interim results 2003 interim results 10 december 2003

Interim Results 2003Interim Results 2003

Interim ResultsInterim Results10 December 200310 December 2003

2 Interim Results 2003Interim Results 2003

Robert SpeirsChairman


Highlights

Delivery of strategic objectives in 6 months to 31 October 2003 New South West Trains and Island Line franchises agreed Coach USA restructuring largely completed Innovative growth ideas in UK Bus introduced

Strong trading performance across the Group Disposal of Citybus Net debt down from £560.0m to £210.9m Interim dividend up 12.5% to 0.9p per share


Martin GriffithsFinance Director


Financial Performance

Strong financial results Operating profit growth in all four retained divisions Operating margin improvement

Actively managing cost pressures Revenue growth initiatives to offset cost increases Reduction in central overhead Risk sharing with Strategic Rail Authority Asset utilisation

Targeting investment in growth areas


Turnover

Total operating profit/(loss)*

- pre exceptionals & goodwill*(after restructuring costs)

Profit/(loss) before tax

- pre exceptionals & goodwill

Free cash flow **

Adjusted EPS

Dividend per share

October 2003£m

October2002£m

963.8

67.3

76.9

44.8

60.3

100.3

3.2p

0.9p

1,067.7

(512.4)

86.9

(524.1)

75.2

100.2

4.4p

0.8p

Financial Highlights

* After restructuring costs of £4.1m (2002 - £2.9m)** Free cash flow comprises net cash inflow from operating activities, dividends from associates,

net cash inflow/(outflow) from returns on investments and servicing of finance, and taxation


2002 PBTOperating profit of retained businesses- UK Bus- New Zealand- Coach USA- Rail – underlyingOverheadsReduction in underlying finance chargesExceptionals & goodwill

Citybus disposalRail – non-recurring liquidated damagesRestructuringJVs & associatesGain on repurchase of bonds in 2002 2003 PBT

Profit Reconciliation

(599.3)

--

575.0-- -8.8

(15.5) - -

- - - (15.5)

(524.1)

3.20.5

575.19.80.3

10.18.8

83.7(11.6)(7.2)(1.2)(3.9)

(15.0)44.8

75.2

3.20.50.19.80.3

10.1 -

99.2(11.6) (7.2)(1.2)(3.9)

(15.0)60.3

Reported£m

Exceptionals & Goodwill

£m

Pre goodwill &

exceptionals£m


Margin ImprovementRetained Divisions

UK BusNew ZealandCoach USARail

Turnover£m

Op profit£m

293.821.5

334.2206.0855.5

31.14.4

15.818.970.2

8.2%

2002

UK BusNew ZealandCoach USARail

Turnover£m

Op profit£m

317.926.4

234.0216.7795.0

34.34.9

15.921.576.6

9.6%

2003

8.2% 9.6%

2002 2003Operating margin excl goodwill & exceptionals

Six months to 31 Oct

1.4%


EBITDA

UK Bus (£2.2m lower due to impact of operating leases)

Coach USAOverseas Bus - New Zealand - Discontinued RailVRGthetrainlineRoad KingOthers

Overheads & restructuringEBITDA before exceptionals

2003£m

2002£m

54.025.3

6.8 3.5

22.55.0

(1.7)5.0

(0.7)119.7

(8.3)111.4

50.437.1

5.9 20.6 20.2

7.7(1.4)5.8

(0.6)145.7

(7.2)138.5


2003£m

2002£m

(5.1)(1.1)0.3Nil

(5.9)

NilNilNil

(575.0)(575.0)

- Loss on sale of Coach USA divisions- Loss on sale of Chongqing investment- Gain on sale of Citybus- Coach USA exceptional items

Redundancy/restructuring costs*

£4.1m (2002 - £2.9m)

Exceptional Items

Exceptionals and Restructuring Costs

* Charged against operating profits


Opening net debt

Cash flows from operations

Net interest received

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

Foreign exchange, tax and other movements

Closing net debt

£m

(560.0)

111.4

1.0

(23.8)

(35.5)

(6.5)

305.7

(3.2)

(210.9)

Movement in Net Debt


UK Bus Trading Results

Turnover growth 8.2% to £317.9m

Underlying passenger growth outwith London 1.3%

Strong contribution from London companies

19.8% revenue growth

Improved operating margin

10.8% versus 10.6% in 2002

11.3% versus 10.7% excluding operating lease impact


UK Bus Profit Analysis

TurnoverOperating profit

Add back increased operating lease costsDeduct saving in depreciation arising fromoperating leases

Add back Megabus & Taxibus R&DExclude Devon

Adjusted margin

October 2002£m

317.934.3*10.8%

2.6

(0.9)36.011.3%0.3

(0.4) 35.9

11.3%

293.831.110.6%

0.4

(0.2)31.310.7%

-(1.6)29.7

10.1%

October 2003£m

*after £3.5m increase in pensions/NI costs and £3.3m increase in insurance costs


Coach USA Trading Results

Turnover £234.0m (2002- £334.2m)

3.1% like for like revenue decline*

Operating profit** £15.9m (2002 - £15.8m)

strong cost control

profit levels maintained on reduced revenue Operating margin up from 4.7% to 6.8%

* Like for like revenue decline is measured as the change in revenue excluding the impact of acquisitions, disposals and foreign exchange** Pre exceptional items and goodwill amortisation throughout presentation


Coach USA Turnover Breakdown

Residual businesses- North East- North Central- Canada

DiscontinuedRemaining taxi operations (to be sold)

October 2003

113.7 57.5 22.5

193.7156.0 32.3

382.0

Turnover$m

October 2002

115.7 59.7 23.1

198.5276.4 34.9

509.8

Turnover$m


New Zealand Trading Results

Turnover £26.4m (2002 - £21.5m)

Underlying 6.1% revenue growth (excluding currency movements)

Operating profit £4.9m (2002 - £4.4m)

Operating margin 18.6% (2002 – 20.5%)

Passenger volumes up 5.5%


Rail Trading Results

Rail Subsidiaries

Turnover £216.7m (2002 - £206.0m)

Operating profit £21.5m (2002 - £18.9m*)

Operating margin 9.9% (2002 – 9.2%)

Passenger volumes up 3.1% at SWT

Sustained improvement in SWT-caused delay minutes

* Included £7.2m of non-recurring liquidated damages


Rail Profit Analysis

Operating Profit per Bid

Passenger income

Net Sch 7/Sch 8

EC4T

Other Costs

Revenue/Profit share to the SRA

Actual SWT operating profit

Other

Total Rail operating profit

October 2003£m

12.7

8.8

1.7

5.2

5.3

(11.7)

22.0

(0.5)

21.5


Joint Ventures & Associates

Virgin Rail Group

Share of revenue £149.5m (2002 - £140.6m)

Share of operating profit £5.0m (2002 – £7.7m)

thetrainline

Share of revenue £5.4m (2002 - £5.1m)

Share of operating loss £1.7m (2002 - £1.4m)

Road King

Share of operating profit £5.0m (2002 - £5.8m)


Completed in six months to 31 Oct 2003:- Coach USA- Citybus- Chongqing associates

Non-core:- Road King- Remaining US taxi businesses

Net cash proceeds

£m

(Loss)/gain before tax

£m

133.0128.7

0.9262.6

(5.1)0.3

(1.1)(5.9)

Disposals

Reduction in net debt

£m

133.0171.8

0.9305.7


Balance Sheet & Financing

Net debt down to £210.9m (April 2003 - £560.0m)

EBITDA*/Interest cover 6.7 times

Progressive dividend policy

Evaluate optimum balance sheet structure in conjunction with 2004 re-financing of Eurobond and bank facilities

* pre exceptionals


Current Trading & Outlook

Maintaining Coach USA profit on lower revenue base

H1 is seasonally stronger

Sustainable SWT profits at upper end of original expectations

Operating profit growth in UK Bus and New Zealand

H2 to date in line with expectations


Brian SouterChief Executive


Group Strategy (1)

• Objectives in the last 12 months STATUS

– Seek new SWT franchise Done

– Restructure Coach USA Largely complete

– Seek substantial improvement in SWT’s own train performance Ongoing

– Get the basics right at UK Bus Ongoing

• Fares

• Driver recruitment

• Engineering

• Core networks


Group Strategy (2)Where next for Stagecoach?• UK Bus

– Continue to get the basics right– Research and development– Challenge is the delivery of organic growth

• Rail– Priority to renegotiate XC and WC franchises– Other franchise opportunities

• Integrated Kent• Manchester Metrolink• UK Intercity

• North America– Deliver profitable growth– Small bolt on acquisitions– Fleet improvement

• New Zealand– Sustain revenue and profit growth


Summary

Delivery of strategic objectives Strong trading performance across the Group Focused management Strengthened balance sheet Increased dividend Current trading in line with expectations

Interim Results 2003Interim Results 2003

Interim ResultsInterim Results10 December 200310 December 2003


Appendices


UK Bus Revenue Development

2002 TurnoverPassenger volumes outside LondonLondon contract changesFares/tender prices2003 Turnover

London£m

Provincial£m

69.2-

11.72.0

82.9

224.62.9-7.5

235.0

TotalUK Bus

£m

293.82.9

11.79.5

317.9


82.9

235.0

317.9

9.0%

11.4%

10.8%

7.5

26.8

34.3

69.2

224.6

293.8

9.8%

10.8%

10.6%

6.8

24.3

31.1

UK Bus - London/Other

October 2003

Operating Operating

Turnover Profit Margin

£m £m %London

Other

October 2002

OperatingOperating


£m £m %


Rail Revenue Development

2002 Turnover

SWT Passenger volumes

SWT Fares

Other

2003 Turnover

£m %

206.0

6.3

4.1

0.3

216.7

3.1%

2.0%

0.1%

5.2%


Overseas Bus Revenue Development

2002 TurnoverDisposal of Citybus and AustraliaCurrency movementsVolumesFares2003 Turnover

Citybus£m

New Zealand

£m

70.3(45.5)

(4.5)(2.5)

-17.8

21.5-3.41.30.2

26.4

Other£m

0.5(0.5)

----

Total£m

92.3(46.0)

(1.1)(1.2)0.2

44.2


Overseas BusSegmental results

70.3

21.5

0.5

92.3

17.9%

20.5%

0.0%

18.4%

12.6

4.4

-

17.0

17.8

26.4

-

44.2

5.6%

18.6%

0.0%

13.3%

1.0

4.9

-

5.9

October 2003

Operating Operating


£m £m %Citybus*

New Zealand

Other

Total

October 2002

OperatingOperating


£m £m %

* Disposal completed June 2003


Coach USA Revenue Development

2002 Turnover

Disposals

Currency movement

Underlying decline

2003 Turnover

£m %

334.2

(76.2)

(16.4)

(7.6)

234.0

(22.8)%

(4.9)%

(2.3)%

(30.0)%


Gross debt & related derivativesCash

Joint ventures & associatesNon-utilisation/commitment feesAmortisation of bond issue costs/bank chargesInsurance letters of creditDiscount on insurance provisionsOther

Finance charges

£m

AnnualEffective rate

%

16.9(3.0)13.9(0.6)0.30.40.81.50.3

16.6

5.6%2.5%7.5%

Finance Charges

Average balance*

£m

607.0 (237.0)

370.0

*Average of month end debt/cash balances


Interest/Debt Ratios

Finance charges* (net)

EBITDA pre-exceptionals

EBITDA pre-exceptionals/Finance charges

2003£m

2002£m

16.6

111.4

6.7 times

11.7*

138.5

11.8 times

* 2002 includes £15.0m gain on repurchase of bonds


Taxation

Pre-goodwill and exceptionalsExceptional itemsGoodwill amortisation

Pre-tax£m

Tax£m

60.3(5.9)(9.6)44.8

(17.9)2.00.8

(15.1)

%

29.7%33.9%

8.3%33.7%

2003


10.9---

10.9

21.99.35.91.1

38.2

(1.8)(0.8)(0.1)

-

(2.7)

20.18.55.81.1

35.5

11.09.35.91.1

27.3

Capital Expenditure

UK BusCoach USAOverseas BusRail

Capex on new hire purchase

£m

Impact ofcapex onnet debt

£m

Disposalproceeds

£mNet£m

Cash spent on

capex £m


Fuel Hedging

% of group fuel usage hedged

Average hedge price $/barrel*

Average floating price $/barrel*

Variable fuel costs

FY2004 FY2003

100%

$24

$30

c.£40m

63%

$24

$20

c.£50m

FY2002

90%**

$24

$23

c.£53m

* Based on blended comparable crude oil price for the year** 6 months to April 2002


Exchange Rates

US$HK$NZ$

Closing rate Average rate

1.564512.2017

3.2177

1.525211.8957

3.2177

October 2002

Closing rate Average rate

1.697013.1780

2.7617

1.632412.7120

2.7875

October 2003

interim results 2003 interim results 10 december 2003

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