Interim Results 6 December 2006 Interim Results 2006
Interim Results 6 December 2006 Interim Results 2006
Robert Speirs Chairman 1 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. £ 265 m Proposal to return no less than £ 400 m 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. + 2 Interim Results 2006
Martin Griffiths Finance Director 3 Interim Results 2006
Financial highlights § Revenue+* from continuing businesses up 10. 0% - £ 711. 1 m (2005: £ 646. 5 m) - Up 10. 5% at constant exchange rates § Operating profit* pre intangibles and exceptionals £ 80. 7 m (2005: £ 68. 5 m) § EBITDA* (pre exceptionals) up 15. 2% at £ 113. 5 m (see slide 8) § Adjusted EPS up 7. 4% to 5. 8 p § Net debt of £ 135. 9 m converted to net funds of £ 140. 9 m excluding acquisitions of Glenvale and Traction. * excluding disposed operations. + 4 Interim Results 2006
Financial summary October 2006 £m October 2005 £m Revenue* 752. 1 653. 3 - continuing operations, excluding Glenvale and Traction 711. 1 646. 5 Total operating profit* 101. 5 55. 3 - pre intangibles & exceptionals* 80. 7 68. 5 Profit before tax* 97. 3 40. 7 - pre intangibles & exceptionals* 77. 4 57. 9 Cash generated from operations 99. 4 120. 2 156. 4 120. 2 - pre £ 57. 0 m one-off pension contribution Adjusted earnings per share 5. 8 p 5. 4 p Interim dividend per share 1. 2 p 1. 1 p * excluding disposed operations 5 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 Businesses disposed UK Bus – London New Zealand October 2005 previously Reported £m Revenue reclassified as “discontinued” £m Constant currency revenue growth in continuing businesses £m 270. 1 123. 2 245. 6 638. 9 - 28. 5 13. 3 31. 2 73. 0 7. 6 646. 5 - (5. 2) 67. 8 653. 3 - 111. 0 28. 7 793. 0 (111. 0) (28. 7) (139. 7) October 2006 before retranslation (Sub total) £m October 2006 (Total) £m 298. 6 136. 5 276. 8 711. 9 11. 4% (3. 1) 298. 6 133. 4 276. 8 708. 8 10. 9% 2. 4 714. 3 10. 5% (0. 1) (3. 2) 2. 3 711. 1 10. 0% 34. 2 102. 0 41. 0 755. 3 (3. 2) 41. 0 752. 1 102. 0 755. 3 (3. 2) 752. 1 6 10. 6% 10. 8% 12. 7% Changes in foreign currency exchange rates £m 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 7 Interim Results 2006
EBITDA October 2006 £m UK Bus - excluding Glenvale/Traction - Glenvale/Traction North America Rail Group overheads & restructuring costs EBITDA from Group companies before exceptionals* Virgin Rail Group (share of EBIT) Other joint ventures and associates (share of EBIT) Total EBITDA before exceptionals* 52. 0 3. 2 24. 6 34. 6 (5. 9) 108. 5 3. 9 1. 1 113. 5 October 2005 £m 48. 0 (0. 5) 23. 5 27. 0 (5. 6) 92. 4 6. 1 Nil 98. 5 +17. 4% +15. 2% * excluding disposed operations 8 Interim Results 2006
Movement in net debt EBITDA from continuing Group companies before exceptionals (slide 8) EBITDA from discontinued operations Movement in pension deficit Working capital and other operating cash movements Net interest paid Tax paid Net capital expenditure including new hire purchase (slide 35) Acquisitions of businesses, intangibles and investments Disposals of businesses and investments Token sales and redemptions Dividends and loan repayments from joint ventures Foreign exchange Net movement in bond issue costs Reduction in net debt before cash flows with shareholders Equity dividends Other share capital movements Reduction in net debt Opening net debt Closing net funds 9 October 2006 £m 108. 5 7. 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. 5 276. 8 (135. 9) 140. 9 Interim Results 2006
UK Bus trading results § Revenue growth 22. 6% to £ 339. 6 m (2005: £ 276. 9 m) - 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. 5 m (2005: operating loss £ 0. 8 m) § Disposal of London bus completed August 2006 10 Interim Results 2006
UK Bus revenue development Glenvale/ Traction Continuing £m 2005 revenue as previously reported % £m 270. 1 % 6. 8 Discontinued £m 111. 0 Traction Nil n/a 30. 3 445. 6% Nil Disposals in year Nil n/a (111. 0) 16. 4 6. 1% Nil n/a Nil 1. 7 0. 6% Nil n/a Fare increases 12. 1 4. 5% Nil megabus. com (incl impact of services transferred out to Citylink JV) (1. 7) (0. 6)% Timing impact of prior year acquisition Nil Passenger volumes (incl impact of new concessionary fare schemes) Tender wins/ contract amendments 2006 revenue 298. 6 % Total £m % 387. 9 30. 3 7. 8% (111. 0) (28. 6)% n/a 16. 4 4. 2% Nil n/a 1. 7 0. 4% n/a Nil n/a 12. 1 3. 1% Nil n/a (1. 7) (0. 4)% n/a 3. 9 57. 3% Nil n/a 3. 9 1. 0% 10. 6% 41. 0 502. 9% Nil 339. 6 (12. 5)% 11 n/a (100. 0)% 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 12 Interim Results 2006
North America trading results § Revenue £ 135. 7 m (2005: £ 130. 8 m) § 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. 7 m (2005: £ 15. 7 m) - US$31. 2 m (2005: US$28. 3 m) - excellent revenue growth - strict cost control 13 Interim Results 2006
North America revenue breakdown by product Megabus Scheduled service/Line run/Commuter Charter Sightseeing & Tour School Bus & Contract Before closed business units Closed business units Total 14 October 2006 US$m October 2005 US$m 2. 2 93. 9 53. 3 55. 9 43. 9 249. 2 4. 3 253. 5 87. 3 47. 1 51. 9 35. 3 221. 6 13. 8 235. 4 % Growth n/a 7. 6% 13. 2% 7. 7% 24. 4% 12. 5% 7. 7% Interim Results 2006
Rail trading results Rail subsidiaries § Revenue £ 276. 8 m (2005: £ 245. 6 m), up 12. 7% § Operating profit £ 31. 4 m (2005: £ 24. 4 m) § Passenger volumes up 8. 5% at SWT § Revenue and profit share to Department for Transport £ 43. 0 m (2005: £ 27. 8 m) § Bid costs £ 8. 0 m (2005: £ 6. 9 m) 15 Interim Results 2006
Virgin Rail Group (“VRG”) § Share of profit after finance income and tax £ 3. 7 m (2005: £ 4. 5 m) § Significant progress on agreeing long-term commercial arrangements for West Coast § Cross. Country - Current contract ends on 10 November 2007 - VRG invited to tender for New Cross. Country franchise 16 Interim Results 2006
Taxation October 2006 Pre intangibles and exceptionals* Exceptional items Intangible asset expenses Results for the period* Cash tax paid (net) Pre-tax Profit £m Tax £m Effective Rate % 79. 6 27. 4 (7. 5) 99. 5 (20. 7) (6. 4) 1. 5 (25. 6) 26. 0% 23. 4% 20. 0% 25. 7% 11. 4 * Adjusted for share of VRG’s tax, classified within operating profit under IFRS Excludes discontinued operations and any exceptional items relating to these discontinued operations 17 Interim Results 2006
Pensions § Significant reduction in retirement benefit obligations - £ 144. 3 m (30 April 2006: £ 222. 2 m) § £ 22. 8 m exceptional past service credit reduces IAS 19 pension liability § £ 57. 0 m of additional contributions reduces IAS 19 pension liability § Rail pension schemes: under IFRS, only the part of the deficit that we expect to fund is recognised § Changes to schemes 18 Interim Results 2006
Balance sheet & financing § Net funds+ £ 140. 9 m ( October 2005: net debt £ 208. 9 m) § 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 £ 400 m - Shareholders to participate pro-rata to ordinary shareholdings - Ordinary share consolidation § £ 50. 0 m pension contribution agreed in principle + UK GAAP definition * from continuing group companies, before exceptional items 19 Interim Results 2006
Brian Souter Chief Executive 20 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 21 Interim Results 2006
Group strategy Quality 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 22 Interim Results 2006
UK Bus Drivers 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 23 Interim Results 2006
Group strategy UK 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% 24 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 Cross. Country franchise (at Virgin Rail Group) § Further development of megatrain. com 25 Interim Results 2006
Group strategy – North America § Revenue and margin growth – Core scheduled services – Contract wins – Capitalise on continued strong leisure bounceback § New product development and improved marketing – megabus. com – Launch of New York Duck Tours – Web-based sales 26 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 27 Interim Results 2006
Interim Results 6 December 2006 Interim Results 2006
Appendices 29 Interim Results 2006
North America revenue development Ongoing business units US$m 2005 revenue 221. 6 Closed/ disposed units US$m 13. 8 Total US$m 235. 4 Year on year impact of closed/disposed business units Nil (9. 5) US$/C$ currency impact 3. 7 Nil 3. 7 23. 9 Nil 23. 9 249. 2 4. 3 253. 5 Underlying growth 2006 revenue 30 Interim Results 2006
Rail revenue development £m 2005 revenue % 245. 6 SWT Passenger volumes 20. 4 8. 3% SWT Fares/yield 8. 2 3. 3% SWT Other 1. 8 0. 7% Island Line/Supertram 0. 8 0. 3% 276. 8 12. 7% 2006 revenue 31 Interim Results 2006
Finance charges ratios October 2006 £m Finance charges (net)* October 2005 £m 3. 3 10. 6 EBITDA from continuing Group companies, preexceptionals* (slide 8) 108. 5 92. 4 EBITDA from continuing Group companies, preexceptionals*/finance charges* 32. 9 times 8. 7 times * UK GAAP definition 32 Interim Results 2006
Finance charges Average balance* £m Gross debt & related derivatives Interest bearing cash balances 337. 0 265. 0 Non-utilisation/commitment fees Amortisation of bond issue costs/bank charges Insurance letters of credit Discount on insurance provisions Other Finance charges £m 8. 0 (6. 5) 1. 5 0. 1 0. 4 1. 4 (0. 6) 3. 3 Annual effective rate % 4. 7% 4. 9% *Average of month end debt/cash balances 33 Interim Results 2006
Fuel hedging 6 months to 31 October 30 April 2006 2007 % of Group fuel hedged Forecast 2007/08 Forecast 2008/09 - fixed 20% 19% Nil - cap/floor 76% 77% 52% 45% US$50 US$60 n/a Average hedge price (crude price US$/barrel) - fixed - cap/floor US$83/US$54 • The Group’s UK Bus and North American bus operations consume the equivalent of 1. 6 m barrels of fuel a year • Each US$10 per barrel movement in crude oil price impacts variable fuel costs by approximately US$16 m if no hedging in place • Amounts shown for future periods exclude London bus operations 34 Interim Results 2006
Capital expenditure Cash spent on capex* £m UK Bus North America Rail Capex on new hire purchase £m 32. 2 11. 7 8. 5 1. 9 22. 1 Impact of capex on net debt £m 43. 9 8. 5 1. 9 54. 3 Disposal proceeds** £m (0. 7) (0. 4) (1. 1) Net £m 43. 2 8. 1 1. 9 53. 2 * Excludes capitalised intangible assets of £ 0. 1 m and additions made as part of business combinations ** Excludes proceeds from selling businesses 35 Interim Results 2006
Exchange rates October 2006 Closing rate US$ NZ$ C$ Average rate 1. 9073 n/a 2. 1370 1. 8687 n/a 2. 0914 36 October 2005 Closing rate 1. 7703 2. 5295 2. 0881 Average rate 1. 7989 2. 5706 2. 1836 Interim Results 2006
Interim Results 6 December 2006 Interim Results 2006
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