Interim Results 6 December 2006
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Transcript of Interim Results 6 December 2006
3 Interim Results 2006
Highlights Strong set of results for six months ended 31 October 2006
Revenue from continuing businesses+: +10.0% Earnings per share*: +7.4% Interim dividend: +9.1%
UK Bus: partnership and innovation driving revenue and passenger growth
Rail: further revenue growth and excellent operational performance North America: increased operating profit** and margin 10-year South Western franchise secured Disposal of London bus operations in August 2006 for c.£265m Proposal to return no less than £400m of funds to shareholders
+ Excluding acquisitions of Glenvale and Traction, and disposed operations.* Excluding intangible asset expenses and exceptional items.** References to the operating profit (or operating margin) of a particular business throughout this presentation mean
operating profit (or operating margin) before intangible asset expenses, exceptional items and restructuring costs.
5 Interim Results 2006
Financial highlights Revenue+* from continuing businesses up 10.0%
- £711.1m (2005: £646.5m)
- Up 10.5% at constant exchange rates
Operating profit* pre intangibles and exceptionals £80.7m (2005: £68.5m)
EBITDA* (pre exceptionals) up 15.2% at £113.5m (see slide 8)
Adjusted EPS up 7.4% to 5.8p
Net debt of £135.9m converted to net funds of £140.9m
+ excluding acquisitions of Glenvale and Traction.* excluding disposed operations.
6 Interim Results 2006
Revenue*
- continuing operations, excluding Glenvale and Traction
Total operating profit*
- pre intangibles & exceptionals*
Profit before tax*
- pre intangibles & exceptionals*
Cash generated from operations
- pre £57.0m one-off pension contribution
Adjusted earnings per share
Interim dividend per share
October 2006£m
October2005£m
752.1
711.1
101.5
80.7
97.3
77.4
99.4
156.4
5.8p
1.2p
653.3
646.5
55.3
68.5
40.7
57.9
120.2
120.2
5.4p
1.1p
Financial summary
* excluding disposed operations
7 Interim Results 2006
Revenue bridge
Businesses held throughout both
periods
UK Bus
Coach USA
Rail
Business units closed
Coach USA
Businesses acquired during
year ended 30 April 2006
UK Bus
Businesses disposed
UK Bus – London
New Zealand
28.5
13.3
31.2
73.0
(5.2)
67.8
34.2
102.0
-
-
102.0
10.6%
10.8%
12.7%
298.6
136.5
276.8
711.9
11.4%
2.4
714.3
10.5%
41.0
755.3
-
-
755.3
-
(3.1)
-
(3.1)
(0.1)
(3.2)
-
(3.2)
-
-
(3.2)
298.6
133.4
276.8
708.8
10.9%
2.3
711.1
10.0%
41.0
752.1
-
-
752.1
October 2006 before re-translation(Sub total)
£m
Changes in foreign
currency exchange
rates£m
October 2006(Total)
£m
270.1
123.2
245.6
638.9
7.6
646.5
6.8
653.3
111.0
28.7
793.0
October 2005previously Reported
£m
Revenuereclassified
as“discontinued”
£m
Constant currency revenue growth in continuing businesses
£m
-
-
-
-
-
-
-
-
(111.0)
(28.7)
(139.7)
8 Interim Results 2006
Revenue and margin growth
* Constant currency revenue growth excluding impact of businesses acquired, sold and closed** Operating margin before intangible asset expenses, exceptional items and restructuring costs, excluding impact of businesses
acquired and discontinued operations
Operating margin growth in all 3 divisions
11.3%
12.3%
11.3%11.2%
12.0%
9.9%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
UK Bus North America UK Rail
Divisions
Mar
gin
as
% o
f re
ven
ue*
*
6 mths ended 31 Oct 2006
6 mths ended 31 Oct 2005
Double-digit revenue growth in all 3 divisions
12.7%
10.8%
10.6%
5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0%
1
Div
isio
ns
% revenue growth year on year*
UK Bus
North America
UK Rail
9 Interim Results 2006
EBITDA
UK Bus - excluding Glenvale/Traction- Glenvale/Traction
North AmericaRailGroup overheads & restructuring costsEBITDA from Group companies before exceptionals*Virgin Rail Group (share of EBIT)Other joint ventures and associates (share of EBIT)Total EBITDA before exceptionals*
October2006£m
October2005£m
52.03.2
24.634.6(5.9)
108.53.91.1
113.5
48.0(0.5)23.527.0(5.6)92.4
6.1 Nil
98.5
* excluding disposed operations
+17.4%
+15.2%
10 Interim Results 2006
EBITDA from continuing Group companies before exceptionals (slide 8)EBITDA from discontinued operationsMovement in pension deficitWorking capital and other operating cash movementsNet interest paidTax paid
Net capital expenditure including new hire purchase (slide 35)Acquisitions of businesses, intangibles and investments Disposals of businesses and investmentsToken sales and redemptionsDividends and loan repayments from joint venturesForeign exchangeNet movement in bond issue costsReduction in net debt before cash flows with shareholdersEquity dividendsOther share capital movementsReduction in net debtOpening net debtClosing net funds
October 2006£m
108.57.7
(60.6)40.1(4.0)
(11.4)80.3
(53.2)(0.4)
260.6(2.8)11.0
8.3(0.1)
303.7(28.4)
1.5276.8
(135.9)140.9
Movement in net debt
11 Interim Results 2006
UK Bus trading results
Revenue growth 22.6% to £339.6m (2005: £276.9m)
revenue growth 10.6%, excluding acquisitions of Glenvale and Traction
new concessionary fare schemes
Like-for-like passenger volume growth 6.1% (see slide 11)
includes impact of new concessionary fare schemes
Operating margin 11.3% (2005: 11.2%), excluding acquisitions of Glenvale and Traction
Glenvale and Traction operating profit £0.5m (2005: operating loss £0.8m)
Disposal of London bus completed August 2006
12 Interim Results 2006
UK Bus revenue development
2005 revenue as previously reported
Traction
Disposals in year
Passenger volumes (incl impact of new concessionary fare schemes)
Tender wins/ contract amendments
Fare increases
megabus.com (incl impact of services transferred out to Citylink JV)
Timing impact of prior year acquisition
2006 revenue
n/a
n/a
6.1%
0.6%
4.5%
(0.6)%
n/a
10.6%
Continuing
£m %
6.8
30.3
Nil
Nil
Nil
Nil
Nil
3.9
41.0
445.6%
n/a
n/a
n/a
n/a
n/a
57.3%
502.9%
111.0
Nil
(111.0)
Nil
Nil
Nil
Nil
Nil
Nil
n/a
(100.0)%
n/a
n/a
n/a
n/a
n/a
(100.0)%
270.1
Nil
Nil
16.4
1.7
12.1
(1.7)
Nil
298.6
Glenvale/Traction
£m %
Discontinued
£m %
387.9
30.3
(111.0)
16.4
1.7
12.1
(1.7)
3.9
339.6
7.8%
(28.6)%
4.2%
0.4%
3.1%
(0.4)%
1.0%
(12.5)%
Total
£m %
13 Interim Results 2006
UK Bus revenue growth
Stagecoach UK Bus: 10.6% like-for-like revenue growth Growing share of UK Bus market Consistent like-for-like revenue growth
UK Bus like-for-like revenue growth (excl. London)
3.0%
5.2%6.1%
7.3%
10.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2002/3 2003/4 2004/5 2005/6 2006/7 (sixmonths to
date)
Lik
e-fo
r-li
ke r
even
ue
gro
wth
14 Interim Results 2006
North America trading results
Revenue £135.7m (2005: £130.8m)
10.8% increase in constant currency revenue excluding closed/disposed business units
Operating margin 12.3% (2005: 12.0%)
Deploying assets to maximise returns
Excluding Megabus, operating margin up from 12.0% to 12.8%
Operating profit £16.7m (2005: £15.7m)
US$31.2m (2005: US$28.3m)
excellent revenue growth
strict cost control
15 Interim Results 2006
MegabusScheduled service/Line run/CommuterCharterSightseeing & TourSchool Bus & ContractBefore closed business unitsClosed business unitsTotal
October 2006
US$m
October2005
US$m
2.293.953.355.943.9
249.24.3
253.5
-87.347.151.935.3
221.613.8
235.4
% Growth
n/a7.6%
13.2%7.7%
24.4%12.5%
7.7%
North America revenue breakdown
by product
16 Interim Results 2006
Rail trading results
Rail subsidiaries
Revenue £276.8m (2005: £245.6m), up 12.7%
Operating profit £31.4m (2005: £24.4m)
Passenger volumes up 8.5% at SWT
Revenue and profit share to Department for Transport £43.0m (2005: £27.8m)
Bid costs £8.0m (2005: £6.9m)
17 Interim Results 2006
Virgin Rail Group (“VRG”)
Share of profit after finance income and tax £3.7m (2005: £4.5m)
Significant progress on agreeing long-term commercial arrangements for West Coast
CrossCountry
Current contract ends on 10 November 2007
VRG invited to tender for New CrossCountry franchise
18 Interim Results 2006
Taxation
Pre intangibles and exceptionals*Exceptional itemsIntangible asset expensesResults for the period*
Cash tax paid (net)
Pre-taxProfit£m
Tax£m
79.627.4(7.5)99.5
(20.7)(6.4)1.5
(25.6)
11.4
EffectiveRate
%26.0%23.4%20.0%25.7%
October 2006
* Adjusted for share of VRG’s tax, classified within operating profit under IFRSExcludes discontinued operations and any exceptional items relating to these discontinued operations
19 Interim Results 2006
Pensions
Significant reduction in retirement benefit obligations
£144.3m (30 April 2006: £222.2m)
£22.8m exceptional past service credit reduces IAS19 pension liability
£57.0m of additional contributions reduces IAS19 pension liability
Rail pension schemes: under IFRS, only the part of the deficit that we expect to fund is recognised
Changes to schemes
20 Interim Results 2006
Balance sheet & financing Net funds+ £140.9m ( October 2005: net debt £208.9m)
EBITDA*/finance charges cover 32.9 times (2005: 8.7 times)
Continuing management objective to optimise capital structure
Proposed return of value of no less than £400m
Shareholders to participate pro-rata to ordinary shareholdings
Ordinary share consolidation
£50.0m pension contribution agreed in principle+ UK GAAP definition* from continuing group companies, before exceptional items
22 Interim Results 2006
Group strategic objectives
Key 5 year strategic objectives achieved
– Restructuring of North American operations
– Repositioning of UK Bus
– Retention of South Western rail franchise
– Organic growth in core operations
23 Interim Results 2006
Group strategyQuality operations driving strong results
Excellent operational
performance
Strong financial results
Bus operator of the Year – second year running South West Trains punctuality consistently
above 90% Improved punctuality at Virgin Rail Group UK Bus reliability 99.5%*
Adjusted EPS up 7.4% Revenue from continuing operations* up 10.0% Absorbing increased fuel costs Interim dividend up 9.1%
↓
* excluding acquired Glenvale and Traction operations
24 Interim Results 2006
UK BusDrivers of continued strong performance
Entrepreneurial expertise and investment focused on regional bus operations
Strong partnerships with public sector (e.g. Kickstart successes)
Marketing strategies generating growth
Acquisition integration on target at Glenvale and Traction Group
Concessionary travel schemes
Strong like-for-like volume growth
25 Interim Results 2006
Group strategyUK Bus passenger volume growth
Passenger volume growth by operating company – excluding London
October 2006 v October 2005
Overall passenger growth 6.1%
> 10%
6 - 10%
0 - 5%
26 Interim Results 2006
Group strategy – Rail
Deliver on commitments and opportunities in South Western and West Coast Mainline franchises
Opportunities to expand rail portfolio
– East Midlands
– New CrossCountry franchise (at Virgin Rail Group)
Further development of megatrain.com
27 Interim Results 2006
Group strategy – North America
Revenue and margin growth– Core scheduled services– Contract wins– Capitalise on continued strong leisure bounce-
back New product development and improved marketing
– megabus.com– Launch of New York Duck Tours– Web-based sales
28 Interim Results 2006
Current trading and outlook
Current trading in line with our expectations Continued focus on organic growth and bolt-on acquisitions
in UK and North American bus markets Evaluate opportunities for new rail franchises Good potential for further growth
31 Interim Results 2006
North America revenue development
2005 revenue
Year on year impact of closed/disposed business units
US$/C$ currency impact
Underlying growth
2006 revenue
Closed/disposed units
US$mTotalUS$m
13.8
(9.5)
Nil
Nil
4.3
Ongoing business units
US$m
221.6
Nil
3.7
23.9
249.2
235.4
(9.5)
3.7
23.9
253.5
32 Interim Results 2006
Rail revenue development
2005 revenue
SWT Passenger volumes
SWT Fares/yield
SWT Other
Island Line/Supertram
2006 revenue
£m %
245.6
20.4
8.2
1.8
0.8
276.8
8.3%
3.3%
0.7%
0.3%
12.7%
33 Interim Results 2006
Finance charges ratios
Finance charges (net)*
EBITDA from continuing Group companies, pre-exceptionals* (slide 8)
EBITDA from continuing Group companies, pre-exceptionals*/finance charges*
October2006£m
October2005£m
3.3
108.5
32.9 times
10.6
92.4
8.7 times
* UK GAAP definition
34 Interim Results 2006
Gross debt & related derivativesInterest bearing cash balances
Non-utilisation/commitment feesAmortisation of bond issue costs/bank chargesInsurance letters of creditDiscount on insurance provisionsOther
Finance charges
£m
Annualeffective rate
%
8.0(6.5)1.50.50.10.41.4
(0.6)3.3
4.7%4.9%
Finance charges
Average balance*
£m
337.0265.0
*Average of month end debt/cash balances
35 Interim Results 2006
Fuel hedging
% of Group fuel hedged - fixed
- cap/floor
Average hedge price (crude price US$/barrel) - fixed
- cap/floor
6 months to 30 April
2007
19%
77%
US$60
US$83/US$54
• The Group’s UK Bus and North American bus operations consume the equivalent of 1.6m barrels of fuel a year
• Each US$10 per barrel movement in crude oil price impacts variable fuel costs by approximately US$16m if no hedging in place
• Amounts shown for future periods exclude London bus operations
Forecast2007/08
Nil
52%
n/a
US$83/US$54
Forecast2008/09
Nil
45%
n/a
US$83/US$54
6 months to 31 October
2006
20%
76%
US$50
US$83/US$54
36 Interim Results 2006
32.2--
32.2
43.98.51.9
54.3
(0.7)(0.4)
-(1.1)
43.28.11.9
53.2
11.78.51.9
22.1
Capital expenditure
UK BusNorth AmericaRail
Capex on new hire purchase
£m
Impact ofcapex onnet debt
£m
Disposalproceeds**
£mNet£m
Cash spent on capex*
£m
* Excludes capitalised intangible assets of £0.1m and additions made as part of business combinations
** Excludes proceeds from selling businesses
37 Interim Results 2006
Exchange rates
US$NZ$C$
Closing rate Average rate
1.77032.52952.0881
1.79892.57062.1836
October 2005
Closing rate Average rate
1.9073 n/a
2.1370
1.8687 n/a
2.0914
October 2006