Transcript Document
Interim Results
5th December 2007
1
Interim Results 2007
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.
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Interim Results 2007
Robert Speirs
Chairman
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Interim Results 2007
Highlights
Good underlying revenue growth in all core divisions
Interim dividend of 1.35p, up 12.5%
Adjusted earnings per ordinary share up 62.1%
Operating profit growth
Earnings-enhancing return of value in May/June
2007
Strong start to new South Western rail franchise and
Manchester Metrolink tram contract
East Midlands rail franchise from November 2007
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Interim Results 2007
Martin Griffiths
Finance Director
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Interim Results 2007
Financial summary
31 Oct 07
31 Oct 06
Change
Revenue - continuing operations
£820.8m
£752.1m
9.1%
Operating profit* - continuing operations
£100.0m
£80.7m
23.9%
Adjusted earnings per ordinary share*
9.4p
5.8p
62.1%
Basic earnings per ordinary share
9.0p
18.9p
(52.4%)
Net (debt)/funds
£(494.7)m
Dividend per ordinary share
1.35p
£140.9m
1.20p
12.5%
* Excluding exceptional items and intangible asset expenses
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Interim Results 2007
Summary income statement
31 Oct 07
£m
31 Oct 06
£m
UK Bus operating profit
52.5
34.1
18.4
North America operating profit excl Megabus
18.0
17.2
0.8
Megabus North America operating loss
(1.1)
(0.5)
(0.6)
UK Rail operating profit
25.3
31.4
(6.1)
Share of joint ventures’ profit after tax
13.2
4.4
8.8
Restructuring and group overheads
(7.9)
(5.9)
(2.0)
Finance charges (net)
(15.4)
(3.3)
(12.1)
Tax
(15.7)
(18.5)
2.8
Profit excluding intangibles and exceptionals
68.9
58.9
10.0
Intangibles and exceptionals, net of tax
(3.1)
15.0
(18.1)
Reported profit from continuing operations
65.8
73.9
(8.1)
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Change
£m
Interim Results 2007
UK Bus
31 Oct 07
31 Oct 06
Change
Revenue (£m)
367.1
339.6
8.1%
Like-for-like revenue (£m)
364.5
338.0
7.8%
Operating profit (£m)
52.5
34.1
54.0%
Operating margin
14.3%
10.0%
4.3%
Estimated passenger journeys (m)
316.0
304.2
3.9%
Total vehicle miles operated (m)
157.3
157.4
(0.1)%
Revenue and journeys benefiting from marketing campaigns, investment in fleet and
excellent value fares
Continued underlying revenue and volume growth
Stable year-on-year fuel costs
Reduced pension costs
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Interim Results 2007
UK Bus - Revenue
Maintaining revenue growth momentum
Focus on non-London operations delivering growth
Non-London bus revenue
380.0
360.0
3.9% volum e
grow th
340.0
£m
320.0
New
concessionary
fares schem es
300.0
280.0
260.0
240.0
220.0
Oct 2003
Oct 2004
Oct 2005
Oct 2006
Oct 2007
Half-year to 31 October
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Interim Results 2007
UK Bus – Operating Profit
Strong UK Bus profit progression
c. £270m for London bus sale in 2006/07
UK Bus operating profit
60.0
50.0
40.0
£m 30.0
20.0
10.0
0.0
Other
London
Oct
2003
Oct
2004
Oct
2005
Oct
2006
Oct
2007
Half-year to 31 October
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Interim Results 2007
North America (excluding Megabus)
31 Oct 07
31 Oct 06
Change
Revenue (US$m)
258.9
251.3
3.0%
Like-for-like revenue (US$m)
255.6
247.0
3.5%
Operating profit (US$m)
36.2
32.2
12.4%
Operating margin
14.0%
12.8%
1.2%
Further margin improvement from optimising asset deployment
10% annualised operating margin targeted by 30 April 2009 (12 months to
31 Oct 07: 8.7%)
Reduction in dedicated charter fleet
Some signs of economic weakness resulting in a reduced rate of revenue
growth
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Interim Results 2007
North America
revenue breakdown
Scheduled service/line run/commuter
Sightseeing & tour
Charter
School bus & contract
Like-for-like revenue excl Megabus
Closed operations and foreign exchange movements
Total North America excl. Megabus
Megabus
Total North America
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31 Oct 07
US$m
31 Oct 06
US$m
% Growth
99.0
62.5
53.4
40.7
255.6
3.3
258.9
4.8
263.7
93.9
55.9
53.3
43.9
247.0
4.3
251.3
2.2
253.5
5.4%
11.8%
0.2%
(7.3)%
3.5%
(23.3)%
3.0%
118.2%
4.0%
Interim Results 2007
UK Rail (wholly-owned)
31 Oct 07
31 Oct 06
Change
Revenue (£m)
322.7
276.8
16.6%
Like-for-like revenue (£m)
318.8
276.8
15.2%
25.3
31.4
(19.4)%
Operating profit (£m)
Operating margin
South Western estimated
passenger miles (000’s)
7.8%
1,619.0
11.3%
1,513.1
Strong start to new South Western franchise
South Western revenue growth 15.3%
Timing of revenue initiatives may result in profit variability
Manchester Metrolink from July 2007
East Midlands from November 2007
13
(3.5)%
7.0%
Interim Results 2007
Virgin Rail Group
31 Oct 07
31 Oct 06
Change
Revenue - 49% share (£m)
225.8
202.4
11.6%
- West Coast
149.1
131.3
13.6%
16.3
3.9
317.9%
Operating profit - 49% share (£m)
Operating margin
7.2%
Dividends received (£m)
Estimated Passenger miles (000’s) West Coast
1.9%
5.3%
11.0
7.7
42.9%
1,284.7
1,172.8
9.5%
Re-negotiated West Coast franchise performing well
Winning market share from airlines
Network expansion - 21 Super Voyager Trains
CrossCountry franchise ended November 2007
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Interim Results 2007
Scottish Citylink/Megabus JV
31 Oct 07
31 Oct 06
Change
Revenue - 35% share (£m)
4.8
4.3
11.6%
Operating profit - 35% share (£m)
0.9
1.1
(18.2)%
18.8%
25.6%
(6.8)%
Operating margin
JV has delivered significant passenger benefits
Better value-for-money
More sensible co-ordination of routes, timetables, etc.
More services
Strong support from passengers, politicians and other stakeholders
Resolution of Competition Commission issues
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Interim Results 2007
Miscellaneous income statement items
31 Oct 07
31 Oct 06
Change
Intangible asset expenses (£m)
(6.2)
(7.5)
17.3%
Group overheads (£m)
(6.2)
(5.2)
(19.2)%
Restructuring costs (£m)
(1.7)
(0.7)
(142.9)%
Pre-tax exceptional net gains (£m)
2.0
155.9
(98.7)%
£2.0m gain on sale of Darlington bus operations
Prior year exceptional gains include London bus sale and past service pensions
credit
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Interim Results 2007
Finance charges and credit ratios
31 Oct 07
Net finance charges (£m)
31 Oct 06
15.4
3.3
EBITDA from continuing operations and joint ventures excl
exceptional items (£m)
135.1
113.5
Ratio of EBITDA from continuing operations and joint
ventures excl exceptional items to net finance charges
8.8 times
Efficient capital structure
Good credit ratios
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34.4 times
Interim Results 2007
Liquidity & interest rate risk
Excellent liquidity
Over £280m of undrawn bank facilities (through to 2012)
Over £100m of other undrawn available credit lines
Cash generative
31 October 2007 net debt
£494.7m
£329.2m
£165.5m
66.5%
33.5%
Fixed Rate at 6.0%
blended*
Floating Rate
* Taking account of interest rate derivatives and amortisation of deferred gains on early settlement of derivatives
(cash rate 7.3%)
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Interim Results 2007
Taxation
31 Oct 2007
Pre-tax
Profit
£m
Pre-tax profit excluding intangible asset expenses
and exceptional items
- Before joint ventures
- Joint ventures
Intangible asset expenses
Exceptional items
Joint venture tax
Reported in income statement
71.4
18.7
90.1
(6.2)
2.0
85.9
(5.5)
80.4
Tax
£m
Rate
%
(15.7)
(5.5)
(21.2)
1.1
(20.1)
5.5
(14.6)
22.0%
29.4%
23.5%
23.4%
18.2%
4.9
Cash tax paid (net)
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Interim Results 2007
Movement in net debt
EBITDA from Group companies before exceptionals
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
Acquisitions of businesses, intangibles and investments
Disposals of businesses and investments
Movement in loans to joint ventures
Token sales and redemptions
Foreign exchange/other
Reduction in net debt before cash flows with shareholders
Return of value, including related costs
Equity dividends
Other share capital movements
Increase in net debt
Opening net funds
Closing net debt
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31 Oct 07
£m
118.2
1.6
11.0
(47.0)
7.1
(12.7)
(4.9)
73.3
(41.6)
(2.6)
3.3
(0.2)
(2.0)
5.4
35.6
(693.0)
(20.5)
(3.2)
(681.1)
186.4
(494.7)
Interim Results 2007
Capital expenditure
UK Bus
North America
UK Rail
Group
Cash
spent on
capex*
£m
Capex on
new hire
purchase
£m
Impact of
capex on
net debt
£m
3.8
4.4
3.4
0.2
11.8
29.9
2.2
32.1
33.7
6.6
3.4
0.2
43.9
Disposal
proceeds**
£m
(1.9)
(0.4)
(2.3)
Net
£m
31.8
6.2
3.4
0.2
41.6
Significant capital expenditure planned for second half of year to 30 April 2008
* Excludes capitalised intangible assets of £1.1m (2006: £0.1m) and assets acquired through business
combinations
** Excludes proceeds from selling businesses
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Interim Results 2007
Brian Souter
Chief Executive
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Interim Results 2007
The Stagecoach Equity Story
Above-industry organic growth
Revenue up 9.1%
UK Bus** 7.8% v industry 6.7%
South Western 15.6% v industry
10.7%
Strong Earnings Momentum
EPS* up 62.1% - 5 year CAGR 16.3%
Operating profit* up 23.9%
Efficient capital structure approximately £940m returned to
shareholders in last five years
Dividend up 12.5% - 5 year CAGR
12.1%
** Like-for-like
Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions
of major UK-listed Groups
London & South East train operating companies revenue growth for six months to 31 October 2007
* Before intangible asset expenses and exceptional items
For last full financial year
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Interim Results 2007
Well balanced portfolio
Excellent potential for further growth
Drivers of bus and rail growth
Supportive government policy: e.g. concessionary
fare schemes; road pricing
Increasing environmental awareness
Rising road congestion
Inward immigration
Stagecoach factors
Innovative and entrepreneurial management with
short chains of command
New products
Good operational delivery
Strong stakeholder partnerships
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Delivering
above-industry
growth
Interim Results 2007
UK Bus
A Continuing Growth Story
Revenue growth* 7.8% (1.1% higher than average market revenue growth of
6.7%**)
Underlying estimated full fare passenger volume growth of approximately 2.4%
Operating profit up 54.0% from £34.1m to £52.5m
New products, marketing and branding
TV Campaign
Goldline
Environmental initiatives
Building long-term stakeholder partnerships
* Like-for-like
** Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions of
major UK-listed Groups
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Interim Results 2007
North America
Continuing Margin Improvement
“Sweating” the assets; segment profitability; cost control
revenue growth* 4.5%
further underlying margin** improvement from 12.8% to 14.0%
Product developments
Splash Tours
megabus.com
Internet selling
Environmental initiatives
Still targeting 10% annualised operating margin on core business by
April 2009
* Like-for-like constant currency including megabus
** Excluding megabus
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Interim Results 2007
UK Rail
Consolidated Market Share
Now have excellent portfolio of high growth franchises on long term
contracts
Continued excellent operational performance
Revenue growth above the industry average
Integrating recent wins
East Midlands
Manchester Metrolink
Maximising shareholder value from existing rail contracts
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Interim Results 2007
Current trading and outlook
Strong earnings momentum
good operational delivery
efficient capital structure
Current trading in line with our upgraded expectations
Continued focus on organic growth and bolt-on
acquisitions
Increased fuel costs in 2008/9 but outlook remains
positive and good potential for further growth
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Interim Results 2007
Interim Results
5th December 2007
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Interim Results 2007
Appendices
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Interim Results 2007
Fuel Hedging
UK Bus
North America
UK Rail
ULSD 10ppm
Heating Oil No 2
Gasoil 0.1%
188m litres
72m litres
62m litres
2007/08
86%
93%
56%
2008/09
95%
76%
77%
2009/10
N/A
N/A
77%
2007/08
25.0p/litre
45.5 cents/litre
30.5p/litre
2008/09
33.6p/litre
56.8 cents/litre
30.5p/litre
2009/10
N/A
N/A
30.5p/litre
Product
Approximate annual usage
% hedged
Average hedge price
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Interim Results 2007
Finance charges
Finance
income/
(charges)
£m
Interest on cash & debt
Non-utilisation/commitment/arrangement fees
Insurance letters of credit
Discount on insurance provisions
Interest on notes receivable
32
(12.6)
(1.0)
(0.3)
(1.6)
0.1
(15.4)
Interim Results 2007
Exchange rates
October 2007
Closing rate
US$
C$
Average rate
2.0774
1.9731
2.0133
2.1034
33
October 2006
Closing rate
1.9073
2.1370
Average rate
1.8687
2.0914
Interim Results 2007
Interim Results
5th December 2007
34
Interim Results 2007