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Annual Results Year Ended April 2008

This report highlights strong revenue growth, increased investment in bus and rail services, and excellent returns to shareholders. It provides a financial summary and details on revenue and operating profit for each business unit. The report also mentions potential for further modal shift and progressive dividend growth.

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Annual Results Year Ended April 2008

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  1. Annual ResultsYear ended 30 April 2008 25 June 2008

  2. 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. • Net debt (or net funds) is the net of cash and borrowings as reported on the consolidated balance sheet, adjusted to exclude any accrued interest and deferred gains on derivatives.

  3. Robert SpeirsChairman

  4. Highlights • Strong underlying revenue growth in all divisions • Positive environment for public transport • Increased investment in bus and rail services • Excellent return to shareholders • 63.0p returned to shareholders in May/June 2007 • Adjusted EPS up 73.5% • Full year dividend up 31.7% • Progressive dividend growth • Significant potential for further modal shift

  5. Martin GriffithsFinance Director

  6. Financial summary Year to 30 April 08 Year to 30 April 07 Change Revenue - continuing operations Operating profit* - continuing operations Adjusted earnings per ordinary share* Basic earnings per ordinary share Net (debt)/funds Dividend per ordinary share £1,763.6m £205.3m 20.3p 34.6p £(319.7)m 5.4p £1,504.6m £161.3m 11.7p 25.4p £186.4m 4.1p 17.2% 27.3% 73.5% 36.2% n/a 31.7% • Dividend rebased up c.32% • Progressive dividend policy maintained * excluding exceptional items and intangible asset expenses

  7. Summary income statement Year to 30 April 08 £m Year to 30 April 07 £m Change £m UK Bus operating profit North America operating profit excluding Megabus Megabus North America operating loss UK Rail operating profit Share of joint ventures’ profit after tax Restructuring costs and group overheads Operating profit Finance (charges)/income (net) Tax Profit excluding intangibles and exceptionals Intangibles and exceptionals, net of tax Reported profit from continuing operations 109.9 23.9 (2.9) 59.1 32.6 (17.3) 205.3 (30.9) (28.3) 146.1 83.1 229.2 84.5 19.1 (1.0) 58.8 14.2 (14.3) 161.3 0.7 (37.8) 124.2 16.3 140.5 25.4 4.8 (1.9) 0.3 18.4 (3.0) 44.0 (31.6) 9.5 21.9 66.8 88.7

  8. UK Bus Year to 30 April 08 Year to 30 April 07 Change 743.9 738.9 313.3 109.9 14.8% 635.1 690.4 687.5 311.9 84.5 12.2% 613.3 7.7% 7.5% 0.4% 30.1% 2.6% 3.6% Revenue (£m) Like-for-like revenue (£m) Total vehicle miles operated (m) Operating profit (£m) Operating margin (%) Estimated like-for-like passenger journeys (m) • Revenue and journeys benefiting from external drivers of public transport demand, marketing, competitive fares, concessionary travel schemes and continued fleet investment • Relatively stable year-on-year fuel costs • Full year effect of pension scheme changes • Further benefits from integrating 2005/6 acquisitions

  9. North America (excluding Megabus) Year to 30 April 08 Year to 30 April 07 Change Revenue (US$m) Like-for-like revenue (US$m) Operating profit (US$m) Operating margin 474.3 465.6 48.0 10.1% 458.9 451.3 36.6 7.9% 3.4% 3.2% 31.1% 2.2% • 10% margin target (excluding Megabus) achieved one year early • Like-for-like revenue up 4.6%, excluding GTAA contract • Reduced insurance and claims costs • Relatively stable year-on-year fuel costs

  10. Rail (wholly-owned) Year to 30 April 08 Year to 30 April 07 Change Revenue (£m) Like-for-like revenue (£m) Operating profit (£m) Operating margin (%) Estimated passenger miles (m) – South Western 777.8 649.3 59.1 7.6% 3,228.7 571.5 571.5 58.8 10.3% 3,055.5 36.1% 13.6% 0.5% (2.7)% 5.7% • Strong first full year of new South Western franchise • Manchester Metrolink from July 2007 • East Midlands from November 2007 – revenue up 9.5% • Sheffield Supertram record passenger volumes

  11. Virgin Rail Group Year to 30 April 08 Year to 30 April 07 Change 394.0 310.3 301.9 83.7 41.9 10.6% 30.5 2,525.2 412.5 271.5 271.5 141.0 12.4 3.0% 31.1 2,330.9 (4.5)% 14.3% 11.2% (40.6)% 237.9% 7.6% (1.9)% 8.3% Revenue – 49% share (£m) • West Coast • West Coast like-for-like • CrossCountry Operating profit – 49% share (£m) Operating margin (%) Dividends received (£m) Estimated like-for-like passenger miles (m) – West Coast • Re-negotiated West Coast franchise performing strongly • Revenue share payable to Department for Transport • Successful resolution of Network Rail open items • December 2008 timetable • c.30% more services • Consistently reliable infrastructure essential • Challenging programme of infrastructure work • Financial protection

  12. Miscellaneous income statement items Year to 30 April 08 Year to 30 April 07 Change Citylink joint venture (£m) Splash Tours joint venture (£m) Intangible asset expenses (£m) Group overheads (£m) Restructuring costs (£m) Post-tax exceptional items (£m) 0.8 (0.4) (13.0) (13.0) (4.3) 113.9 0.9 (0.2) (14.7) (11.1) (3.2) 160.9 (11.1)% (100.0)% 11.6% (17.1)% (34.4)% (29.2)% • Citylink – divestment of certain services; OFT costs • Increased group overheads includes higher share based payment expenses • Restructuring costs include £3.6m in UK Rail Division • Exceptional gains include favourable resolution of historic tax issues

  13. Finance (charges)/income and credit ratios Year to 30 April 08 Year to 30 April 07 Change Net finance (charges)/income* (£m) EBITDA from continuing operations and joint ventures* (£m) Year-end net (debt)/funds (£m) Net Debt/EBITDA* EBITDA*/Interest* (30.9) 271.9 (319.7) 1.2x 8.8x 0.7 229.6 186.4 n/a n/a (31.6) 42.3 (506.1) n/a n/a • Efficient capital structure • Good credit ratios * excluding exceptional items

  14. Taxation Year to 30 April 2008 Pre-tax Profit* £m Tax* £m Rate % Excluding intangible asset expenses and exceptional items - Before joint ventures - Joint ventures Intangible asset expenses Exceptional items Joint venture tax Reported in income statement Cash tax received (net) 141.8 46.3 188.1 (13.0) 5.9 181.0 (13.7) 167.3 (28.3) (13.7) (42.0) 2.1 88.1 48.2 13.7 61.9 57.6 20.0% 29.6% 22.3% 16.2% n/a n/a n/a n/a * Excludes discontinued operations

  15. Divisional income statements Year ended 30 April 2008 UK Bus £m North America £m UK Rail £m VRG £m 743.9 - 13.9 (382.1) (81.6) (29.4) (47.6) - (6.7) - (32.8) (67.7) 109.9 241.9 - 3.1 (106.3) (25.1) (17.8) (16.9) - (3.9) - (18.2) (35.8) 21.0 777.8 78.2 48.4 (225.1) (16.2) (3.5) (2.1) (151.2) (3.6) (282.6) (22.8) (138.2) 59.1 803.9 283.4 62.1 (164.8) (26.1) (5.1) (1.0) (254.5) - (456.9) - (155.6) 85.4 Revenue 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 Material & consumables Other costs Operating profit

  16. Movement in net debt 30 April 2008 £m EBITDA from Group companies before exceptionals Dividends from joint ventures Movement in retirement benefits Working capital and other operating cash movements Net interest paid Tax received Net cash from operating activities Net capital expenditure including new hire purchase & finance leases Cash outflow in respect of inception of rail franchise 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 Equity dividends Return of value Other share capital movements Increase in net debt Opening net funds Closing net debt 239.3 31.6 (69.0) 89.7 (24.2) 57.6 325.0 (99.5) (0.5) (9.7) 3.6 (0.3) (1.6) (2.5) 214.5 (30.0) (693.0) 2.4 (506.1) 186.4 (319.7)

  17. Capital expenditure New hire purchase/finance leases* £m Impact of capex on net debt £m Disposal proceeds** £m Net 2007/8 Actual £m Net 2008/9 Budget £m Cash spent on capex* £m UK Bus North America UK Rail Group 55.8 7.6 - - 63.4 73.6 24.7 10.2 0.2 108.7 (8.1) (1.0) - (0.1) (9.2) 65.5 23.7 10.2 0.1 99.5 100.3 22.3 63.1 - 185.7 17.8 17.1 10.2 0.2 45.3 * Excludes capitalised intangible assets and business combinations ** Excludes proceeds from selling businesses

  18. Liquidity • £448.9m undrawn committed bank facilities at 30 April 2008 • available for immediate cash drawings • Over £50m of surplus cash at 30 April 2008 • Investment grade credit rating • Next significant debt maturity – US$334m bonds, November 2009 • Comfortably within covenant levels

  19. Fuel Hedging UK Bus North America UK Rail 2007/8 - average effective price (per litre) 2008/9 - % of forecast consumption hedged - average hedge price (per litre) 2009/10 - % of forecast consumption hedged - average hedge price (per litre) 2010/11 - % of forecast consumption hedged - average hedge price (per litre) Market price (per litre) 26.5p 94.4% 33.6p 50.1% 53.8p - n/a 56.3p 56.3 cents 75.9% 61.5 cents 50.6% 96.3 cents - n/a 101.2 cents 30.7p 76.0% 31.6p 76.0% 31.6p 76.0% 31.6p 55.4p Market prices are as at 17 June 2008 Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant

  20. Fuel costsLatest forecasts Fuel costs Volumes 2006/07 Actual £m 2007/08 Actual £m 2008/09 Forecast £m 2009/10 Forecast £m 2008/9 Forecast Litres m UK Bus, excluding BSOG* UK Bus, BSOG* UK Bus, including BSOG* North America South Western Trains London Bus East Midlands Trains Total (145.4) 65.9 (79.5) (25.5) (4.3) (109.3) (6.1) - (115.4) (150.1) 68.5 (81.6) (25.1) (5.3) (112.0) - (10.9) (122.9) (168.0) 72.1 (95.9) (34.6) (8.6) (139.1) - (22.5) (161.6) (201.9) 72.1 (129.8) (43.6) (8.7) (182.1) - (22.7) (204.8) 189.9 - 189.9 74.8 13.1 277.8 - 50.5 328.3 Market prices are as at 17 June 2008, when Brent Crude was $134 per barrel Above costs include delivery margins, duty and taxes * Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services

  21. Brian SouterChief Executive New Opportunities

  22. Dynamic of a changing market The Rail “U” Curve Passenger miles (LHS) Passenger journeys (RHS) Source: Association of Train Operating Companies

  23. Dynamic of a changing market The Bus Graph Source: Department for Transport

  24. Changing consumer behaviour • Stagecoach survey of more than 4,000 people in the UK found: • 64% see the environment as a high priority • 47% use the car less than before • 36% use the bus more than previously • 19% make more use of the train

  25. Modal shift • 10% of respondents said they had changed their transport mode in the last 3 years • Reasons cited for modal shift include: • 20% health reasons • 12% environmental considerations • 10% availability of free bus pass AND… • 32% said they would pay more for environmentally friendly public transport

  26. “Green partnerships” • Public transport should partner with organisations that share a common interest in ‘greener’ lifestyles • Stagecoach Group survey: In order of importance, how would you rate the following behaviours?

  27. UK Rail • Recent economic trends are challenging • GDP growth forecasts now 1.7%* v 2.5-2.9% when bidding • Latest Central London Employment: now 0.7%** decline v 1.4% growth when bidding BUT… • Still strong passenger revenue growth • Modal shift driven by fuel prices, environmental concerns, rising road congestion • Improved train service • Revenue initiatives • Gating • Timetable step-up • Capacity increases • Pricing * Source: Average independent forecasts for UK GDP growth in 2008 as published by HM Treasury on 18 June 2008. ** Source: April 2008 v April 2007 as supplied by Oxford Economic Forecasting (OEF)

  28. UK Bus • Higher than industry-average growth • Strong operational delivery and customer service • Record investment in greener, accessible fleet • Product development • Competitive pricing strategy • Market-leading telemarketing programme • Excellent stakeholder partnerships

  29. UK Bus (cont’d) • Robust and predictable business model • Flexible to market/economic conditions • Pricing headroom • Cash generative • Strong provincial bus network • Organic growth • “Railway” characteristics • National concession scheme from 1 April 2008

  30. North America • Complementary business mix • Weaker dollar positive for sightseeing business • High fuel prices driving modal shift • Megabus creating a new market for inter city coach services • Continued cost control; further margin improvement delivered

  31. Current trading and outlook • Strong start to new financial year • Current trading in line with our expectations • Outlook for the sector and the Group good • Monitoring economic and energy price developments • Continued focus on organic growth and bolt-on acquisitions • Good potential for further growth in revenue, earnings and dividends

  32. Annual ResultsYear ended 30 April 2008 25 June 2008

  33. Appendices

  34. North America revenue breakdown Year to 30 April 2008 US$m Year to 30 April 2007 US$m % Growth Scheduled service/line run/commuter Charter Sightseeing & tour School bus & contract Like-for-like revenue (excluding Megabus) Closed operations and Canada fx Total North America (excluding Megabus) Megabus Total North America 198.0 88.9 88.9 89.8 465.6 8.7 474.3 11.3 485.6 188.5 87.9 84.1 90.8 451.3 7.6 458.9 4.7 463.6 5.0% 1.1% 5.7% (1.1)%* 3.2% 14.5% 3.4% 140.4% 4.7% * Includes impact of loss of contract work at Toronto airport

  35. Rail subsidy/(premium) profiles South Western £m East Midlands £m West Coast £m Year to 31 March: 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 63.1 21.1 (42.2) (93.6) (157.1) (231.3) (299.2) (363.6) (435.2) (431.7) 35.7 64.9 36.8 0.2 (44.7) (78.6) (99.9) (157.5) n/a n/a 270.0 291.6 265.2 229.6 197.4 n/a n/a n/a n/a n/a The above amounts are subject to adjustment for: (1) various inflation measure (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 but exclude “pass through” adjustment re Network Rail charges.

  36. Rail subsidy/(premium) Year ended 30 April 2008 South Western £m East Midlands £m Total £m Subsidy per previous slide “Pass through” of Network Rail charges Other adjustments Year to 30 April 2008 reported in results 63.1 (39.5) (4.6) 19.0 35.7 21.0 2.5 59.2 98.8 (18.5) (2.1) 78.2

  37. Exchange rates April 2008 April 2007 Closing rate Average rate Closing rate Average rate US$ C$ 1.9806 1.9947 2.0072 2.0525 1.9999 2.2102 1.9103 2.1738

  38. Annual ResultsYear ended 30 April 2008 25 June 2008

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