Interim Results For the six months ended 31 October 2010 8 December 2010
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Transcript of Interim Results For the six months ended 31 October 2010 8 December 2010
Interim ResultsInterim ResultsFor the six months ended 31 October 2010For the six months ended 31 October 2010
8 December 20108 December 2010
Interim Results 2010
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.
Robert SpeirsRobert Speirs
ChairmanChairman
Highlights
Adjusted earnings per share up 35.6%
Revenue and operating profit growth in all divisions
Strong organic growth with improving market conditions
Excellent operational performance and customer satisfaction
Interim dividend of 2.2p, up 10%
Positive outlook
Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
Summary income statement
UK Bus (regional) operating profit
UK Bus (London) operating loss
North America operating profit incl megabus
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
31 Oct 10£m
31 Oct 09£m
73.3
(0.1)
15.1
8.8
22.9
10.0
(5.3)
124.7
(16.0)
(21.5)
87.2
(1.2)
86.0
58.9
Nil
8.3
7.4
14.9
9.3
(5.3)
93.5
(18.0)
(11.1)
64.4
(7.7)
56.7
Change£m
14.4
(0.1)
6.8
1.4
8.0
0.7
Nil
31.2
2.0
(10.4)
22.8
6.5
29.3
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)
31 Oct 10 31 Oct 09
445.1
438.9
73.3
16.5%
334.7
163.2
433.0
429.2
58.9
13.6%
330.5
167.1
Change
2.8%
2.3%
24.4%
290bp
1.3%
(2.3)%
First half performance Outlook
Modest fare rises, as planned Return to passenger volume growth Reduced fuel costs Other costs closely managed Sector-leading operating margin
Modest revenue growth in second half Higher fuel costs in 2011/12 BSOG reduction in 2012/13 Flexible services and cost base Positive prospects notwithstanding short-term
risks re government funding
* Excludes inter-city coach services operated as a sub-contractor
Government spending & regulationBus
Revenue/BSOG
recognised in 2009/10
£m
Area Developments Reaction
80.0 + London 20.0
Bus Services Operators Grant (“BSOG”)
20% cut in England from April 2012 Rate held for at least three years thereafter No change as yet in Scotland/Wales
Better than some feared Hedged fuel further out to protect
“net” fuel costs Factor into decisions on contract
bids, fares and mileage
230.0 UK Bus concessionary fares
No change to “no better or worse off” requirement
Government commitment to schemes New DfT guidance in England and target to
save costs Likely downward pressure on
reimbursement
Responded to consultation Challenge insufficient
reimbursement rates Factor into decisions on contract
bids, fares and mileage
106.3 Tendered bus services
Squeeze on local authority funding Some authorities already planning cuts
Reduce costs where tendered revenue lost
n/a Competition Commission market study
Provisional findings expected January 2011 Co-operating with study
North America
First half performance Outlook
megabus.com revenue over 80% up Stable revenue from other businesses Reduced fuel costs
Higher fuel costs in 2011/12 Further megabus.com growth
opportunities Ongoing recovery in other businesses
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 (%)
31 Oct 10 31 Oct 09
237.3
45.4
282.7
23.1
13.9
37.0
13.1%
221.4
41.0
262.4
13.5
12.0
25.5
9.7%
Change
7.7%
45.1%
340bp
UK Rail (wholly-owned)
Revenue (£m)
Like-for-like revenue excluding tram (£m)
Operating profit (£m)
Operating margin (%)
Estimated passenger miles - South Western Trains (m)
Estimated passenger miles - East Midlands Trains (m)
31 Oct 10 31 Oct 09
525.0
505.6
22.9
4.4%
1,708.4
647.6
512.9
475.0
14.9
2.9%
1,635.6
584.8
Change
2.4%
6.4%
53.7%
150bp
4.5%
10.7%
First half performance Outlook
Passenger volume growth in line with recovering economy
Revenue support at South Western Trains Excellent punctuality and customer satisfaction
Awaiting final conclusions of rail refranchising review and McNulty study
No material financial effect on Group expected from change to RPI+3% fares regulation
East Midlands Trains revenue support from November 2011
Could see reduced profit in subsequent years
Government spending & regulationRail
Area Developments Reaction
Future of rail franchising
Strategy for implementing franchise reform announced 7 December 2010
Announcements made on plans for specific franchises
Proposals for industry reform expected by November 2011
Responded to consultation Evaluating prospects
McNulty study Interim conclusions published 7 December 2010 Final report expected April 2011
Responded to consultation Working with McNulty team Supportive of efforts to reduce
industry costs Supportive of greater alignment of
track and train Analysing interim conclusions
Fares regulation Cap on increases in basket of regulated fares Generally RPI + 1% moving to RPI + 3% for three
years from 2012
Agree changes to franchise payments with DfT
Not expected to have material financial effect on Group
Virgin Rail Group
Revenue - 49% share (£m)
Operating profit - 49% share (£m)
Operating margin (%)
Dividends received (£m)
Estimated Passenger miles (millions)
31 Oct 10 31 Oct 09
195.6
13.7
7.0%
7.3
1,790.5
170.4
12.8
7.5%
8.6
1,594.6
Change
14.8%
7.0%
(50)bp
(15.1)%
12.3%
First half performance Outlook
Strong revenue growth Improved Network Rail operational
performance but still variable by day Disappointment at Government decision
not to extend franchise by two years
Good profit to franchise-end in March 2012
Focus on bidding for new West Coast franchise – subject to understanding the detailed proposition from Government
Miscellaneous income statement items
31 Oct 10 31 Oct 09 Change
Citylink joint venture (£m)
Group overheads (£m)
Restructuring costs (non-exceptional) (£m)
Intangible asset expenses (£m)
Post-tax exceptional items (£m)
1.1
(5.4)
(1.0)
(5.3)
(4.4)
21.2
0.9
(5.8)
(0.4)
(5.3)
(5.7)
1.0
0.2
0.4
(0.6)
Nil
1.3
20.2
Exceptional items:
£18.5m pre-tax gain – release of liabilities related to past business disposals
£4.6m pre-tax gain – pre-acquisition insurance provision no longer expected to be settled
£0.6m pre-tax loss – London Bus acquisition costs
Finance charges and credit ratios
Net Group finance charges, including net finance income from joint ventures (£m)
EBITDA from continuing operations and joint ventures* (£m)
- last six months
- last twelve months
Period-end net debt (£m)
Net Debt/EBITDA (12 months)*
EBITDA*/Net finance charges (including net finance income from joint ventures)
31 Oct 10 31 Oct 09
(15.9)
171.7
314.9
(313.4)
1.0x
10.8x
(17.9)
147.9
300.9
(343.1)
1.1x
8.3x
Change
(11.2)%
16.1%
4.7%
(8.7)%
(0.1)x
2.5x
* excluding exceptional items
Strong financial position
Ongoing evaluation of capital structure
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
113.2(4.4)4.0
112.8(4.5)
108.3
(26.0)0.5
(1.3)(26.8)
4.5
(22.3)
5.8
Rate%
23.0%11.4%32.5%23.8%
20.6%
31 Oct 2010
31 Oct 10£m
Movement in net debt
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 redemptions/othersCash generationForeign exchange/income statement movementsShare capital movementsIncrease in net debtOpening net debtClosing net debt
147.40.72.3
15.5(9.2)
(35.0)(5.1)(5.8)
110.8(73.7)(56.8)
(0.9)(20.6)
5.7 (1.8)
(16.7)(296.7)(313.4)
5.3--5.3
53.110.919.383.3
(1.4)(1.4)(6.8)(9.6)
51.79.5
12.573.7
47.810.919.378.0
Capital expenditure
UK Bus/CentralNorth AmericaUK Rail
New hire purchase
and finance leases
£m
Impact ofcapex onnet debt
£m
Disposalproceeds
£mNet£m
Cash spent on capex
£m
Pensions
UK Bus/CentralNorth AmericaUK Rail
9.40.5
12.222.1
31 Oct 2010Pensionexpense
£m
31 Oct 2009Pension expense
£m
31 Oct 2010Cash
contributions £m
11.80.68.1
20.5
16.60.5
14.231.3
Post-tax deficit of £80.6m (April 2010: £145.7m)
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. Increase in contributions and expense reflects introduction of salary sacrifice scheme (with a corresponding reduction in salary costs)
Bus – schemes closed to new entrants and contributions have stabilised
31 Oct 2009Cash
contributions £m
16.70.5
11.228.4
Summary
Strong performance from all divisions
Reflected in adjusted earnings per share up 35.6% and dividend up 10.0%
Management action and financial discipline underpin a strong business emerging from recession
Positive outlook for second half of financial year
Brian SouterBrian Souter
Chief ExecutiveChief Executive
Overview
Strong financial position Strong organic growth across Group portfolio Improving economic environment Clearer picture on UK public sector spending Opportunities ahead:
Maximise opportunities from commercial bus model Rail regulatory reform megabus.com expansion in North America
Growth strategy at UK Bus
Strong industry-leading margins and passenger growth UK leader on commercial smartcard development Turnaround plans at London bus
Overhead reductions Business review Efficiency improvements
Rail recovery and reform
Strong revenue growth across all franchises Cost control, operating performance and customer
satisfaction Significant opportunities from radical industry reform and
better franchising
megabus.com: North America growth engine
Growing footprint and volumes in US and Canada
Focus of investment and redeployment of resources
Extension of successful hub concept
Stabilisation of non-megabus.com revenue
Current trading and outlook
Current trading in line with management expectations Improving trends continue Continued focus on organic growth and shareholder
value
Interim ResultsInterim ResultsFor the six months ended 31 October 2010For the six months ended 31 October 2010
8 December 20108 December 2010
Appendices
Divisional income statementsSix months ended 31 October 2010
UK Rail£m
525.0
41.5
(131.7)
37.2
(133.7)
(16.7)
(2.7)
(1.7)
(94.4)
(1.4)
(103.4)
(17.0)
(12.6)
(14.9)
(50.6)
22.9
UK Bus(regional)
£mNorth America
£m
445.1
-
-
7.8
(220.0)
(55.5)
(16.4)
(29.7)
-
(5.3)
-
-
-
(17.2)
(35.5)
73.3
155.1
-
-
2.1
(63.3)
(15.7)
(13.7)
(10.7)
-
(3.8)
-`
-
-
(10.8)
(24.1)
15.1
VRG (100%)£m
399.2
11.8
(59.2)
13.2
(68.3)
(9.7)
(1.7)
(1.3)
(105.8)
-
(79.3)
(5.0)
(23.2)
(0.7)
(42.0)
28.0
Revenue
Rail revenue support
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
Commissions payable
Material & consumables
Other costs
Operating profit
UK Bus Revenue
Like-for-like
Acquisitions:Islwyn Borough Transport (acquired January 2010)
Start-ups:Rail replacement South (started May 2009)
Preston Bus
Total reported
Change%
2.3%
2.8%
31 Oct 2010£m
31 Oct 2009£m
438.9
1.0
0.6
4.6
445.1
429.2
-
0.5
3.3
433.0
Scheduled service/line run/commuterCharterSchool bus & contractSightseeing & tourLike-for-like revenue excl megabusClosed operations and foreign exchange movementsTotal North America excl megabusmegabusTotal North America incl. megabus60% share of Twin AmericaTotal North America incl Twin
31 Oct 10US$m
31 Oct 09US$m
96.748.338.015.0
198.03.0
201.036.3
237.345.4
282.7
94.349.639.614.3
197.83.5
201.320.1
221.441.0
262.4
% Growth
2.5%(2.6)%(4.0)%4.9%0.1%
(14.3)%(0.1)%80.6%7.2%
10.7%7.7%
North America revenue breakdown
Rail subsidy/(premia) profiles
2010
2011
2012
2013
2014
2015
2016
2017
South Western
£m
East Midlands
£m
(161.6)
(224.9)
(309.6)
(394.9)
(448.6)
(526.4)
(609.2)
(582.4)
3.8
(33.5)
(81.8)
(117.3)
(124.8)
(186.3)
-
-
West Coast£m
(101.0)
(147.8)
(206.9)
-
-
-
-
-
Year to 31 March:
The above amounts are subject to future 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.
The amounts shown above reflect estimated changes arising from changes to Network Rail charges for Control Period 4, which began on 1 April 2009. These changes to the rail subsidy/premia amounts are not yet finalised.
Fuel Hedging
2009/10 - average effective price (per litre)
2010/11 - % of forecast consumption hedged
- average hedge 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)
2012/13 - % of forecast consumption hedged
- average hedge price (per litre)
Market price (per litre)
UK Bus(regional)
North America
45.4p
98%
36.0p
78%
40.6p
50%
42.5p
-
-
41.3p
76.6 cents
82%
50.5 cents
77%
57.7 cents
5%
62.4 cents
-
-
61.2 cents
UK Rail32.5p
77%
31.3p
75%
40.4p
28%
41.0p
-
-
40.0p
Market prices are as at 30 November 2010
Prices excludes delivery margins, duty, taxes and Bus Services Operators Grant
UK Bus(London)
n/a
-
-
38%
41.5p
25%
42.4p
13%
43.5p
41.3p
(184.8)
77.0
(24.5)
9.7
(29.9)
(6.2)
(21.4)
(180.1)
(196.8)
76.2
(46.0)
17.9
(32.4)
(6.4)
(25.8)
(213.3)
(199.0)
65.1
(46.1)
14.4
(33.5)
(6.4)
(25.7)
(231.2)
Fuel costsLatest forecasts
UK Bus (regional), excluding BSOG*
UK Bus (regional), BSOG*
UK Bus (London), excluding BSOG*
UK Bus (London), BSOG*
North America
South Western Trains
East Midlands Trains
Total
2010/11Forecast
£m
2011/12Forecast
£m
2012/13Forecast
£m
Fuel costs
(201.2)
80.0
-
-
(38.7)
(5.0)
(21.3)
(186.2)
2009/10Actual
£m
Market prices are as at 30 November 2010, when Brent Crude was US$86 per barrel
Forecast costs for the unhedged element of fuel are based on 30 November 2010 spot prices
Above costs include delivery margins, duty and taxes (duty forecast at current levels) and exclude 3rd party fuel costs
* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services. The forecasts are based on the latest announced BSOG rates and in the absence of any announcements, BSOG rates are assumed to remain constant.
(197.8)
65.1
(46.1)
14.4
(33.5)
(6.4)
(25.6)
(229.9)
2013/14Forecast
£m
192.7
-
45.0
-
69.1
12.4
49.2
368.4
2011/12 ForecastLitres m
Volumes
Exchange rates
US$C$
Closing rate Average rate
1.64841.7756
1.62071.7885
October 2009
Closing rate Average rate
1.59881.6270
1.53011.5851
October 2010
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.
Gross debt is borrowings as reported on the consolidated balance sheet, adjusted to exclude accrued interest, deferred gains on derivatives 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.
Interim ResultsInterim ResultsFor the six months ended 31 October 2010For the six months ended 31 October 2010
8 December 20108 December 2010