annual results year ended 30 april 2011 29 june 2011
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Annual Results Year ended 30 April 2011 29 June 2011. Preliminary Results 2011. Cautionary statement. This document is solely for use in connection with a briefing on Stagecoach Group plc (“the Group”). - PowerPoint PPT PresentationTRANSCRIPT
1
Annual ResultsAnnual ResultsYear ended 30 April 2011Year ended 30 April 2011
29 June 2011 29 June 2011
Preliminary Results 2011
2
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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Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
4
Highlights
Continued strong management of business
− Operational excellence and high customer satisfaction
− Winning new customers(e.g. megabus.com, modal shift)
− Acquisition (e.g. London Bus) and rail opportunities
− Reduced costs in response to changing circumstances
Excellent returns for shareholders
− Adjusted EPS 23.8p (2010: 18.7p)
− 9.2% increase in full year dividend per share
Positive outlook for 2011/12
5
Summary income statement
UK Bus (regional) operating profit
UK Bus (London) operating loss
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 11
£m
Year to 30 April 10
£m
153.1
(5.9)
19.3
9.3
48.4
28.4
(12.4)
240.2
(34.5)
(35.1)
170.6
(12.7)
157.9
126.1
Nil
9.1
7.6
41.6
19.2
(11.6)
192.0
(30.7)
(27.2)
134.1
(26.3)
107.8
Change£m
27.0
(5.9)
10.2
1.7
6.8
9.2
(0.8)
48.2
(3.8)
(7.9)
36.5
13.6
50.1
6
UK Bus (regional operations)
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 11
Year to 30 April 10
893.6
883.0
153.1
17.1%
661.5
319.2
875.4
864.7
126.1
14.4%
655.4
326.3
Change
2.1%
2.1%
21.4%
270bp
0.9%
(2.2)%
2010/11 performance Outlook Modest fare rises, as planned Organic volume growth Reduced fuel costs Other costs closely managed; some mileage
reduction Sector-leading operating margin
Concessionary and tendered revenue expected to fall c.£15m in 2011/12
Higher fuel costs in 2011/12 BSOG reduction in 2012/13 Flexibility on fares and service patterns Rising costs of motoring Challenge is to maintain similar level of operating
profit in 2011/12 versus 2010/11
7
UK Bus (London)
Revenue (£m)
Operating loss (£m)
Operating margin (%)
October 2010 to
April 2011
133.6
(5.9)
(4.4)%
2010/11 performance Outlook Back-office integration completed
− £2.0m annualised savings Driver restructuring agreed
− £9.9m up-front costs− £9.1m annualised savings
Property rationalisation Good relationship with TfL Sensible tender bids Some contracts lost at re-tender
Annual revenue of current contracts: c.£220m Cost savings improve competitive position Return to profitability targeted for 2011/12
8
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 11
Year to 30 April 10
461.7
67.7
529.4
30.2
15.2
45.4
8.6%
426.3
64.1
490.4
14.6
12.8
27.4
5.6%
Change
8.3%
5.6%
8.0%
106.8%
18.8%
65.7%
300bp
2010/11 performance Outlook megabus.com revenue up 67%
− Established Chicago/New York hubs up 51%
Return to revenue growth in other business− Like-for-like revenue up 3% in second half
Reduced fuel costs
Higher fuel costs in 2011/12 Further megabus.com growth opportunities Further rationalisation of under-performing
business units Twin America opportunities – River tours from
New York, bus tours in Los Angeles
9
megabus.com North AmericaFinancial Overview
Year ended 30 April 2011Revenue
(US$m)
Operating Income (US$m)
Operating Margin %
EBITDAR*
(US$m)
EBITDAR*
%
Megabus Chicago
(April 2006)23.8 5.4 22.7% 8.0 33.6%
Megabus New York
(June 2008)44.2 8.2 18.6% 14.3 32.4%
Megabus Philadelphia
(July 2010)5.7 (3.9) (68.4)% (3.3) (57.9)%
Megabus Washington DC
(December 2010)1.7 (5.3) (311.8)% (4.6) (270.6)%
Megabus Pittsburgh (May 2011) - (0.3) n/a (0.3) n/a
Total megabus.com 75.4 4.1 5.4% 14.1 18.7%
* Earnings before interest, taxation, depreciation, amortisation and operating lease rentals
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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 11
Year to 30 April 10
1,070.0
1,026.9
48.4
4.5%
3,395.7
1,298.3
1,026.7
968.9
41.6
4.1%
3,262.0
1,214.9
Change
4.2%
6.0%
16.3%
40bp
4.1%
6.9%
2010/11 performance Outlook Good passenger volume growth £68.1m revenue support at South Western Trains Loss at East Midlands Trains Operational excellence
Supportive of many of McNulty’s recommendations – vertical integration opportunities
East Midlands Trains revenue support from November 2011
Lower profit forecast in 2011/12− Higher premium payments to Government
Anglia franchise bid
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Virgin Rail Group
Revenue – 49% share (£m)
Operating profit – 49% share (£m)
Operating margin (%)
Dividends received (£m)
Estimated passenger miles (m)
Year to 30 April 11
Year to 30 April 10
392.7
39.5
10.1%
17.1
3,530.7
355.3
25.5
7.2%
25.1
3,230.2
Change
10.5%
54.9%
290bp
(31.9)%
9.3%
2010/11 performance Outlook
Good passenger volume growth April 2011 revenue down (bank holidays,
Royal wedding) but bounced back in May 2011
Favourable contractual settlements
Lower profit forecast in 2011/12− Non-recurrence of contractual
settlements Extension potential to December 2012 New franchise bid Revenue support
12
Rail revenue risk sharing
Target revenue – year to 31 March 2011 (£m)
Actual revenue – year to 31 March 2011 (£m)
Revenue shortfall (£m)
Theoretical revenue support (£m)
Actual revenue support (£m)
South Western
EastMidlands
862.7
747.4
(115.3)
68.1
68.1
343.9
272.0
(71.9)
47.9
Nil
WestCoast
825.0
746.3
(78.7)
39.8
39.8
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 2011 if the train
company were contractually entitled to revenue support for that period
13
Miscellaneous income statement items
Exceptional items include £18.5m of gains from the resolution of liabilities relating to past business disposals
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 11
Year to 30 April 10
1.8
(11.3)
(2.9)
(12.4)
(15.2)
17.9
1.2
(11.6)
(1.2)
(11.6)
(11.1)
(13.0)
Change
50.0%
(2.6)%
141.7%
6.9%
14
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 11
Year to 30 April 10
(34.5)
330.5
(280.9)
0.8x
9.6x
(30.7)
283.9
(296.7)
1.0x
9.2x
Change
12.4%
16.4%
(5.3)%
(0.2)x
0.4x
* excluding exceptional items
− Successful re-financing of bank facilities, now committed through to 2016
− Capital structure under review – will report conclusion by AGM in late August 2011
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Taxation
Excluding intangible asset expenses and exceptional itemsIntangible asset expensesExceptional items
Reclassify joint venture taxation for reporting purposes
Reported in income statement
Cash tax paid (net)
Pre-taxProfit£m
Tax£m
218.1(15.2)
0.7203.6(12.4)
191.2
(47.5)3.1
(1.3)(45.7)12.4
(33.3)
(20.4)
Rate%
21.8%20.4%
185.7%22.4%
n/a
17.4%
Year to 30 April 2011
16
EBITDA from Group companies before exceptional itemsLoss on disposal of plant and equipmentEquity-settled share based paymentDividends from joint venturesMovement in retirement benefit obligationsWorking capital movementsNet interest paidTax paidNet cash from operating activitiesNet capital expenditure including new hire purchase and finance leasesAcquisitions /disposals of businesses, intangibles and investmentsToken sales and redemptionsCash generationForeign exchange/income statement movementsEquity dividendsShare capital movementsDecrease in net debtOpening net debtClosing net debt
Year to 30 April
2011£m
291.00.94.7
28.8(20.4)(22.7)(30.1)(20.4)231.8
(149.7)(56.6)
(2.7)22.810.1
(15.8)(1.3)15.8
(296.7)(280.9)
Movement in net debt
17
(8.1)----
(8.1)
(100.4)(1.4)
(27.3)(35.2)(0.1)
(164.4)
1.70.33.29.5-
14.7
(98.7)(1.1)
(24.1)(25.7)(0.1)
(149.7)
(92.3)(1.4)
(27.3)(35.2)(0.1)
(156.3)
Capital expenditure
UK Bus (regional operations)UK Bus (London)North AmericaUK RailCentral
New hire purchase
and financeleases
£m
Impact ofcapex onnet debt
£m
Disposalproceeds**
£m
Net2010/11Actual
£m
Cash spent on capex*
£m
* Excludes capitalised intangible assets and assets acquired through business combinations
** Excludes proceeds from selling businesses
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Pensions
UK Bus/CentralNorth AmericaUK Rail
16.21.1
24.942.2
2011Pensionexpense
£m
2010Pension expense
£m
2011Cash
contributions £m
22.01.7
21.144.8
33.21.0
28.462.6
Post-tax deficit of £71.9m (2010: £145.5m)
Deficit reduction from asset outperformance and CPI switch
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
2010Cash
contributions £m
33.8 1.0 27.2 62.0
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Summary
Results ahead of original expectations
Positive management action underpins profitability
− Operational excellence
− Organic growth
− Acquisition turnaround opportunities
− Rail franchise opportunities
− Cost control
− Financial discipline
Positive outlook for 2011/12
Encouraging start to the new financial year
20
Sir Brian SouterSir Brian SouterChief ExecutiveChief Executive
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Winning new customers
− Rising fuel prices driving modal shift
− High growth on all Mega products
− New rail franchise opportunities
− Clarity on bus and rail regulatory framework
− Commercial model at heart of future delivery
Positive environment for public transport
22
Budget travel
UK: c.60 towns and cities, c.3 million passengers a year
North America: five US hubs, c.60 towns and cities, c.10 million passengers since 2006
23
megabus.com North America network
24
Market DemographicsCustomer Profile Previous Modes
31%
16% 17%
23%
10%
2%
39%
14%
17%
20%
8%2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
18-30 30-39 40-49 50-59 60-69 70+2009 2011
Key MarketStudent/Young Professional
Key MarketCar Travel
Source: Online tracking survey by Stagecoach Group plc, December 2010 – March 2011 versus June 2009 – September 2009, new Megabus users only
megabus.com North America
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megabus.com expansion strategy
Targeting megabus.com revenue of over US$110m in North America in 2011/12
Considering accelerating roll-out
− Short-term reduction in profitability
− But prospect of good margin once established
Roll-out model options:
− Direct Operation
− Contract
− Franchise
26
UK regulatory environment UK Bus
− Changes now largely known
− Reduced BSOG, concessionary revenue and tendered revenue unwelcome - but lowers dependency on Government
− Competition Commission findings manageable - will closely monitor developments
UK Rail
− McNulty recommendations welcome
− Potential for more commercial, customer-focused model
− Excited by vertical integration opportunities
− Work closely with Government and Network Rail to implement structural change
27
UK Bus Winning new customers through:
− Value fares strategy
− Leading position in smartcard technology and products
− Continued investment (e.g. hybrid buses)
− Innovation: biomethane powered buses
28
UK Rail/Virgin Rail Group Strengths
− Stagecoach low-cost model good fit with McNulty recommendations
− Continued high performance and customer satisfaction, above industry average
− Passengers benefitting from fleet renewals and station investment
Opportunities− Discussions with DfT on extension to current WC franchise
− VRG shortlisted for new WC franchise
− Stagecoach shortlisted for Greater Anglia franchise
− Potential for greater commercial freedom from franchise reform
− Vertical integration
29
Current trading and outlook
Current trading in line with expectations
Outlook positive
Build on track record of winning new customers
Continue to focus on opportunities to deliver value to shareholders
30
Annual ResultsAnnual ResultsYear ended 30 April 2011Year ended 30 April 2011
29 June 2011 29 June 2011
31
Appendices
32
Divisional income statementsYear ended 30 April 2011
Revenue
Rail franchise premia
Rail revenue 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(London)
£m
North America
£m
133.6
-
-
1.2
(99.6)
(15.5)
(5.0)
(2.7)
-
(5.0)
-
-
-
(6.3)
(6.6)
(5.9)
295.1
-
-
3.1
(126.0)
(31.5)
(24.8)
(21.1)
-
(7.5)
-
-
-
(22.6)
(45.4)
19.3
UK Rail£m
1,070.0
(284.8)
68.1
74.9
(271.3)
(35.0)
(5.4)
(5.6)
(185.7)
(2.9)
(196.0)
(29.3)
(25.5)
(34.7)
(88.4)
48.4
Virgin Rail Group (100%)
£m
801.5
(159.2)
43.6
52.3
(130.3)
(20.8)
(3.9)
(2.7)
(214.9)
-
(134.1)
(23.0)
(37.9)
(0.8)
(89.2)
80.6
UK Bus(Regional)
£m
893.6
-
-
14.7
(436.8)
(107.9)
(31.6)
(60.8)
-
(8.6)
-
-
-
(36.2)
(73.3)
153.1
33
UK Bus (regional) revenue
Like-for-like
Acquisitions:Islwyn (acquired January 2010)
Disposals:Preston Bus (disposed January 2011)
Start-ups:Rail replacement South (started May 2009)
Total reported
Change%
2.1%
2.1%
Year to30 April 2011
£m
Year to30 April 2010
£m
883.0
2.0
6.9
1.7
893.6
864.7
0.7
7.7
2.3
875.4
34
Scheduled service/line run/commuterSchool bus & contractCharterMegabusSightseeing & tourLike-for-like revenue “Disposed” & closed operations and Canada fxTotal North America
Year to 30 April 2011
US$m
Year to30 April 2010
US$m
193.087.081.975.419.7
457.04.7
461.7
184.587.185.345.119.1
421.15.2
426.3
% Growth
4.6%(0.1)%(4.0)%67.2%
3.1%8.5%
(9.6)%8.3%
North America revenue breakdown
35
Rail premium profiles
2011
2012
2013
2014
2015
2016
2017
South Western
£m
East Midlands
£m
(227.1)
(316.6)
(410.9)
(468.5)
(550.2)
(636.9)
(616.9)
(31.7)
(80.9)
(118.3)
(126.2)
(189.2)
-
-
West Coast£m
(145.6)
(203.2)
-
-
-
-
-
Year to 31 March:
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, and exclude revenue support.
36
Fuel Hedging
2010/11 - average effective price (per litre)
2011/12 - % of forecast consumption hedged
- average hedge price (per litre)
2012/13 - % of forecast consumption hedged
- average hedge price (per litre)
2013/14 - % of forecast consumption hedged
- average hedge price (per litre)
2014/15 - % of forecast consumption hedged
- average hedge price (per litre)
Market price (per litre)
UK Bus(London)
North America
46.7p
50%
44.3p
38%
46.1p
25%
48.3p
13%
53.0p
48.0p
53.3 cents
77%
60.3 cents
28%
77.4 cents
-
-
-
-
72.9 cents
UK Rail34.2p
76%
40.6p
61%
46.1p
5%
54.6p
-
-
46.8p
Market prices are as at 24 June 2011
Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant
UK Bus(Regional)
36.9p
96%
42.0p
51%
42.5p
-
-
-
-
48.0p
37
(185.1)
78.7
(106.4)
(25.7)
10.2
(15.5)
(31.5)
(6.4)
(22.4)
(182.2)
(194.1)
78.7
(115.4)
(45.6)
18.2
(27.4)
(37.8)
(7.2)
(27.4)
(215.2)
(204.6)
68.7
(135.9)
(47.0)
14.5
(32.5)
(42.7)
(7.2)
(30.1)
(248.4)
Fuel costsLatest forecasts
UK Bus (regional), excluding BSOG*
UK Bus (regional), BSOG*
UK Bus (regional), including BSOG*
UK Bus (London), excluding BSOG*
UK Bus (London), BSOG*
UK Bus (London), including BSOG*
North America
South Western Trains
East Midlands Trains
Total
2010/11Actual
£m
2011/12Forecast
£m
2012/13Forecast
£m
Fuel costs
(201.2)
80.0
(121.2)
-
-
-
(38.7)
(5.0)
(21.3)
(186.2)
2009/10Actual
£m
Market prices are as at 24 June 2011, when Brent Crude was US$105 per barrel
Forecast costs for the unhedged element of fuel are based on 24 June 2011 spot prices
Above costs include delivery margins, duty and taxes and exclude 3 rd party fuel costs
The forecasts are based on the latest announced duty rates and BSOG rates and in the absence of any announcements, rates are assumed to remain constant.
* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services.
(209.9)
68.7
(141.2)
(47.3)
14.5
(32.8)
(42.0)
(7.2)
(30.6)
(253.8)
2013/14Forecast
£m
189.0
42.4
75.6
12.0
50.6
369.6
2011/12 ForecastLitres m
Volumes
38
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 or loss for a particular business unit or division within the Group refers to profit or loss 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 or loss 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 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.
39
Annual ResultsAnnual ResultsYear ended 30 April 2011Year ended 30 April 2011
29 June 2011 29 June 2011