annual results - stagecoach group/media/files/s/...stagecoach uk rail great britain rail rail...

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Annual ResultsYear ended 30 April 2014

25 June 2014

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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.

Figures from previous years have been restated as appropriate to reflect the application of new accounting rules in respect of pensions.

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ROSS PATERSONFINANCE DIRECTOR

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Continued good financial performance and investment

Adjusted EPS up 5.7% to 26.0p

Full year dividend per share up 10.5% to 9.5p

Organic volume and revenue growth in UK regional bus business

Over 80% increase in North America operating profit

£9m invested in pursuing new rail franchise opportunities

£118.9m net capital expenditure investment

5UK Bus (regional operations)Delivering further organic growth

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

Year to 30 April 2014

Year to 30 April 2013 Change

Revenue (£m) 1,012.8 966.7 4.8%

Like-for-like revenue (£m) 982.7 939.8 4.6%

Operating profit (£m) 147.4 143.2 2.9%

Operating margin (%) 14.6% 14.8% (20)bp

Estimated like-for-like passenger journeys* (m) 679.6 671.0 1.3%

£8.2m rise in operating profit, excluding Olympics contracts in 2012

Continued organic growth

c.4% commercial revenue growth

Increased share of tender market – revenue up 7%

Wage awards over last six months averaging c.2.5%

6UK Bus (regional operations)Growth and outperformance through the recession and beyond

Change in passenger journeys – six years from 2006/7 to 2012/13*

* Sources: Stagecoach UK Bus – compounded like-for-like passenger volumes for years to 30 April; Great Britain - derived from Transport Statistics Great Britain, table BUS0103, for years to 31 March; includes effect of new concessionary schemes but also government cuts to tendered services

** Source: Great Britain – derived from Transport Statistics Great Britain, table TSGB0101, for years to 31 March. Bus and coach shown together and includes London

Stagecoach UK Bus

(regional operations)

Great Britain local bus

excluding London

Bus industry share of “all road” passenger kilometres**

2006/7 5.6% 93.0% 1.4%

2011/12 6.0% 92.6% 1.4%

Change +0.4% -0.4% -

7UK Bus (regional operations)Taking a long-term perspective for a sustainable business

Wigan bus operations

Acquired March 2012 Stagecoach route costing implemented Weekly ticket reduced 50% from £18 to £9

(now £11) New Wigan Dayrider ticket at £2.80 70 vehicles replaced with better models Passenger volume growth estimated at

28% over two years Profit down but growing and on a

significantly larger customer base

8UK Bus (London)Winning new profitable business



Revenue and like-for-like revenue (£m) 244.9 232.7 5.2%

Operating profit (£m) 23.9 19.0 25.8%

Operating margin (%) 9.8% 8.2% 160bp

Success in winning profitable new business reflected in return to revenue growth

New business wins underpin prospects for 2014/15 – 18 bids submitted since 1 May 2013:

− 100% retention rate on 3 incumbent services

− 29% win rate from bids for new services (2 out of 7)

− Awaiting outcome on 8 others

Drivers’ wage agreements concluded through to April 2015 – c.2.4%

Focus remains on tight control of costs and growth through new contract wins

9North AmericaSubstantial profit growth



Revenue (US$m) 685.7 641.2 6.9%

Like-for-like revenue (US$m) 530.1 510.3 3.9%

Operating profit (US$m) 38.0 21.1 80.1%

Operating margin (%) 5.5% 3.3% 220bp

Significant increase in operating profit, principally from megabus.com

Strong performance whilst absorbing the adverse effects of severe weather

16.4% growth in megabus.com revenue

Progressing further expansion of megabus.com

10UK RailPursuing new opportunities



Revenue and like-for-like revenue (£m) 1,252.0 1,201.3 4.2%

Operating profit (£m) 34.3 41.2 (16.7)%


Estimated passenger miles – South West* (m) 3,724.6 3,600.7 3.4%

Estimated passenger miles – East Midlands (m) 1,368.9 1,380.5 (0.8)%

Solid results despite severe weather in South West England and substantial bid costs

Profit is after £9.0m bid costs as we invest in pursuing new opportunities

South West Trains Alliance extended

Negotiation of terms for new franchises - South West to 2019; East Midlands to 2017

One of three bidders for new Docklands Light Railway – franchise to start September 2014

Bid submitted with Virgin for new East Coast franchise – franchise to start March 2015

* The growth in South West Trains passenger miles is inflated by changes made by Transport for London to London Travelcard allocations.

11UK RailMeeting the challenges of extended severe weather

In two days at South West Trains

23 & 24 December 2013

200+ incidents

140+ fallen trees

Landslides

Flooding in 9 locations

Huge clear up operation over Christmas

2 Jan: 93% of services ran

South WesternRailway area

12UK RailGrowth and outperformance through the recession and beyond

Change in passenger miles – five years from 2006/7 to 2011/12*

* Sources: Stagecoach UK Rail – compounded like-for-like passenger volumes for years to 30 April for South West Trains, East Midlands Trains and 49% of West Coast Trains; Great Britain – derived from Transport Statistics Great Britain, table TSGB0101, for years to 31 March. Rail and tram shown together.

** Source: Great Britain – derived from Transport Statistics Great Britain, table TSGB0101, for years to 31 March. Rail and tram shown together.

Stagecoach UK Rail

Great Britain Rail

Rail industry share of “all modes” passenger kilometres**

2006/7 7.4%

2011/12 9.1%

Change +1.7%

13Virgin Rail GroupTransition to new franchise



Revenue and like-for-like revenue – 49% share (£m) 465.6 441.5 5.5%

Operating profit – 49% share (£m) 2.6 10.5 (75.2)%


Dividends received (£m) 4.2 13.2 (68.2)%

Estimated passenger miles (m) 3,890.2 3,723.3 4.5%

Operating margin reflects full year of 1% management contract

New franchise effective from 22 June 2014

‒ Until 31 March 2017 with DfT option to extend by one year

14Virgin Rail GroupNew franchise to benefit all stakeholders

Customer benefits Taxpayer benefits

High bandwidth wi-fi Nectar loyalty scheme More standard class seating c.£20m stations investment Upgraded website and more ticket vending points New destinations – Blackpool; Shrewsbury

£433m expected premium over three years Government option to extend by one year (further

£261m premium) Share of any financial outperformance Share of any GDP outperformance HS2 co-operation

Shareholder benefits Community and employee benefits

Improved risk-return trade off 3 to 4 years of further expected cash flows Appropriate GDP risk share

Apprenticeships, internships and other young people’s benefits

Community Rail Partnerships and Champions Ex-offender and Princes Trust placements Virgin Unite Additional driver alerts to cut energy consumption CO2 and waste reduction plans

15Stagecoach GroupA strong financial position



Net finance charges (including share of net finance income of joint ventures) (£m) (42.3) (42.8) 0.5

EBITDA from continuing operations and joint ventures* (£m) 340.2 333.9 6.3

Closing net debt (£m) (461.6) (538.0) 76.4

Net Debt/EBITDA * 1.4x 1.6x (0.2)x

EBITDA*/Net finance charges (including share of net finance income of joint ventures) 8.0x 7.8x 0.2x

* excluding exceptional items

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MARTIN GRIFFITHSCHIEF EXECUTIVE

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Private operators underpin UK Bus industry success

Continued delivery

Value for money: best value weekly ticket; average TfLweekly ticket costs 50% more

Stable bus networks: commercial services largely maintained v cuts to LA contracted services

Innovation: launch of new products (StagecoachGold, sleepercoach network)

High customer satisfaction: Stagecoach leading major operators

Growing proportion of network commercially funded Partnerships: schemes in place and under discussion

Opportunities ahead

Building on strong partnerships Recovering economy and modal shift Improved retail options and customer information

through technology investment

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Growing momentum in UK Rail

Continued delivery

UK has highest passenger satisfaction, best safety record and fastest growth of any major European railway

Rail Delivery Group providing leadership and focus on improvements to franchising model

Insight from alliancing New terms agreed at West Coast

Opportunities ahead

Extensions at South West & East Midlands Additional rail capacity One of three bidders for DLR One of three bidders for East Coast

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Investment and innovation driving growth in North America

Continued delivery

Launch of megabus.com Florida network megabus.com now links c.130 destinations in

US and Canada Progress with Twin America litigation Sale of small non-core business units

Opportunities ahead

Expansion of new megabus.com premium seat reservation facility

Further scope to rationalise non-megabus.com portfolio

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UK

France

Germany

Belgium

The Netherlands

Spain

Growing inter-city coach services in UK and mainland Europe

High load factors on sleepercoach services Existing European services now profitable New London-Paris-Toulouse-Barcelona route Scope for further services in Europe

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Strong performance and healthy outlook

Good 2013/14 results amidst significant challenges

Current trading as expected

Strong financial position

Further opportunities ahead

− Extensions and new franchises in UK Rail

− megabus.com expansion – North America and Europe

− Further organic growth

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ANNUAL RESULTSYEAR ENDED 30 APRIL 2014

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APPENDICES

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Summary income statement


£m


£m

Change

£m

UK Bus (regional) operating profit 147.4 143.2 4.2

UK Bus (London) operating profit 23.9 19.0 4.9

Citylink profit after tax 1.3 1.3 -

North America operating profit 23.7 13.4 10.3

Twin America profit after tax 5.5 11.7 (6.2)

UK Rail operating profit 34.3 41.2 (6.9)

Virgin Rail Group profit after tax 2.0 8.3 (6.3)

Restructuring costs, Group overheads and other items (14.8) (17.4) 2.6

Operating profit 223.3 220.7 2.6

Finance charges (net) (42.6) (43.3) 0.7

Tax (31.2) (36.3) 5.1

Profit excluding intangibles and exceptionals 149.5 141.1 8.4

Intangibles and exceptionals, net of tax (17.0) (14.6) (2.4)

Reported profit from continuing operations 132.5 126.5 6.0

Adjusted earnings per share (pence) 26.0p 24.6p 1.4p

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Divisional income statements – Year ended 30 April 2014

UK Bus (Regional)

£m

UK Bus (London)

£m

North America

US$mUK Rail

£m

Revenue 1,012.8 244.9 685.7 1,252.0

Rail franchise premia - - - (599.0)

Rail revenue support - - - 301.3

Other operating income 11.1 2.5 7.9 93.8

Staff costs (499.8) (143.2) (276.7) (307.4)

Fuel costs (i.e. diesel) (148.7) (35.4) (90.6) (52.6)

Insurance and claims costs (27.3) (6.7) (46.6) (5.1)

Depreciation (68.7) (5.9) (52.0) (8.2)

Rolling stock costs – lease & maintenance - - - (205.1)

Other operating leases (9.4) (15.0) (21.6) (1.9)

Network Rail - - - (217.5)

Electricity for trains - - - (33.4)

Commissions payable - - - (33.2)

Materials & consumables (39.0) (8.6) (54.5) (32.9)

Other costs (83.6) (8.7) (113.6) (116.5)

Operating profit 147.4 23.9 38.0 34.3

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Rail premium profiles

The amounts shown above do not reflect the changes to premium payments that result from the Rail Regulator’s determination of Network Rail’s charging of train operating companies for the five year control period that commenced on 1 April 2014. The effect on the premium payments has yet to be agreed with the Department for Transport.

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.

Year to 31 March:South West

£mEast Midlands

£m

2014 (465.4) (123.8)

2015 (515.8) (187.8)

2016 (598.4) (100.0)*

2017 (589.0)

* Part year to October 2017

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Miscellaneous income statement items



Twin America joint venture after tax* (£m) 5.5 11.7 (6.2)

Citylink joint venture after tax (£m) 1.3 1.3 -

Group overheads (£m) (13.9) (15.7) 1.8

Restructuring costs (non-exceptional) (£m) (0.9) (1.7) 0.8

Intangible asset expenses (£m) (14.0) (16.1) 2.1

Post-tax exceptional items (£m) (7.5) (3.2) (4.3)

Tough trading conditions at Twin America. Increased competition and loss of market share

Principal exceptional items:

− Further refund of West Coast franchise bid costs

− Provision for Twin America litigation

* excluding exceptional items

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Taxation


Pre-tax profit£m

Tax£m

Rate%

Excluding intangible asset expenses and exceptional items 182.2 (32.7) 17.9%

Intangible asset expenses (14.0) 4.5 32.1%

Exceptional items (8.5) 1.0 11.8%

159.7 (27.2) 17.0%

Reclassify joint venture taxation for reporting purposes (1.7) 1.7

Reported in income statement 158.0 (25.5) 16.1%

Cash tax paid (net) (20.2)

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Movement in net debt

Year to 30 April 2014£m

EBITDA from Group companies before exceptional items 330.2

Loss on disposal of property, plant and equipment 2.1

Equity-settled share based payment expense 2.2

Dividends from joint ventures 8.2

Difference between employer pension contributions and pension expense in operating profit 1.6

Working capital movements (42.3)

Net interest paid (33.5)

Tax paid (20.2)

Net cash from operating activities 248.3

Net capital expenditure including new hire purchase and finance leases (118.9)

Acquisitions /disposals of businesses, intangibles and investments (11.4)

Token sales and redemptions (0.3)

Cash generation 117.7

Foreign exchange, income statement and other movements 12.0

Equity dividends (51.0)

Net own shares purchased (2.3)

Decrease in net debt 76.4

Opening net debt (538.0)

Closing net debt (461.6)

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Fuel hedging

UK Bus (regional

operations) UK Bus (London) North America UK Rail

2014/15 - % of forecast consumption hedged 94% 50% 81% 72%

- average hedge price (per litre) 49.1p 49.9p 75.8 cents 48.8p

2015/16 - % of forecast consumption hedged 36% 37% 30% 37%

- average hedge price (per litre) 46.2p 48.4p 73.7 cents 47.2p

2016/17 - % of forecast consumption hedged - 25% 1% -

- average hedge price (per litre) - 47.1p 73.6 cents -

2017/18 - % of forecast consumption hedged - 12% 1% -

- average hedge price (per litre) - 45.3p 73.6 cents -

Market price (per litre) 45.4p 45.4p 75.4 cents 45.6p

Market prices are as at 30 May 2014

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

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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, the effect of fair value hedges on the carrying value of borrowings and unamortised gains on the early settlement of interest rate swaps.

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

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ANNUAL RESULTSYEAR ENDED 30 APRIL 2014

annual results - stagecoach group/media/files/s/...stagecoach uk rail great britain rail rail...

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