Interim Results Interim Results 5 th December 2007
Interim Results 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.
Interim Results Robert Speirs Chairman
Interim Results Highlights Good underlying revenue growth in all core divisions Interim dividend of 1.35p, up 12.5% Adjusted earnings per ordinary share up 62.1% Operating profit growth Earnings-enhancing return of value in May/June 2007 Strong start to new South Western rail franchise and Manchester Metrolink tram contract East Midlands rail franchise from November 2007
Interim Results Martin Griffiths Finance Director
Interim Results Financial summary *Excluding exceptional items and intangible asset expenses Revenue - continuing operations Operating profit* - continuing operations Adjusted earnings per ordinary share* Basic earnings per ordinary share Net (debt)/funds Dividend per ordinary share 31 Oct 0731 Oct 06 £820.8m £100.0m 9.4p 9.0p £(494.7)m 1.35p £752.1m £80.7m 5.8p 18.9p £140.9m 1.20p Change 9.1% 23.9% 62.1% (52.4%) 12.5%
Interim Results Summary income statement UK Bus operating profit North America operating profit excl Megabus Megabus North America operating loss UK Rail operating profit Share of joint ventures’ profit after tax Restructuring and group overheads Finance charges (net) Tax Profit excluding intangibles and exceptionals Intangibles and exceptionals, net of tax Reported profit from continuing operations 31 Oct 07 £m 31 Oct 06 £m (1.1) (7.9) (15.4) (15.7) 68.9 (3.1) (0.5) (5.9) (3.3) (18.5) Change £m (0.6) (6.1) 8.8 (2.0) (12.1) (18.1) (8.1)
Interim Results UK Bus Revenue and journeys benefiting from marketing campaigns, investment in fleet and excellent value fares Continued underlying revenue and volume growth Stable year-on-year fuel costs Reduced pension costs Revenue (£m) Like-for-like revenue (£m) Operating profit (£m) Operating margin Estimated passenger journeys (m) Total vehicle miles operated (m) 31 Oct 0731 Oct % % Change 8.1% 7.8% 54.0% 4.3% 3.9% (0.1)%
Interim Results UK Bus - Revenue Maintaining revenue growth momentum Focus on non-London operations delivering growth
Interim Results UK Bus – Operating Profit Strong UK Bus profit progression c. £270m for London bus sale in 2006/07
Interim Results North America (excluding Megabus) Further margin improvement from optimising asset deployment 10% annualised operating margin targeted by 30 April 2009 (12 months to 31 Oct 07: 8.7%) Reduction in dedicated charter fleet Some signs of economic weakness resulting in a reduced rate of revenue growth Revenue (US$m) Like-for-like revenue (US$m) Operating profit (US$m) Operating margin 31 Oct 0731 Oct % % Change 3.0% 3.5% 12.4% 1.2%
Interim Results Scheduled service/line run/commuter Sightseeing & tour Charter School bus & contract Like-for-like revenue excl Megabus Closed operations and foreign exchange movements Total North America excl. Megabus Megabus Total North America 31 Oct 07 US$m 31 Oct 06 US$m % Growth 5.4% 11.8% 0.2% (7.3)% 3.5% (23.3)% 3.0% 118.2% 4.0% North America revenue breakdown
Interim Results UK Rail (wholly-owned) Strong start to new South Western franchise South Western revenue growth 15.3% Timing of revenue initiatives may result in profit variability Manchester Metrolink from July 2007 East Midlands from November 2007 Revenue (£m) Like-for-like revenue (£m) Operating profit (£m) Operating margin South Western estimated passenger miles (000’s) 31 Oct 0731 Oct % 1, % 1,513.1 Change 16.6% 15.2% (19.4)% (3.5)% 7.0%
Interim Results Virgin Rail Group Re-negotiated West Coast franchise performing well Winning market share from airlines Network expansion - 21 Super Voyager Trains CrossCountry franchise ended November 2007 Revenue - 49% share (£m) - West Coast Operating profit - 49% share (£m) Operating margin Dividends received (£m) Estimated Passenger miles (000’s) - West Coast 31 Oct 0731 Oct % , % 7.7 1,172.8 Change 11.6% 13.6% 317.9% 5.3% 42.9% 9.5%
Interim Results Scottish Citylink/Megabus JV JV has delivered significant passenger benefits Better value-for-money More sensible co-ordination of routes, timetables, etc. More services Strong support from passengers, politicians and other stakeholders Resolution of Competition Commission issues Revenue - 35% share (£m) Operating profit - 35% share (£m) Operating margin 31 Oct 0731 Oct % % Change 11.6% (18.2)% (6.8)%
Interim Results Miscellaneous income statement items Intangible asset expenses (£m) Group overheads (£m) Restructuring costs (£m) Pre-tax exceptional net gains (£m) 31 Oct 0731 Oct 06 (6.2) (1.7) 2.0 (7.5) (5.2) (0.7) Change 17.3% (19.2)% (142.9)% (98.7)% £2.0m gain on sale of Darlington bus operations Prior year exceptional gains include London bus sale and past service pensions credit
Interim Results Finance charges and credit ratios Net finance charges (£m) EBITDA from continuing operations and joint ventures excl exceptional items (£m) Ratio of EBITDA from continuing operations and joint ventures excl exceptional items to net finance charges 31 Oct 0731 Oct times times Efficient capital structure Good credit ratios
Interim Results Liquidity & interest rate risk 31 October 2007 net debt £494.7m £329.2m 66.5% Fixed Rate at 6.0% blended* £165.5m 33.5% Floating Rate * Taking account of interest rate derivatives and amortisation of deferred gains on early settlement of derivatives (cash rate 7.3%) Excellent liquidity Over £280m of undrawn bank facilities (through to 2012) Over £100m of other undrawn available credit lines Cash generative
Interim Results Taxation Pre-tax profit excluding intangible asset expenses and exceptional items - Before joint ventures - Joint ventures Intangible asset expenses Exceptional items Joint venture tax Reported in income statement Cash tax paid (net) Pre-tax Profit £m Tax £m (6.2) (5.5) 80.4 (15.7) (5.5) (21.2) (20.1) 5.5 (14.6) Rate % 22.0% 29.4% 23.5% 23.4% 18.2% 31 Oct
Interim Results EBITDA from Group companies before exceptionals 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 Acquisitions of businesses, intangibles and investments Disposals of businesses and investments Movement in loans to joint ventures Token sales and redemptions Foreign exchange/other Reduction in net debt before cash flows with shareholders Return of value, including related costs Equity dividends Other share capital movements Increase in net debt Opening net funds Closing net debt 31 Oct 07 £m (47.0) 7.1 (12.7) (4.9) 73.3 (41.6) (2.6) 3.3 (0.2) (2.0) (693.0) (20.5) (3.2) (681.1) (494.7) Movement in net debt
Interim Results (1.9) (0.4) - (2.3) Capital expenditure UK Bus North America UK Rail Group Capex on new hire purchase £m Impact of capex on net debt £m Disposal proceeds** £m Net £m Cash spent on capex* £m * Excludes capitalised intangible assets of £1.1m (2006: £0.1m) and assets acquired through business combinations ** Excludes proceeds from selling businesses Significant capital expenditure planned for second half of year to 30 April 2008
Interim Results Brian Souter Chief Executive
Interim Results The Stagecoach Equity Story Strong Earnings Momentum EPS* up 62.1% - 5 year CAGR 16.3% Operating profit* up 23.9% Efficient capital structure - approximately £940m returned to shareholders in last five years Dividend up 12.5% - 5 year CAGR 12.1% Revenue up 9.1% UK Bus** 7.8% v industry 6.7% South Western 15.6% v industry 10.7% Above-industry organic growth **Like-for-like Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions of major UK-listed Groups London & South East train operating companies revenue growth for six months to 31 October 2007 *Before intangible asset expenses and exceptional items For last full financial year
Interim Results Well balanced portfolio Excellent potential for further growth Drivers of bus and rail growth Supportive government policy: e.g. concessionary fare schemes; road pricing Increasing environmental awareness Rising road congestion Inward immigration Stagecoach factors Innovative and entrepreneurial management with short chains of command New products Good operational delivery Strong stakeholder partnerships Delivering above-industry growth
Interim Results UK Bus A Continuing Growth Story Revenue growth* 7.8% (1.1% higher than average market revenue growth of 6.7%**) Underlying estimated full fare passenger volume growth of approximately 2.4% Operating profit up 54.0% from £34.1m to £52.5m New products, marketing and branding TV Campaign Goldline Environmental initiatives Building long-term stakeholder partnerships *Like-for-like **Determined from applying the most recently available year on year revenue growth trends for UK Bus divisions of major UK-listed Groups
Interim Results North America Continuing Margin Improvement “Sweating” the assets; segment profitability; cost control revenue growth* 4.5% further underlying margin** improvement from 12.8% to 14.0% Product developments Splash Tours megabus.com Internet selling Environmental initiatives Still targeting 10% annualised operating margin on core business by April 2009 *Like-for-like constant currency including megabus **Excluding megabus
Interim Results UK Rail Consolidated Market Share Now have excellent portfolio of high growth franchises on long term contracts Continued excellent operational performance Revenue growth above the industry average Integrating recent wins East Midlands Manchester Metrolink Maximising shareholder value from existing rail contracts
Interim Results Current trading and outlook Strong earnings momentum good operational delivery efficient capital structure Current trading in line with our upgraded expectations Continued focus on organic growth and bolt-on acquisitions Increased fuel costs in 2008/9 but outlook remains positive and good potential for further growth
Interim Results Interim Results 5 th December 2007
Interim Results Appendices
Interim Results Fuel Hedging Product Approximate annual usage % hedged 2007/ / /10 Average hedge price 2007/ / /10 UK BusNorth America ULSD 10ppm 188m litres 86% 95% N/A 25.0p/litre 33.6p/litre N/A Heating Oil No 2 72m litres 93% 76% N/A 45.5 cents/litre 56.8 cents/litre N/A UK Rail Gasoil 0.1% 62m litres 56% 77% 30.5p/litre
Interim Results Interest on cash & debt Non-utilisation/commitment/arrangement fees Insurance letters of credit Discount on insurance provisions Interest on notes receivable Finance income/ (charges) £m (12.6) (1.0) (0.3) (1.6) 0.1 (15.4) Finance charges
Interim Results Exchange rates US$ C$ Closing rateAverage rate October 2006 Closing rateAverage rate October 2007
Interim Results Interim Results 5 th December 2007