Preliminary Results 200 Annual Results Annual Results Year ended 30 April 2008 Year ended 30 April 2008 25 June 2008 25 June 2008
Preliminary Results 2008
Annual ResultsAnnual ResultsYear ended 30 April 2008Year ended 30 April 2008
25 June 2008 25 June 2008
2 Preliminary Results 2008
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.
Net debt (or net funds) is the net of cash and borrowings as reported on the consolidated balance sheet, adjusted to exclude any accrued interest and deferred gains on derivatives.
3 Preliminary Results 2008
Robert SpeirsRobert Speirs
ChairmanChairman
4 Preliminary Results 2008
Highlights
Strong underlying revenue growth in all divisions
Positive environment for public transport
Increased investment in bus and rail services
Excellent return to shareholders
63.0p returned to shareholders in May/June 2007
Adjusted EPS up 73.5%
Full year dividend up 31.7%
Progressive dividend growth
Significant potential for further modal shift
5 Preliminary Results 2008
Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
6 Preliminary Results 2008
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
Year to 30 April 08
Year to 30 April 07
£1,763.6m
£205.3m
20.3p
34.6p
£(319.7)m
5.4p
£1,504.6m
£161.3m
11.7p
25.4p
£186.4m
4.1p
Change
17.2%
27.3%
73.5%
36.2%
n/a
31.7%
Dividend rebased up c.32%
Progressive dividend policy maintained
7 Preliminary Results 2008
Summary income statement
UK Bus operating profit
North America operating profit excluding Megabus
Megabus North America operating loss
UK Rail operating profit
Share of joint ventures’ profit after tax
Restructuring costs and group overheads
Operating profit
Finance (charges)/income (net)
Tax
Profit excluding intangibles and exceptionals
Intangibles and exceptionals, net of tax
Reported profit from continuing operations
Year to 30 April 08
£m
Year to 30 April 07
£m
109.9
23.9
(2.9)
59.1
32.6
(17.3)
205.3
(30.9)
(28.3)
146.1
83.1
229.2
84.5
19.1
(1.0)
58.8
14.2
(14.3)
161.3
0.7
(37.8)
124.2
16.3
140.5
Change£m
25.4
4.8
(1.9)
0.3
18.4
(3.0)
44.0
(31.6)
9.5
21.9
66.8
88.7
8 Preliminary Results 2008
UK Bus
Revenue and journeys benefiting from external drivers of public transport demand, marketing, competitive fares, concessionary travel schemes and continued fleet investment
Relatively stable year-on-year fuel costs
Full year effect of pension scheme changes
Further benefits from integrating 2005/6 acquisitions
Revenue (£m)
Like-for-like revenue (£m)
Total vehicle miles operated (m)
Operating profit (£m)
Operating margin (%)
Estimated like-for-like passenger journeys (m)
Year to 30 April 08
Year to 30 April 07
743.9
738.9
313.3
109.9
14.8%
635.1
690.4
687.5
311.9
84.5
12.2%
613.3
Change
7.7%
7.5%
0.4%
30.1%
2.6%
3.6%
9 Preliminary Results 2008
North America (excluding Megabus)
10% margin target (excluding Megabus) achieved one year early
Like-for-like revenue up 4.6%, excluding GTAA contract
Reduced insurance and claims costs
Relatively stable year-on-year fuel costs
Revenue (US$m)
Like-for-like revenue (US$m)
Operating profit (US$m)
Operating margin
Year to 30 April 08
Year to 30 April 07
474.3
465.6
48.0
10.1%
458.9
451.3
36.6
7.9%
Change
3.4%
3.2%
31.1%
2.2%
10 Preliminary Results 2008
Rail (wholly-owned)
Strong first full year of new South Western franchise
Manchester Metrolink from July 2007
East Midlands from November 2007 – revenue up 9.5%
Sheffield Supertram record passenger volumes
Revenue (£m)
Like-for-like revenue (£m)
Operating profit (£m)
Operating margin (%)
Estimated passenger miles (m) – South Western
Year to 30 April 08
Year to 30 April 07
777.8
649.3
59.1
7.6%
3,228.7
571.5
571.5
58.8
10.3%
3,055.5
Change
36.1%
13.6%
0.5%
(2.7)%
5.7%
11 Preliminary Results 2008
Virgin Rail Group
Re-negotiated West Coast franchise performing strongly Revenue share payable to Department for Transport Successful resolution of Network Rail open items December 2008 timetable
c.30% more services Consistently reliable infrastructure essential Challenging programme of infrastructure work Financial protection
Revenue – 49% share (£m)
- West Coast
- West Coast like-for-like
- CrossCountry
Operating profit – 49% share (£m)
Operating margin (%)
Dividends received (£m)
Estimated like-for-like passenger miles (m) – West Coast
Year to 30 April 08
Year to 30 April 07
394.0
310.3
301.9
83.7
41.9
10.6%
30.5
2,525.2
412.5
271.5
271.5
141.0
12.4
3.0%
31.1
2,330.9
Change(4.5)%
14.3%
11.2%
(40.6)%
237.9%
7.6%
(1.9)%
8.3%
12 Preliminary Results 2008
Miscellaneous income statement items
Citylink – divestment of certain services; OFT costs
Increased group overheads includes higher share based payment expenses
Restructuring costs include £3.6m in UK Rail Division
Exceptional gains include favourable resolution of historic tax issues
Citylink joint venture (£m)
Splash Tours joint venture (£m)
Intangible asset expenses (£m)
Group overheads (£m)
Restructuring costs (£m)
Post-tax exceptional items (£m)
Year to 30 April 08
Year to 30 April 07
0.8
(0.4)
(13.0)
(13.0)
(4.3)
113.9
0.9
(0.2)
(14.7)
(11.1)
(3.2)
160.9
Change
(11.1)%
(100.0)%
11.6%
(17.1)%
(34.4)%
(29.2)%
13 Preliminary Results 2008
Finance (charges)/income and credit ratios
Net finance (charges)/income* (£m)
EBITDA from continuing operations and joint ventures* (£m)
Year-end net (debt)/funds (£m)
Net Debt/EBITDA*
EBITDA*/Interest*
Year to 30 April 08
Year to 30 April 07
(30.9)
271.9
(319.7)
1.2x
8.8x
0.7
229.6
186.4
n/a
n/a
Change
(31.6)
42.3
(506.1)
n/a
n/a
Efficient capital structure
Good credit ratios
* excluding exceptional items
14 Preliminary Results 2008
Taxation
Excluding intangible asset expenses and exceptional items- Before joint ventures- Joint ventures
Intangible asset expensesExceptional items
Joint venture taxReported in income statement
Cash tax received (net)
Pre-taxProfit*
£mTax*£m
141.8 46.3
188.1(13.0)
5.9181.0(13.7)167.3
(28.3)(13.7)(42.0)
2.188.148.213.761.9
57.6
Rate%
20.0%29.6%22.3%16.2%
n/a n/a n/a n/a
Year to 30 April 2008
* Excludes discontinued operations
15 Preliminary Results 2008
Divisional income statementsYear ended 30 April 2008
Revenue
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
Material & consumables
Other costs
Operating profit
UK Bus £m
North America
£m
743.9
-
13.9
(382.1)
(81.6)
(29.4)
(47.6)
-
(6.7)
-
(32.8)
(67.7)
109.9
241.9
-
3.1
(106.3)
(25.1)
(17.8)
(16.9)
-
(3.9)
-
(18.2)
(35.8)
21.0
UK Rail£m
777.8
78.2
48.4
(225.1)
(16.2)
(3.5)
(2.1)
(151.2)
(3.6)
(282.6)
(22.8)
(138.2)
59.1
VRG£m
803.9
283.4
62.1
(164.8)
(26.1)
(5.1)
(1.0)
(254.5)
-
(456.9)
-
(155.6)
85.4
16 Preliminary Results 2008
EBITDA from Group companies before exceptionals Dividends from joint venturesMovement in retirement benefitsWorking capital and other operating cash movementsNet interest paidTax receivedNet cash from operating activitiesNet capital expenditure including new hire purchase & finance leasesCash outflow in respect of inception of rail franchiseAcquisitions of businesses, intangibles and investmentsDisposals of businesses and investmentsMovement in loans to joint venturesToken sales and redemptionsForeign exchange/otherReduction in net debt before cash flows with shareholdersEquity dividendsReturn of valueOther share capital movementsIncrease in net debtOpening net fundsClosing net debt
30 April2008£m
239.331.6
(69.0)89.7
(24.2)57.6
325.0(99.5)
(0.5)(9.7)3.6
(0.3)(1.6)(2.5)
214.5(30.0)
(693.0)2.4
(506.1)186.4
(319.7)
Movement in net debt
17 Preliminary Results 2008
55.87.6--
63.4
73.624.710.2
0.2108.7
(8.1)(1.0)
-(0.1)(9.2)
65.523.710.2
0.199.5
17.817.110.2
0.245.3
Capital expenditure
UK BusNorth AmericaUK RailGroup
New hire purchase/
financeleases*
£m
Impact ofcapex onnet debt
£m
Disposalproceeds**
£m
Net2007/8Actual
£m
Cash spent on capex*
£m
* Excludes capitalised intangible assets and business combinations
** Excludes proceeds from selling businesses
100.322.363.1
-185.7
Net2008/9Budget
£m
18 Preliminary Results 2008
Liquidity
£448.9m undrawn committed bank facilities at 30 April 2008
available for immediate cash drawings
Over £50m of surplus cash at 30 April 2008
Investment grade credit rating
Next significant debt maturity – US$334m bonds, November 2009
Comfortably within covenant levels
19 Preliminary Results 2008
Fuel Hedging
2007/8 - average effective price (per litre)
2008/9 - % of forecast consumption hedged
- average hedge price (per litre)
2009/10 - % of forecast consumption hedged
- average hedge price (per litre)
2010/11 - % of forecast consumption hedged
- average hedge price (per litre)
Market price (per litre)
UK BusNorth
America
26.5p
94.4%
33.6p
50.1%
53.8p
-
n/a
56.3p
56.3 cents
75.9%
61.5 cents
50.6%
96.3 cents
-
n/a
101.2 cents
UK Rail
30.7p
76.0%
31.6p
76.0%
31.6p
76.0%
31.6p
55.4p
Market prices are as at 17 June 2008
Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant
20 Preliminary Results 2008
(150.1)
68.5
(81.6)
(25.1)
(5.3)
(112.0)
-
(10.9)
(122.9)
(168.0)
72.1
(95.9)
(34.6)
(8.6)
(139.1)
-
(22.5)
(161.6)
(201.9)
72.1
(129.8)
(43.6)
(8.7)
(182.1)
-
(22.7)
(204.8)
Fuel costsLatest forecasts
UK Bus, excluding BSOG*
UK Bus, BSOG*
UK Bus, including BSOG*
North America
South Western Trains
London Bus
East Midlands Trains
Total
2007/08Actual
£m
2008/09Forecast
£m
2009/10Forecast
£m
Fuel costs
(145.4)
65.9
(79.5)
(25.5)
(4.3)
(109.3)
(6.1)
-
(115.4)
2006/07Actual
£m
Market prices are as at 17 June 2008, when Brent Crude was $134 per barrel
Above costs include delivery margins, duty and taxes
* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services
189.9
-
189.9
74.8
13.1
277.8
-
50.5
328.3
2008/9ForecastLitres m
Volumes
21 Preliminary Results 2008
Brian SouterBrian SouterChief ExecutiveChief Executive
New OpportunitiesNew Opportunities
22 Preliminary Results 2008
Source: Association of Train Operating Companies
Dynamic of a changing marketThe Rail “U” CurveRail Passenger Miles and Journeys since 1946
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1946 1956 1966 1976 1986 1996 2006
0
500
1,000
1,500
2,000
2,500
3,000
Passenger miles (LHS)
Passenger journeys (RHS)
23 Preliminary Results 2008
Bus Passenger Journeys in the UK, 1950 - 2006/07
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1950
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
/88
1990
/91
1993
/94
1996
/97
1999
/00
2002
/03
2005
/06
Year
Bu
s p
asse
ng
er jo
urn
eys
Source: Departmentfor Transport
Dynamic of a changing marketThe Bus Graph
24 Preliminary Results 2008
Changing consumer behaviour
Stagecoach survey of more than 4,000 people in the UK found:– 64% see the environment as a high priority– 47% use the car less than before– 36% use the bus more than previously– 19% make more use of the train
25 Preliminary Results 2008
Modal shift 10% of respondents said they had changed their transport
mode in the last 3 years Reasons cited for modal shift include:
– 20% health reasons
– 12% environmental considerations
– 10% availability of free bus pass
AND…
32% said they would pay more for environmentally friendly public transport
26 Preliminary Results 2008
“Green partnerships”
Recycling 92% Very important
Reducing energy use at home 88% Very important
Reducing water use 85% Very important
Buying locally produced food 80% Very important
Using a car less 61% Very important
Flying less 55% Very important
Public transport should partner with organisations that share a common interest in ‘greener’ lifestyles
Stagecoach Group survey: In order of importance, how would you rate the following behaviours?
27 Preliminary Results 2008
UK Rail Recent economic trends are challenging
– GDP growth forecasts now 1.7%* v 2.5-2.9% when bidding– Latest Central London Employment: now 0.7%** decline v 1.4%
growth when bidding
BUT… Still strong passenger revenue growth
– Modal shift driven by fuel prices, environmental concerns, rising road congestion
– Improved train service– Revenue initiatives
• Gating• Timetable step-up• Capacity increases• Pricing
* Source: Average independent forecasts for UK GDP growth in 2008 as published by HM Treasury on 18 June 2008.
** Source: April 2008 v April 2007 as supplied by Oxford Economic Forecasting (OEF)
28 Preliminary Results 2008
UK Bus
Higher than industry-average growth– Strong operational delivery and customer service– Record investment in greener, accessible fleet– Product development – Competitive pricing strategy – Market-leading telemarketing programme – Excellent stakeholder partnerships
29 Preliminary Results 2008
UK Bus (cont’d) Robust and predictable business model
– Flexible to market/economic conditions– Pricing headroom– Cash generative
Strong provincial bus network– Organic growth– “Railway” characteristics– National concession scheme from 1 April 2008
30 Preliminary Results 2008
North America
Complementary business mix Weaker dollar positive for sightseeing business High fuel prices driving modal shift Megabus creating a new market for inter city coach
services Continued cost control; further margin improvement
delivered
31 Preliminary Results 2008
Current trading and outlook
Strong start to new financial year Current trading in line with our expectations Outlook for the sector and the Group good Monitoring economic and energy price developments Continued focus on organic growth and bolt-on
acquisitions Good potential for further growth in revenue, earnings
and dividends
32 Preliminary Results 2008
Annual ResultsAnnual ResultsYear ended 30 April 2008Year ended 30 April 2008
25 June 2008 25 June 2008
33 Preliminary Results 2008
Appendices
34 Preliminary Results 2008
Scheduled service/line run/commuterCharterSightseeing & tourSchool bus & contractLike-for-like revenue (excluding Megabus)Closed operations and Canada fxTotal North America (excluding Megabus)MegabusTotal North America
Year to 30 April
2008US$m
Year to30 April 2007
US$m
198.088.988.989.8
465.68.7
474.311.3
485.6
188.587.984.190.8
451.37.6
458.94.7
463.6
% Growth
5.0%1.1%5.7%
(1.1)%*3.2%
14.5%3.4%
140.4%4.7%
North America revenue breakdown
* Includes impact of loss of contract work at Toronto airport
35 Preliminary Results 2008
Rail subsidy/(premium) profiles
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
South Western
£m
East Midlands
£m
63.1
21.1
(42.2)
(93.6)
(157.1)
(231.3)
(299.2)
(363.6)
(435.2)
(431.7)
35.7
64.9
36.8
0.2
(44.7)
(78.6)
(99.9)
(157.5)
n/a
n/a
West Coast£m
270.0
291.6
265.2
229.6
197.4
n/a
n/a
n/a
n/a
n/a
Year to 31 March:
The above amounts are subject to adjustment for: (1) various inflation measure (2) risks borne by the Department for Transport (3) called options and (4) changes in Regulated Network Rail charges. The amounts shown above are based on estimated inflation and options called to date but exclude “pass through” adjustment re Network Rail charges.
36 Preliminary Results 2008
Rail subsidy/(premium)Year ended 30 April 2008
Subsidy per previous slide
“Pass through” of Network Rail charges
Other adjustments
Year to 30 April 2008 reported in results
South Western
£m
East Midlands
£m
63.1
(39.5)
(4.6)
19.0
35.7
21.0
2.5
59.2
Total£m
98.8
(18.5)
(2.1)
78.2
37 Preliminary Results 2008
Exchange rates
US$C$
Closing rate Average rate
1.99992.2102
1.91032.1738
April 2007
Closing rate Average rate
1.98061.9947
2.00722.0525
April 2008
38 Preliminary Results 2008
Annual ResultsAnnual ResultsYear ended 30 April 2008Year ended 30 April 2008
25 June 2008 25 June 2008