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1 Annual Results Year ended 30 April 2011 29 June 2011 Preliminary Results 2011.

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Presentation on theme: "1 Annual Results Year ended 30 April 2011 29 June 2011 Preliminary Results 2011."— Presentation transcript:

1 1 Annual Results Year ended 30 April June 2011 Preliminary Results 2011

2 2 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.

3 3 Martin Griffiths Finance Director

4 4 Highlights Continued strong management of business Operational excellence and high customer satisfaction Winning new customers(e.g., modal shift) Acquisition (e.g. London Bus) and rail opportunities Reduced costs in response to changing circumstances Excellent returns for shareholders Adjusted EPS 23.8p (2010: 18.7p) 9.2% increase in full year dividend per share Positive outlook for 2011/12

5 5 Summary income statement UK Bus (regional) operating profit UK Bus (London) operating loss North America operating profit 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 Year to 30 April 11 £m Year to 30 April 10 £m (5.9) (12.4) (34.5) (35.1) (12.7) Nil (11.6) (30.7) (27.2) (26.3) Change £m 27.0 (5.9) (0.8) 48.2 (3.8) (7.9)

6 6 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) Year to 30 April 11 Year to 30 April % % Change 2.1% 21.4% 270bp 0.9% (2.2)% 2010/11 performanceOutlook Modest fare rises, as planned Organic volume growth Reduced fuel costs Other costs closely managed; some mileage reduction Sector-leading operating margin Concessionary and tendered revenue expected to fall c.£15m in 2011/12 Higher fuel costs in 2011/12 BSOG reduction in 2012/13 Flexibility on fares and service patterns Rising costs of motoring Challenge is to maintain similar level of operating profit in 2011/12 versus 2010/11

7 7 UK Bus (London) Revenue (£m) Operating loss (£m) Operating margin (%) October 2010 to April (5.9) (4.4)% 2010/11 performanceOutlook Back-office integration completed £2.0m annualised savings Driver restructuring agreed £9.9m up-front costs £9.1m annualised savings Property rationalisation Good relationship with TfL Sensible tender bids Some contracts lost at re-tender Annual revenue of current contracts: c.£220m Cost savings improve competitive position Return to profitability targeted for 2011/12

8 8 North America 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 (%) Year to 30 April 11 Year to 30 April % % Change 8.3% 5.6% 8.0% 106.8% 18.8% 65.7% 300bp 2010/11 performanceOutlook revenue up 67% Established Chicago/New York hubs up 51% Return to revenue growth in other business Like-for-like revenue up 3% in second half Reduced fuel costs Higher fuel costs in 2011/12 Further growth opportunities Further rationalisation of under-performing business units Twin America opportunities – River tours from New York, bus tours in Los Angeles

9 9 North America Financial Overview Year ended 30 April 2011 Revenue (US$m) Operating Income (US$m) Operating Margin % EBITDAR* (US$m) EBITDAR* % Megabus Chicago (April 2006) % % Megabus New York (June 2008) % % Megabus Philadelphia (July 2010) 5.7(3.9)(68.4)%(3.3)(57.9)% Megabus Washington DC (December 2010) 1.7(5.3)(311.8)%(4.6)(270.6)% Megabus Pittsburgh (May 2011)-(0.3)n/a(0.3)n/a Total % % *Earnings before interest, taxation, depreciation, amortisation and operating lease rentals

10 10 UK Rail Revenue (£m) Like-for-like revenue, excluding tram (£m) Operating profit (£m) Operating margin (%) Estimated passenger miles – S Western (m) Estimated passenger miles – E Midlands (m) Year to 30 April 11 Year to 30 April 10 1, , % 3, , , % 3, ,214.9 Change 4.2% 6.0% 16.3% 40bp 4.1% 6.9% 2010/11 performanceOutlook Good passenger volume growth £68.1m revenue support at South Western Trains Loss at East Midlands Trains Operational excellence Supportive of many of McNultys recommendations – vertical integration opportunities East Midlands Trains revenue support from November 2011 Lower profit forecast in 2011/12 Higher premium payments to Government Anglia franchise bid

11 11 Virgin Rail Group Revenue – 49% share (£m) Operating profit – 49% share (£m) Operating margin (%) Dividends received (£m) Estimated passenger miles (m) Year to 30 April 11 Year to 30 April % , % ,230.2 Change 10.5% 54.9% 290bp (31.9)% 9.3% 2010/11 performanceOutlook Good passenger volume growth April 2011 revenue down (bank holidays, Royal wedding) but bounced back in May 2011 Favourable contractual settlements Lower profit forecast in 2011/12 Non-recurrence of contractual settlements Extension potential to December 2012 New franchise bid Revenue support

12 12 Rail revenue risk sharing Target revenue – year to 31 March 2011 (£m) Actual revenue – year to 31 March 2011 (£m) Revenue shortfall (£m) Theoretical revenue support (£m) Actual revenue support (£m) South Western East Midlands (115.3) (71.9) 47.9 Nil West Coast (78.7) 39.8 Revenue support bands Up to 2% below target revenue – no revenue support Between 2% and 6% below target revenue – 50% revenue support Over 6% below target revenue – 80% revenue support Notes Revenue for this purpose includes items other than reported revenue such as Network Rail performance regime payments, commissions payable and commissions receivable Target revenue figures include the effects of indexation and other required adjustments Theoretical revenue support shows the amounts that would have been receivable for the year to 31 March 2011 if the train company were contractually entitled to revenue support for that period

13 13 Miscellaneous income statement items Exceptional items include £18.5m of gains from the resolution of liabilities relating to past business disposals Citylink joint venture (£m) Group overheads (£m) Restructuring costs (non-exceptional) (£m) Intangible asset expenses (£m) Post-tax exceptional items (£m) Year to 30 April 11 Year to 30 April (11.3) (2.9) (12.4) (15.2) (11.6) (1.2) (11.6) (11.1) (13.0) Change 50.0% (2.6)% 141.7% 6.9%

14 14 Finance charges and credit ratios Net Group finance charges* (£m) EBITDA from continuing operations and joint ventures* (£m) Year-end net debt (£m) Net Debt/EBITDA* EBITDA*/Net finance charges* Year to 30 April 11 Year to 30 April 10 (34.5) (280.9) 0.8x 9.6x (30.7) (296.7) 1.0x 9.2x Change 12.4% 16.4% (5.3)% (0.2)x 0.4x *excluding exceptional items Successful re-financing of bank facilities, now committed through to 2016 Capital structure under review – will report conclusion by AGM in late August 2011

15 15 Taxation Excluding intangible asset expenses and exceptional items Intangible asset expenses Exceptional items Reclassify joint venture taxation for reporting purposes Reported in income statement Cash tax paid (net) Pre-tax Profit £m Tax £m (15.2) (12.4) (47.5) 3.1 (1.3) (45.7) 12.4 (33.3) (20.4) Rate % 21.8% 20.4% 185.7% 22.4% n/a 17.4% Year to 30 April 2011

16 16 EBITDA from Group companies before exceptional items Loss on disposal of plant and equipment Equity-settled share based payment Dividends from joint ventures Movement in retirement benefit obligations Working capital movements Net interest paid Tax paid Net cash from operating activities Net capital expenditure including new hire purchase and finance leases Acquisitions /disposals of businesses, intangibles and investments Token sales and redemptions Cash generation Foreign exchange/income statement movements Equity dividends Share capital movements Decrease in net debt Opening net debt Closing net debt Year to 30 April 2011 £m (20.4) (22.7) (30.1) (20.4) (149.7) (56.6) (2.7) (15.8) (1.3) 15.8 (296.7) (280.9) Movement in net debt

17 17 (8.1) - (8.1) (100.4) (1.4) (27.3) (35.2) (0.1) (164.4) (98.7) (1.1) (24.1) (25.7) (0.1) (149.7) (92.3) (1.4) (27.3) (35.2) (0.1) (156.3) Capital expenditure UK Bus (regional operations) UK Bus (London) North America UK Rail Central New hire purchase and finance leases £m Impact of capex on net debt £m Disposal proceeds** £m Net 2010/11 Actual £m Cash spent on capex* £m * Excludes capitalised intangible assets and assets acquired through business combinations ** Excludes proceeds from selling businesses

18 18 Pensions UK Bus/Central North America UK Rail Pension expense £m 2010 Pension expense £m 2011 Cash contributions £m Post-tax deficit of £71.9m (2010: £145.5m) Deficit reduction from asset outperformance and CPI switch 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 Bus – schemes closed to new entrants and contributions have stabilised 2010 Cash contributions £m

19 19 Summary Results ahead of original expectations Positive management action underpins profitability Operational excellence Organic growth Acquisition turnaround opportunities Rail franchise opportunities Cost control Financial discipline Positive outlook for 2011/12 Encouraging start to the new financial year

20 20 Sir Brian Souter Chief Executive

21 21 Winning new customers Rising fuel prices driving modal shift High growth on all Mega products New rail franchise opportunities Clarity on bus and rail regulatory framework Commercial model at heart of future delivery Positive environment for public transport

22 22 Budget travel UK: c.60 towns and cities, c.3 million passengers a year North America: five US hubs, c.60 towns and cities, c.10 million passengers since 2006

23 23 North America network

24 24 Market Demographics Customer ProfilePrevious Modes Key Market Student/Young Professional Key Market Car Travel Source: Online tracking survey by Stagecoach Group plc, December 2010 – March 2011 versus June 2009 – September 2009, new Megabus users only North America

25 25 expansion strategy Targeting revenue of over US$110m in North America in 2011/12 Considering accelerating roll-out Short-term reduction in profitability But prospect of good margin once established Roll-out model options: Direct Operation Contract Franchise

26 26 UK regulatory environment UK Bus Changes now largely known Reduced BSOG, concessionary revenue and tendered revenue unwelcome - but lowers dependency on Government Competition Commission findings manageable - will closely monitor developments UK Rail McNulty recommendations welcome Potential for more commercial, customer-focused model Excited by vertical integration opportunities Work closely with Government and Network Rail to implement structural change

27 27 [x] locations UK Bus Winning new customers through: Value fares strategy Leading position in smartcard technology and products Continued investment (e.g. hybrid buses) Innovation: biomethane powered buses

28 28 [x] locations UK Rail/Virgin Rail Group Strengths Stagecoach low-cost model good fit with McNulty recommendations Continued high performance and customer satisfaction, above industry average Passengers benefitting from fleet renewals and station investment Opportunities Discussions with DfT on extension to current WC franchise VRG shortlisted for new WC franchise Stagecoach shortlisted for Greater Anglia franchise Potential for greater commercial freedom from franchise reform Vertical integration

29 29 [x] locations Current trading and outlook Current trading in line with expectations Outlook positive Build on track record of winning new customers Continue to focus on opportunities to deliver value to shareholders

30 30 Annual Results Year ended 30 April June 2011

31 31 Appendices

32 32 Divisional income statements Year ended 30 April 2011 Revenue Rail franchise premia Rail revenue 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 Materials & consumables Other costs Operating profit UK Bus (London) £m North America £m (99.6) (15.5) (5.0) (2.7) - (5.0) - (6.3) (6.6) (5.9) (126.0) (31.5) (24.8) (21.1) - (7.5) - (22.6) (45.4) 19.3 UK Rail £m 1,070.0 (284.8) (271.3) (35.0) (5.4) (5.6) (185.7) (2.9) (196.0) (29.3) (25.5) (34.7) (88.4) 48.4 Virgin Rail Group (100%) £m (159.2) (130.3) (20.8) (3.9) (2.7) (214.9) - (134.1) (23.0) (37.9) (0.8) (89.2) 80.6 UK Bus (Regional) £m (436.8) (107.9) (31.6) (60.8) - (8.6) - (36.2) (73.3) 153.1

33 33 UK Bus (regional) revenue Like-for-like Acquisitions: Islwyn (acquired January 2010) Disposals: Preston Bus (disposed January 2011) Start-ups: Rail replacement South (started May 2009) Total reported Change % 2.1% Year to 30 April 2011 £m Year to 30 April 2010 £m

34 34 Scheduled service/line run/commuter School bus & contract Charter Megabus Sightseeing & tour Like-for-like revenue Disposed & closed operations and Canada fx Total North America Year to 30 April 2011 US$m Year to 30 April 2010 US$m % Growth 4.6% (0.1)% (4.0)% 67.2% 3.1% 8.5% (9.6)% 8.3% North America revenue breakdown

35 35 Rail premium profiles South Western £m East Midlands £m (227.1) (316.6) (410.9) (468.5) (550.2) (636.9) (616.9) (31.7) (80.9) (118.3) (126.2) (189.2) - West Coast £m (145.6) (203.2) - Year to 31 March: The above amounts are subject to 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, and exclude revenue support.

36 36 Fuel Hedging 2010/11- average effective 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) 2013/14- % of forecast consumption hedged - average hedge price (per litre) 2014/15- % of forecast consumption hedged - average hedge price (per litre) Market price (per litre) UK Bus (London) North America 46.7p 50% 44.3p 38% 46.1p 25% 48.3p 13% 53.0p 48.0p 53.3 cents 77% 60.3 cents 28% 77.4 cents cents UK Rail 34.2p 76% 40.6p 61% 46.1p 5% 54.6p p Market prices are as at 24 June 2011 Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant UK Bus (Regional) 36.9p 96% 42.0p 51% 42.5p p

37 37 (185.1) 78.7 (106.4) (25.7) 10.2 (15.5) (31.5) (6.4) (22.4) (182.2) (194.1) 78.7 (115.4) (45.6) 18.2 (27.4) (37.8) (7.2) (27.4) (215.2) (204.6) 68.7 (135.9) (47.0) 14.5 (32.5) (42.7) (7.2) (30.1) (248.4) Fuel costs Latest forecasts UK Bus (regional), excluding BSOG* UK Bus (regional), BSOG* UK Bus (regional), including BSOG* UK Bus (London), excluding BSOG* UK Bus (London), BSOG* UK Bus (London), including BSOG* North America South Western Trains East Midlands Trains Total 2010/11 Actual £m 2011/12 Forecast £m 2012/13 Forecast £m Fuel costs (201.2) 80.0 (121.2) - (38.7) (5.0) (21.3) (186.2) 2009/10 Actual £m Market prices are as at 24 June 2011, when Brent Crude was US$105 per barrel Forecast costs for the unhedged element of fuel are based on 24 June 2011 spot prices Above costs include delivery margins, duty and taxes and exclude 3 rd 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 Services Operators Grant (BSOG) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services. (209.9) 68.7 (141.2) (47.3) 14.5 (32.8) (42.0) (7.2) (30.6) (253.8) 2013/14 Forecast £m /12 Forecast Litres m Volumes

38 38 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, 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.

39 39 Annual Results Year ended 30 April June 2011

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