New
Zealand
£m
17.8
(17.8)
Nil
26.4
(0.1)
(0.1)
26.2
Total
£m
44.2
(17.8)
(0.1)
(0.1)
26.2
Interim Results 2004
Rail Revenue Development
£m
2003 Turnover
%
216.7
SWT Passenger volumes
8.9
4.1%
SWT Fares
7.8
3.6%
SWT Other
0.9
0.4%
Island Line/Supertram
0.5
0.2%
234.8
8.4%
2004 Turnover
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Interim Results 2004
Interest/Debt Ratios
October
2003
£m
Finance charges (net)
October
2004
£m
9.3
EBITDA pre-exceptionals
110.2
111.4
EBITDA pre-exceptionals/finance charges
35
11.8 times
16.6
6.7 times
Interim Results 2004
Finance Charges
Gross debt & related derivatives
Cash
Average
balance*
£m
Finance
charges
£m
Annual
Effective rate
%
561.0
(415.0)
146.0
17.2
(9.5)
7.7
(1.3)
0.3
0.4
0.5
1.4
0.3
9.3
6.1%
4.6%
10.7%
Joint ventures & associates
Non-utilisation/commitment fees
Amortisation of bond issue costs/bank charges
Insurance letters of credit/guarantee
Discount on insurance provisions
Other
*Average of month end interest bearing debt and cash balances
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Interim Results 2004
Fuel Hedging
Actual
2003/04
Forecast
2004/05
Forecast
2005/06
Forecast
2006/07
% of Group fuel hedged/capped at present
100%
97%
50%
0%
Average hedge price US$/barrel
US$24
US$35
US$43
N/A
1.71
1.85
1.90
1.90
Average unhedged floating price US$/barrel
US$32
US$45
US$45
US$45
Variable fuel costs of continuing businesses
(excludes product margin/ delivery/tax)
£25m
£35m
£43m
£44m
£77m
£78m
Average US$/£ rate
Total Fuel Cost
£59m
£68m
Continuing Bus divisions use 1.84m barrels of fuel a year (292m litres)
Each US$10 per barrel movement in crude oil price impacts variable fuel costs by
approximately US$18m if no hedging in place
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Interim Results 2004
Fuel Usage and Impact of Crude Price
Annual
Usage
litres
Annual
Usage
barrels
US$ variable
costs based
on $45
a barrel
189.0m
1.2m
$54.0m
$42.0m
North America
81.0m
0.5m
$22.5m
$17.5m
New Zealand
22.4m
0.14m
$6.4m
$4.9m
292.4m
1.84m
$82.9m
$64.4m
UK Bus
38
US$ variable
costs based
on $35
a barrel
Interim Results 2004
Capital Expenditure
UK Bus
North America
New Zealand
Rail
Cash
spent on
capex
£m
Capex on
new hire
purchase
£m
Impact of
capex on
net debt
£m
12.1
19.0
3.7
1.0
23.8
-
35.9
19.0
3.7
1.0
(2.3)
(3.7)
-
33.6
15.3
3.7
1.0
35.8
23.8
59.6
(6.0)
53.6
Disposal
Proceeds*
£m
Net
£m
*Excludes proceeds from selling businesses
Note: In addition to the above, vehicles with a capital value of £23.5m were acquired by UK Bus
during the six months on operating leases (2003 - £7.9m).
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Interim Results 2004
Exchange Rates
October 2004
Closing rate
US$
NZ$
C$
Average rate
1.8323
2.6784
2.2350
1.8131
2.7985
2.4114
40
October 2003
Closing rate
1.6970
2.7617
2.2367
Average rate
1.6324
2.7875
2.2299
Interim Results 2004
Interim Results
8 December 2004
Interim Results 2004