Annual Results 2003 1 Annual Results 25 th June 2003.

1 Annual Results 2003

Annual ResultsAnnual Results2525thth June 2003 June 2003


Robert SpeirsRobert Speirs

ChairmanChairman


Highlights

Continued profitability in all four key operating divisions

Strong cash generation across the Group

£214.6m (28%) debt reduction since April 2002

Free cash flow up 18%

c. £300m of disposals announced post year-end

US £136m; Hong Kong £176m

Good progress in restructuring Coach USA

Terms of new franchise at South West Trains agreed with SRA

Final dividend of 1.8p per share (giving full year dividend of 2.6p (2002: 2.6p))


Martin GriffithsMartin Griffiths

Finance DirectorFinance Director


Turnover

Total operating (loss)/profit

- pre goodwill & exceptionals

(Loss)/profit before tax

- pre goodwill & exceptionals

Free cash flow*

Adjusted earnings per share

Dividend per share

2003£m

2002£m

2,076.6

(466.2)

146.4

(500.2)

112.9

217.8

6.4p

2.6p

2,111.4

96.5

166.6

42.0

106.8

184.3

6.3p

2.6p

Financial Highlights

* Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and associates, net cash outflow from returns on investments and servicing of finance, and taxation.


EBITDA

UK BusCoach USAOverseas BusRailVirgin Rail Groupthetrainline.comRoad KingOthers

Overheads & restructuringEBITDA before exceptionals

2003£m

2002Restated

£m

112.049.551.840.9

7.2(4.3)10.5(0.8)

266.8(15.1)251.7

105.281.957.034.110.8(4.4)12.9(0.8)

296.7(17.4)279.3


Opening net debtCash flows from operationsRoad King dividendsNet interest paidTax paidDividends paidNet capital expenditure and new hire purchase financeAcquisition/disposal of subsidiaries/investmentsNet token cashForeign Exchange and other movementsClosing net debt

£m(774.6)272.2

5.3(51.9)

(7.8)(27.6)(52.3)

(4.8)2.1

79.4(560.0)

Movement in Net Debt


Coach USA Trading Results

Results in line with expectations set in December Turnover £603.0m (2002 - £682.3m) 3.4% like for like revenue decline*

0.4% like for like decline in coach and bus Operating profit** £14.0m (2002 - £38.4m)

strict cost control Insurance and claims costs up 38.2% in US$

Decline in taxicab sales and utilisation Results stated after all claims costs (one-off and recurring)

* Like for like revenue decline is measured as the change in revenue excluding the impact of acquisitions, disposals and foreign exchange movements

** Pre exceptional items and goodwill amortisation


Coach USA – 2002/03 build-up

Businesses sold & closed in 2002/03Disposals announced since 30 April 2003:- West/South Central- Transit- New England

Disposals planned:- Taxi- South East- Canada

North East/North CentralTotal turnover

Turnover$m

41.7

215.9100.849.5

407.9

118.249.838.4

614.3324.7939.0


UK Bus Trading Results

Sales and profit are growing Turnover growth 5.4% to £598.4m Underlying passenger growth 3.2% Strong contribution from London companies

13.7% revenue growth Improved operating margin

11.2% versus 11.0% in 2002 11.3% versus 11.0% excluding operating lease impact Delivered through revenue growth and operating

efficiencies


Overseas Bus Trading Results

Turnover £183.7m (2002 - £ 194.7m)

Operating profit £30.3m (2002 - £33.4m)

Operating margin 16.5% (2002 - 17.2%)

Impact of SARS and sluggish Hong Kong economy on Citybus

Further sales and profit growth in New Zealand

New Zealand


Operating margin 22.0% (2002 - 21.3%)

Passenger volumes up 8.5%


Rail Trading Results

Rail Subsidiaries

Turnover £413.6m (2002 - £402.8m)


Passenger volumes up 2.1% at SWT (0.9% excluding strike action in prior year)

Financial performance benefited from significant operational improvements at South West Trains

Operating profit stated after franchise bid costs


Joint Ventures and Associates

Virgin Rail Group

Share of revenue £276.1m (2002 - £261.2m)

Share of operating profit £7.2m (2002 - £10.8m)

Trainline

Share of revenue £11.0m (2002 - £11.7m)

Share of operating loss £4.3m (2002 - £4.4m)

Road King

Share of operating profit £10.5m (2002 - £12.9m)


Disposals announced

Disposals completed in year ended 30 April 2003

- Australia

- Coach USA – various units

Disposals announced since 30 April 2003

- Citybus

- Coach USA – South Central & West

- Coach USA – New England

- Coach USA – Transit

Gross consideration

£m

2.1

4.9

7.0

176.5

97.0

25.0

14.1

319.6

Deferredconsideration

£m

-

-

-

-

16.6

4.4

-

21.0

Reduction inconsolidated

net debt£m

2.1

4.9

7.0

176.5

80.4

20.6

14.1

298.6

Foreign currency amounts have been translated using the average exchange rate for the year ended 30 April 2003 for disposals completed in the year and using the 30 April 2003 rate for the other disposals


As at 30 April 2003Disposals announced post year-endPro-forma net debt

£m(560.0)291.6

(268.4)

Balance sheet impact

Minimal net asset impact from disposals

No significant gain or loss

Net Debt

Pro-forma gearing – 84.6%

Significant improvement (i.e. reduction) in Net Debt/EBITDA


Pensions

Increased employer and employee contributions

£31.2m total pension costs (2002 - £18.0m)

£26.9m cash paid (2002 - £19.5m)

FRS17 post-tax deficit of £156.2m for UK Bus/Group

Financial support in new SWT franchise allows for cost of funding the deficit for SWT

Managed as part of overall cost base


Current Trading

Group trading in line with expectations Continuing revenue and profit growth in UK Bus SWT trading under the terms of the one-year franchise

extension Coach USA

restructuring ongoing no significant change in trading environment

Further growth in New Zealand Virgin Rail Group - one year SRA budget 2003/04


Divisional StrategyDivisional Strategy


Graham EcclesGraham Eccles

Director – Rail OperationsDirector – Rail Operations


Rail

The new SWT Franchise

Prospects for Virgin Rail Group

Rail Business Development


Brian SouterBrian Souter

Chief ExecutiveChief Executive


Coach USA Reducing exposure to leisure

related businesses Realising value through sales

process Reducing management

stretch Retaining businesses with

geographically large units and more predictable revenue streams

Redeploying assets to maximise utilisation and eliminate unnecessary capital expenditure

30/70

70/30


Hong Kong - Citybus Disposal

HK$2.2 billion enterprise value – compelling offer for the business Economic uncertainty Changing political landscape

Pressure to reduce fares Costly bus modifications relating to the environment, e.g.

catalytic convertors Pressure for market consolidation

Increasing capital spend to retain franchises New depot Fleet replacement

Competition – Railway extensions


Other Overseas Interests New Zealand

Commercial structure Organic growth Dominant market share Strong management team

core part of the Stagecoach portfolio

Road King Sound underlying business but non core to

Stagecoach Group Would exit if the right opportunity arose


UK Bus

Historic performance and trends Growth prospects

London Provincial companies

Organic growth in southern networks Refresh “tired” northern networks

New Products Taxibus Kick Start


Summary

Coach USA sales programme and restructuring on schedule

Terms of new franchise at SWT agreed with SRA Ongoing discussions between VRG and the SRA to

re-negotiate the West Coast and Cross Country franchises

Operating margin improvement at UK Bus Continued organic growth in New Zealand US and Citybus disposals – substantial debt reduction Significant de-risking of the Group portfolio


Where next for Stagecoach? Maximise shareholder value from existing Portfolio A portfolio now dominated by UK Bus and Rail businesses

Organic growth New products Maximise value from existing rail franchises

Residual US Portfolio Over US$300m of revenue More predictable $22m operating profit in 2002/03 can be sustained and grown despite

lower revenue base; EBITDA base of approximately $40m Organic growth opportunities/small bolt on acquisitions

Growth characteristics in New Zealand Strong cash generation

Further debt reduction Well placed for refinancing in 2004

Evaluate capital structure post US restructuring Progressive Dividend policy


Appendices


UK Bus Revenue Development

2001/02 Turnover

Passenger volumes outside London

London contract changes

Fares/tender prices/business mix

2002/03 Turnover

£m %

567.9

1.8

14.6

14.1

598.4

-

0.3%

2.6%

2.5%

5.4%


144.2

454.2

598.4

10.5%

11.4%

11.2%

15.1

51.9

67.0

126.8

441.1

567.9

10.6%

11.2%

11.0%

13.5

49.2

62.7

UK Bus - London/Other

2003

Operating Operating

Turnover Profit Margin

£m £m %London

Other

2002Operating

Operating Profit

MarginTurnover Restated

Restated £m £m

%


Overseas Bus Revenue Development

2001/02 TurnoverDisposal of Portugal and AustraliaWithdrawal of PRC servicesCurrency movementsVolumes

- Severe weather impact in prior year- Underlying growth

Impact of SARSFares2002/03 Turnover

Citybus£m

New Zealand

£m

148.6-

(0.1)(11.9)

0.9(2.3)(2.9)-

132.3

42.2--3.8

-4.6-0.4

51.0

Other£m

3.9(3.5)--

----0.4

Total£m

194.7(3.5)(0.1)(8.1)

0.92.3

(2.9)0.4

183.7


Overseas BusSegmental results

148.6

42.2

3.9

194.7

17.0%

21.3%

-

17.2%

25.2

9.0

(0.8)

33.4

132.3

51.0

0.4

183.7

14.4%

22.0%

-

16.5%

19.1

11.2

-

30.3

2003

Operating Operating


£m £m %Citybus

New Zealand

Other

Total

2002Operating

Operating Profit


Restated £m £m

%


Revenue

SARS effect - March

- April

Normalised revenue (excluding SARS)

2003HK$m

2002HK$m

1,607.4

7.3

27.6 34.9

1,642.3

1,660.3

Nil

Nil

1,660.3

Citybus – SARS Impact

May 2003 revenues 20% down on prior year


133.2

63.5

485.6

682.3

12.7%

7.1%

3.5%

5.6%

16.9

4.5

17.0

38.4

91.4

64.7

446.9

603.0

5.1%

0.0%

2.1%

2.3%

4.7

-

9.3

14.0

Coach USASegmental results

2003

Operating Operating


£m £m %Taxi

Transit

Coach & Bus

Total

2002Operating

Operating Profit


Restated £m £m

%


Capital Expenditure

UK BusCoach USAOverseas BusRail

Capital Expenditure

£m

DisposalProceeds*

£m

15.821.513.3

2.352.9

(13.9)(5.1)(1.1)

-(20.1)

2003 Net£m

1.916.412.2

2.332.8

2002Net£m

19.648.4

7.41.6

77.0

*excludes proceeds from selling businesses


Interest/Debt Ratios

Finance charges* (net)

EBITDA pre-exceptionals

EBITDA pre-exc/Finance charges

Net Debt/EBITDA

2003£m

2002£m

33.5

251.7

7.5 times

2.2 times

59.8

279.3

4.7 times

2.8 times

* 2003 includes £13.1m net gain on early redemption of bonds and close out of interest rate swaps


Taxation

Pre-goodwill and exceptionalsExceptional itemsGoodwill amortisation

Cash tax

Pre-tax£m

Tax£m

112.9(575.5)

(37.6)(500.2)

(28.8) Nil

3.8(25.0)(7.8)

%

25.5% Nil

10.1%5.0%

2003

33.4% effective rate excluding £575.0m Coach USA write-downs

Annual Results 2003 1 Annual Results 25 th June 2003.

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Transcript of Annual Results 2003 1 Annual Results 25 th June 2003.