Interim Results - Stagecoach Group€¦ · Summary income statement Six months to 31 Oct 12 £m Six...

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Interim Results For the six months ended 31 October 2012

5 December 2012

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Cautionary statement

This document is solely for use in connection with a briefing on the group headed by 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 Griffiths

Finance Director

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Highlights Earnings per share up 66.3% to 16.8 pence (2011: 10.1 pence)

Interim dividend up 8.3% to 2.6 pence (2011: 2.4 pence)

Good profit growth across UK divisions

Good performance at recently acquired Coach America businesses

Expansion of megabus.com into Texas and California

Virgin Rail Group nearing agreement for continued operation of West Coast train services

Contributed to Laidlaw Review of West Coast Trains tender process and Brown Review of UK rail franchising

US$150m 10-year private placement

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Summary income statement Six months to

31 Oct 12 £m

Six months to 31 Oct 11

£m Change

£m

UK Bus (regional operations) operating profit 87.2 80.0 7.2

UK Bus (London) operating profit 9.6 5.5 4.1

North America operating profit incl megabus 13.7 15.3 (1.6)

North America joint ventures’ profit after tax 9.9 8.5 1.4

UK Rail operating profit/(loss) 22.7 (6.9) 29.6

Virgin Rail Group profit after tax 6.2 9.1 (2.9)

Restructuring costs, Group overheads and other items (7.3) (5.3) (2.0)

Operating profit 142.0 106.2 35.8

Finance charges (net) (18.3) (17.5) (0.8)

Tax (27.4) (18.1) (9.3)

Profit excluding intangibles and exceptionals 96.3 70.6 25.7

Intangibles and exceptionals, net of tax (6.2) 2.6 (8.8)

Reported profit from continuing operations 90.1 73.2 16.9

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UK Bus (regional operations)

* Excludes inter-city coach services operated as a sub-contractor


Six months to 31 Oct 11 Change

Revenue (£m) 488.3 450.9 8.3%

Like-for-like revenue (£m) 468.9 450.6 4.1%

Operating profit (£m) 87.2 80.0 9.0%

Operating margin (%) 17.9% 17.7% 20bp

Estimated like-for-like passenger journeys* (m) 336.3 337.1 (0.2)%

Like-for-like vehicle miles operated (m) 162.5 162.0 0.3%

First half performance Outlook

5.9% like-for-like growth in commercial revenue

Successful delivery of contracts to provide transport for the media and athletes at the London 2012 Olympics – c. £4m operating profit

Cut in rate of fuel duty rebate (i.e. “BSOG”) managed through measured fare changes and adjustments to networks

Acquisition of Wigan Bus business in December 2012 and plans announced to acquire further two bus businesses

Increase in fuel costs in second half of year

Continue to focus on commercial services

Well placed to grow full-year operating profit in 2012/13

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UK Bus (regional operations) Margin analysis

Operating margin – 2011 17.7%

Effects of Olympics contracts 0.1%

Change in:

- Staff costs 1.4%

- Bus Service Operators’ Grant (1.5)%

- Fuel costs 0.4%

- Other (0.2)%


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UK Bus (London) Six months to

31 Oct 12 Six months to

31 Oct 11 Change

Revenue (£m) 116.4 117.1 (0.6)%

Operating profit (£m) 9.6 5.5 74.5%

Operating margin (%) 8.2% 4.7% 350bp

Number of contracts operated 81 85 (4.7)%

Annualised contract revenue (£m) 225 217 3.7%


Turnaround progressing to plan Some less profitable contracts not retained Overhead and labour unit cost savings Additional Olympics and Paralympics services

Full-year revenue for 2012/13 forecast to be similar to 2011/12

Increase in fuel costs in second half of year

Continued focus on cost control and bidding for contracts at realistic profit margins

Well placed to grow full-year operating profit in 2012/13

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North America Six months to


31 Oct 11 Change

Revenue – wholly owned (US$m) 316.4 264.2 19.8%

Revenue – joint venture (US$m) 57.9 51.7 12.0%

Revenue – total (US$m) 374.3 315.9 18.5%

Operating profit – wholly owned (US$m) 21.7 24.6 (11.8)%

Operating profit – joint venture (US$m) 16.2 14.2 14.1%

Operating profit – total (US$m) 37.9 38.8 (2.3)%

Operating margin (%) 10.1% 12.3% (220)bp


2011 figures include Wisconsin school bus operations sold November 2011

Hurricane Sandy affected services in October and November 2012

Acquisition of nine businesses and related assets from Coach America for $134.2m in July 2012

Launched Texas megabus.com network in June 2012

Twin America competition review nearing completion

Launch of California megabus.com network planned for December 2012

Good contribution from acquired businesses

Cautious on short-term profit potential but remain positive for medium-term

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North America (excluding JVs) Margin analysis


Change in:

- Staff costs 0.9%

- Fuel costs (1.5)%

- Insurance and claims costs 0.7%

- Sub-contracted services (1.0)%

- Other (1.5)%


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UK Rail Six months to


31 Oct 11 Change

Revenue (£m) 599.9 562.6 6.6%

Like-for-like revenue (£m) 599.9 556.4 7.8%

Operating profit (£m) 22.7 (6.9) (429.0)%

Operating margin (%) 3.8% (1.2)% 500bp

Estimated passenger miles – S West (m) 1,813.0 1,763.9 2.8%

Estimated passenger miles – E Midlands (m) 692.2 662.7 4.5%


Good growth in passenger revenue

Return to profitability at East Midlands Trains since becoming eligible for revenue support in November 2011

Alliance between South West Trains and Network Rail successfully established

Full year of revenue support at East Midlands Trains should contribute to profit growth in year ending 30 April 2013

Participate in future franchise competitions if there is the right risk-reward profile

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UK Rail (wholly owned) Margin analysis

Operating margin – 2011 (1.2)%

Change in:

- Revenue support 12.1%

- Rail franchise premia (8.8)%

- Staff costs 1.1%

- Bid costs (0.8)%

- Other 1.4%


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Virgin Rail Group Six months to


31 Oct 11 Change

Revenue – 49% share (£m) 220.2 216.0 1.9%

Operating profit – 49% share (£m) 8.1 12.2 (33.6)%

Operating margin (%) 3.7% 5.6% (190)bp

Dividends received (£m) 0.7 4.4 (84.1)%

Estimated passenger miles (m) 1,902.0 1,885.3 0.9%


Reduced profit in April to December 2012 franchise extension period

Introduction of more than 100 new Pendolino train carriages

New InterCity West Coast rail franchise competition cancelled in October 2012

Nearing agreement on new contract for West Coast train operations

West Coast bid costs to be refunded

Participate in new West Coast franchise competition

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Miscellaneous income statement items

Increase in overheads primarily related to effect of share price performance on share based payment expenses

Exceptional items:

− £1.4m of Coach America acquisition expenses

− £0.6m relating to previous acquisitions and disposals of businesses and sale of properties



Citylink joint venture (£m) 0.9 1.2 (25.0)%

Group overheads (£m) (7.8) (5.0) 56.0%

Restructuring costs (non-exceptional) (£m) (0.4) (1.5) (73.3)%

(7.3) (5.3) 37.7%

Intangible asset expenses (£m) (5.6) (6.8) (17.6)%

Post-tax exceptional items (£m) (2.0) 8.1 (124.7)%

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Finance charges and credit ratios

* excluding exceptional items

c.£352m of unrestricted cash and headroom under committed bank facilities available for loans

Re-financing of acquisition from Coach America through US$150m 10-year US private placement

Objective to maintain an investment grade credit rating



Net finance charges (including net finance income from joint ventures) (£m)

(18.2)

(17.4)

4.6%

EBITDA from continuing operations and joint ventures* (£m) - last six months - last twelve months

196.8 384.1

156.6 327.6

25.7% 17.2%

Period-end net debt (£m) (552.0) (552.4) (0.1)%

Net Debt/EBITDA (12 months)* 1.4x 1.7x (0.3)x

EBITDA*/Net finance charges (including net finance income from joint ventures)

10.8x

9.0x

1.8x

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Taxation


Pre-tax profit £m

Tax £m

Rate %

Excluding intangible asset expenses and exceptional items 126.3 (30.0) 23.8%

Intangible asset expenses (5.6) 1.4 25.0%

120.7 (28.6) 23.7%

Exceptional items (2.0) - -

118.7 (28.6) 24.1%

Reclassify joint venture taxation for reporting purposes (2.6) 2.6

Reported in income statement 116.1 (26.0) 22.4%

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Movement in net debt Six months to 31 Oct 12

£m

EBITDA from Group companies before exceptional items 177.3

Loss on disposal of plant and equipment 0.6

Equity-settled share based payment expense 1.1

Dividends from joint ventures 8.7

Movement in retirement benefit obligations (15.5)

Working capital movements 26.0

Net interest paid (5.7)

Tax paid (1.2)

Net cash from operating activities 191.3

Net capital expenditure including new hire purchase and finance leases (97.4)

Acquisitions /disposals of businesses, intangibles and investments (88.1)

Token sales and redemptions (0.3)

Cash generation 5.5

Foreign exchange/income statement movements (1.4)

Equity dividends (31.0)

Net own shares purchased (1.3)

Increase in net debt (28.2)

Opening net debt (523.8)

Closing net debt (552.0)

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Summary

Strong first half profit growth

Good prospects for second half

Robust bus businesses and existing rail franchises underpinned by Government revenue support

Range of opportunities for further growth

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UK Rail Business update

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Rail

Strong operating performance and high customer satisfaction

− Successfully established South West Trains – Network Rail Alliance

− East Midlands Trains best long distance operator for four years

Further revenue growth in commuter and leisure markets

Passenger improvements

− Extra peak capacity on South West Trains from May 2013

− Fleet refurbishments, station investment, better customer information

− More than 100 new carriages introduced on West Coast

Significant net contributor to taxpayer

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UK rail franchising

Actively contributing to the Brown review – directly and as part of the Rail Delivery Group

Franchising on right terms remains appropriate for UK train operations

Key Stagecoach recommendations:

− Franchise programme should be restarted as soon as possible

• Meet need for short contracts by extending with incumbents

− Improve governance in relation to franchise awards/management

− Strengthen the expertise of the franchising authority

− Maintain the notion that riskier bids need more contingent capital

− Consistent and transparent method to determine contingent capital

− Majority of macroeconomic risk should rest with Government

− Allow more flexibility in bids and during franchise terms

Ready to progress bids for Great Western and Thameslink when competitions re-started; VRG to re-bid new InterCity West Coast

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Sir Brian Souter Chief Executive

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Route to growth

Customer focus – partnership, product price, performance

Clear market strategy

− Organic growth + acquisitions in commercial bus/coach

Effective management

− Strong senior and devolved local teams

− Succession plans in place

Delivering for passengers and shareholders

− Strong operational performance and customer satisfaction

− Progressive dividend growth + sector-leading shareholder return

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Bus (UK)

Commercial bus operations driving growth opportunities

− Fare paying passenger volume growth and modal shift

− StagecoachSmart ticketing now covers around 70% of its regional bus operations; launch of NFC trial

− Targeted acquisitions – Greater Manchester, Merseyside, Cheshire

− Inter-city coach development: megabus.com + inter-urban express + sleeper

− Fleet investment and customer service initiatives (e.g., social media)

Contracted London Bus plan on track

− More sustainable contract wins + improved profitability

Successful delivery of London 2012 athlete and media transport contract

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Bus (North America)

Successful integration of recent Coach America acquisitions

Further expansion and investment at megabus.com

− Now covers around 120 key destinations in US + Canada

− 8 million passenger journeys a year and growing rapidly

− Nearly 100 new double-decker coaches introduced in 2012

− California hub live in December 2012

− Investment mileage gives strong platform for future growth

− Improved customer service through megabus.com tracking app

Growth in commuter services in North East US

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Current trading and outlook

Current trading in line with expectations

Strong financial position

Positive outlook for all divisions

− Organic growth opportunities in all divisions

− Acquisition potential for tuck-in deals

− Well positioned for recommencement of rail franchising

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5 December 2012

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Appendices

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Pensions

£163.1m pre-tax net pensions liabilities

Up from £124.1m at 30 April 2012, mostly due to (i) reduced discount rate as bond yields have fallen and (ii) investment returns below rate expected at start of year.

Six months to 31 Oct 12 Pension expense

£m

Six months to 31 Oct 11 Pension expense

£m


Cash contributions

£m


Cash contributions

£m

UK Bus/Central 0.3 5.3 13.7 17.6

North America 0.9 0.8 0.8 0.8

UK Rail 11.4 12.4 13.6 14.8

12.6 18.5 28.1 33.2

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Divisional income statements Six months ended 31 October 2012

UK Bus (Regional)

£m

UK Bus (London)

£m North America

£m UK Rail

£m

Revenue 488.3 116.4 199.8 599.9

Rail franchise premia - - - (267.3)

Rail revenue support - - - 124.8

Other operating income 12.5 1.6 2.5 41.8

Staff costs (233.9) (72.6) (78.6) (139.6)

Fuel costs (i.e. diesel) (65.9) (14.6) (27.4) (24.2)

Insurance and claims costs (16.2) (3.8) (12.1) (2.5)

Depreciation (29.9) (3.2) (14.7) (4.4)

Rolling stock costs – lease & maintenance - - - (101.1)

Other operating leases (5.9) (6.6) (5.2) (3.6)

Network Rail - - - (110.2)

Electricity for trains - - - (12.8)

Commissions payable - - - (15.0)

Materials & consumables (17.3) (4.6) (13.9) (13.0)

Other costs (44.5) (3.0) (36.7) (50.1)

Operating profit 87.2 9.6 13.7 22.7

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UK Bus (regional operations) Like-for-like revenue split


£m


£m Change

Commercial on and off bus revenue 283.8 268.0 5.9%

Concessionary revenue 117.1 113.0 3.6%

Tendered & school revenue 47.6 49.3 (3.4)%

Contract revenue 17.2 17.2 -

Hires & excursions 3.2 3.1 3.2%

468.9 450.6 4.1%

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North America revenue breakdown


US$m


US$m Change

Scheduled service/commuter 108.5 106.1 2.3%

Charter 46.7 46.6 0.2%

Sightseeing 16.6 15.7 5.7%

School bus & contract 23.8 24.1 (1.2)%

Like-for-like revenue excluding megabus 195.6 192.5 1.6%

Megabus 73.9 54.0 36.9%

Like-for-like revenue including megabus 269.5 246.5 9.3%

60% share of Twin America 57.9 51.7 12.0%

Like-for-like revenue including share of Twin 327.4 298.2 9.8%

Acquisitions, closed operations and foreign exchange movements 46.9 17.7 165.0 %

Total North America including Twin 374.3 315.9 18.5%

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Rail premium profiles

The principal reason for the change in the amounts shown above for South West Trains from those previously shown is that the above amounts include changes in relation to agreed High Level Output Specification plans.

The above amounts are subject to adjustment for: (1) various inflation measures (2) risks borne by the Department for Transport (3) called options (4) changes in Regulated Network Rail charges and (5) changes in relation to agreed High Level Output Specification plans. The amounts shown above are based on estimated inflation and options called to date, and exclude revenue support.

Year to 31 March:

South West Trains

£m

East Midlands

Trains £m

2013 (391.5) (115.3)

2014 (456.1) (122.8)

2015 (505.2) (182.6)

2016 (589.6) -

2017 (574.6) -

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Fuel Hedging

Market prices are as at 12 November 2012

Prices exclude delivery margins, duty, taxes and Bus Service Operators’ Grant

UK Bus (Regional) North America UK Rail UK Bus (London)

2012/13 - % of forecast consumption hedged 98% 82% 77% 50%

- average hedge price (per litre) 47.0p 78.4 cents 47.1p 46.9p





2015/16 - % of forecast consumption hedged - - - 14%

- average hedge price (per litre) - - - 50.4p

Market price (per litre) 52.1p 78.1 cents 50.5p/52.4p 52.1p

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Fuel costs Latest forecasts

Market prices are as at 12 November 2012, when Brent Crude was US$109 per barrel

Forecast costs for the unhedged element of fuel are based on 12 November 2012 spot prices

Above costs include delivery margins, duty and taxes and exclude 3rd 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 Service Operators’ Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services.

Fuel costs Volumes

2011/12 Actual

£m

2012/13 Forecast

£m

2013/14 Forecast

£m

2014/15 Forecast

£m

2015/16 Forecast

£m

2012/13 Forecast Litres m

UK Bus (regional), excluding BSOG* (194.8) (201.9) (211.8) (214.7) (215.0) 186.1

UK Bus (regional), BSOG* 83.4 67.0 67.0 67.0 67.0

UK Bus (regional), including BSOG* (111.4) (134.9) (144.8) (147.7) (148.0)

UK Bus (London), excluding BSOG* (43.5) (42.4) (43.7) (44.2) (44.1) 38.4

UK Bus (London), BSOG* 17.1 13.2 13.2 13.2 13.2

UK Bus (London), including BSOG* (26.4) (29.2) (30.5) (31.0) (30.9)

North America (excluding Coach America acquisition)

(37.1) (45.0) (43.3) (43.4) (43.4) 21.4

Coach America acquisition - (13.3) (16.3) (16.4) (16.4) 73.0

South Western Trains (7.7) (7.7) (7.8) (7.8) (7.8) 11.8

East Midlands Trains (28.3) (31.5) (32.9) (32.7) (33.4) 51.9

Total (210.9) (261.6) (275.6) (279.0) (279.9) 382.6

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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.

Net debt (or net funds) is the net of cash and gross debt.

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5 December 2012

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Interim Results - Stagecoach Group€¦ · Summary income statement Six months to 31 Oct 12 £m Six...

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