Download - Interim Results 2008 1 Interim Results For the six months ended 31 October 2008 3 December 2008
Interim Results 20081
Interim ResultsInterim ResultsFor the six months ended 31 October 2008For the six months ended 31 October 2008
3 December 20083 December 2008
Interim Results 20082
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.
Interim Results 20083
Robert SpeirsRobert Speirs
ChairmanChairman
Interim Results 20084
Highlights
Good underlying revenue growth in all core divisions
Interim dividend of 1.8p, up 33.3%
Adjusted earnings per ordinary share up 28.7%
Challenging short-term outlook in UK Rail; decisive management action in anticipation of this
Interim Results 20085
Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
Interim Results 20086
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
Dividend per ordinary share
31 Oct 08 31 Oct 07
£1,045.0m
£119.8m
12.1p
9.7p
£(370.2)m
1.8p
£820.8m
£100.0m
9.4p
9.0p
£(494.7)m
1.35p
Change
27.3%
19.8%
28.7%
7.8%
25.2%
33.3%
Interim Results 20087
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 08£m
31 Oct 07£m
60.9
20.2
(0.4)
31.7
15.6
(8.2)
(14.6)
(18.9)
86.3
(16.9)
69.4
52.5
18.0
(1.1)
25.3
13.2
(7.9)
(15.4)
(15.7)
68.9
(3.1)
65.8
Change£m
8.4
2.2
0.7
6.4
2.4
(0.3)
0.8
(3.2)
17.4
(13.8)
3.6
Interim Results 20088
UK Bus
Revenue and journeys benefiting from marketing campaigns, investment in fleet, excellent value fares and concessionary fare schemes
Acquisitions of small, complementary businesses
Continued underlying revenue and volume growth
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)
31 Oct 08 31 Oct 07
410.4
395.0
60.9
14.8%
325.2
157.4
367.1
361.6
52.5
14.3%
312.4
154.4
Change
11.8%
9.2%
16.0%
0.5%
4.1%
2.0%
Interim Results 20089
North America (excluding megabus)
Further margin improvement
Further expansion of megabus.com
Revenue (US$m)
Like-for-like revenue (US$m)
Operating profit (US$m)
Operating margin
31 Oct 08 31 Oct 07
267.7
267.9
38.0
14.2%
258.9
257.0
36.2
14.0%
Change
3.4%
4.2%
5.0%
0.2%
Interim Results 200810
UK Rail (wholly-owned)
Continued like-for-like revenue growth and good profitability Risk and opportunities
Challenging economic environment New timetable at East Midlands Trains Two new stations at East Midlands Trains Automatic ticket gates at London Waterloo and four major East Midlands Trains stations
East Midlands revenue up 14.1% compared to equivalent predecessor businesses in prior year
Revenue (£m)
Like-for-like revenue (£m)
Operating profit (£m)
Operating margin
South Western Trains estimated passenger miles (millions)
31 Oct 08 31 Oct 07
486.4
345.0
31.7
6.5%
1,675.6
322.7
318.8
25.3
7.8%
1,619.0
Change
50.7%
8.2%
25.3%
(1.3)%
3.5%
Interim Results 200811
Virgin Rail Group
2007 includes CrossCountry franchise that ended November 2007
Plans to increase number of services by approximately one-third starting December 2008
Recent performance and revenue adversely affected by infrastructure work, however overall profitability not adversely affected
Revenue - 49% share (£m)
- West Coast
- West Coast like-for-like
Operating profit - 49% share (£m)
Operating margin
Dividends received (£m)
Estimated Passenger miles (millions) - West Coast
31 Oct 08 31 Oct 07
159.3
159.2
149.1
19.4
12.2%
19.4
1,378.0
225.8
149.1
149.1
16.3
7.2%
11.0
1,284.7
Change
(29.5%)
6.8%
0.0%
19.0%
5.0%
76.4%
7.3%
Interim Results 200812
Miscellaneous income statement items
Increased group overheads includes higher share based payment expenses
Exceptional items include
£13.5m exceptional tax charge in relation to the abolition of UK Industrial Buildings Allowances
a gain of £2.2m in relation to resolution of acquisition & disposal liabilities
Citylink joint venture (£m)
Splash Tours joint venture (£m)
Intangible asset expenses (£m)
Group overheads (£m)
Restructuring costs (£m)
Post-tax exceptional items (£m)
31 Oct 08 31 Oct 07
0.7
(0.2)
(6.5)
(7.2)
(1.0)
(11.5)
0.6
(0.3)
(6.2)
(6.2)
(1.7)
2.0
Change
16.7%
33.3%
(4.8)%
(16.1)%
41.2%
(675.0)%
Interim Results 200813
Finance charges and credit ratios
Net Group finance charges (£m)
Net finance charges, including net finance income from joint ventures (£m)
EBITDA from continuing operations and joint ventures* (£m)
- last six months
- last twelve months
Period-end net debt (£m)
Net Debt/EBITDA (12 months)*
EBITDA*/Net finance charges (including net finance income from joint ventures)
31 Oct 08 31 Oct 07
(14.6)
(13.0)
156.2
302.7
370.2
1.2x
12.0x
(15.4)
(13.6)
135.1
250.5
494.7
2.0x
9.9x
Change
5.2%
4.4%
15.6%
20.8%
25.2%
(0.8)x
2.1x
* excluding exceptional items
Interim Results 200814
Liquidity & interest rate risk Excellent liquidity
c.£500m of undrawn committed bank facilities
Sufficient bank facilities to refinance US$ bond in November 2009
Key refinancing required by 2012
Other undrawn available credit lines – e.g. asset finance
Operating well within bank covenants
Cash generative
Upward pressure on debt pricing
Significantly higher margins for new UK asset finance
Likely step up in bank margins for refinancing
Interim Results 200815
Taxation
Excluding intangible asset expenses and exceptional items- Before joint ventures- Joint venturesIntangible asset expenses
Exceptional items
Reclassify joint venture taxation for reporting purposesReported in income statement
Cash tax paid (net)
Pre-taxProfit£m
Tax£m
89.621.6(6.5)
104.72.0
106.7(6.0)
100.7
(18.9) (6.0)
1.1(23.8)(13.5)(37.3)
6.0(31.3)
0.7
Rate%
21.1% 27.8%
16.9%22.7%
35.0%
31.1%
31 Oct 2008
Interim Results 200816
EBITDA from Group companies before exceptionals Loss on disposal of plant and equipmentEquity-settled share based paymentDividends from joint venturesMovement in retirement benefit obligationsWorking capital movementsNet interest paidTax paidNet cash from operating activitiesNet capital expenditure including new hire purchase and finance leasesAcquisitions of businesses, intangibles and investmentsDisposals of businesses and investmentsMovement in loans to joint venturesToken sales and redemptionsForeign exchange/otherIncrease in net debt before cash flows with shareholdersEquity dividendsShare capital movementsIncrease in net debtOpening net debtClosing net debt
31 Oct 08£m
136.20.61.2
19.4(15.5)(19.6)(14.5)
(0.7)107.1(79.1)
(9.6)0.3
(0.1)(1.8)
(38.7)(21.9)(28.9)
0.3(50.5)
(319.7)(370.2)
Movement in net debt
Interim Results 200817
28.27.7
Nil 35.9
54.213.115.9 83.2
(3.5)(0.5)(0.1)
(4.1)
50.712.615.8
79.1
26.05.4
15.9 47.3
Capital expenditure
UK BusNorth AmericaUK Rail
New hire purchase
and finance leases
£m
Impact ofcapex onnet debt
£m
Disposalproceeds**
£mNet£m
Cash spent on capex*
£m
* Excludes capitalised intangible assets of £3.1m (2007: £1.1m) and assets acquired through business combinations
** Excludes proceeds from selling businesses
Significant capital expenditure planned for second half of year to 30 April 2009
Interim Results 200818
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
91.6%
33.6p
78.3%
49.2p
6.0%
41.9p
31.6p
56.3 cents
75.7%
61.5 cents
63.3%
90.8 cents
4.7%
67.9 cents
45.9 cents
UK Rail
30.7p
76.1%
31.6p
74.7%
31.6p
74.7%
31.6p
30.7p
Market prices are as at 26 November 2008
Prices exclude premia payable on fuel caps, delivery margins, duty, taxes and Bus Services Operators Grant
Interim Results 200819
(167.1)
73.7
(93.4)
(33.6)
(6.7)
(133.7)
(4.5)
(20.6)
(158.8)
(183.6)
73.8
(109.8)
(43.4)
(5.4)
(158.6)
(5.8)
(22.0)
(186.4)
(158.5)
73.8
(84.7)
(30.1)
(5.4)
(120.2)
(5.1)
(22.0)
(147.3)
Fuel costsLatest forecasts
UK Bus, excluding BSOG*
UK Bus, BSOG*
UK Bus, including BSOG*
North America
South Western Trains
2008/9 UK Bus Acquisitions (Bullocks, Highland)
East Midlands Trains
Total
2008/09Forecast
£m
2009/10Forecast
£m
2010/11Forecast
£m
Fuel costs
(150.1)
68.5
(81.6)
(25.1)
(5.3)
(112.0)
-
(10.9)
(122.9)
2007/08Actual
£m
Market prices are as at 26 November 2008, when Brent Crude was US$50 per barrel
Forecast costs for the unhedged element of fuel are based on 26 November 2008 spot prices
Above costs include delivery margins, duty and taxes (duty forecast at current levels)
* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services
189.8
-
189.8
74.8
12.0
276.6
5.5
50.5
332.6
2008/9ForecastLitres m
Volumes
Interim Results 200820
Brian SouterBrian Souter
Chief ExecutiveChief Executive
Interim Results 200821
Overview
Good growth in bus and rail services Consumer demand for good value products and
services Planning for challenging economic conditions in
2009/10 Decisive management action now in UK Rail
Interim Results 200822
UK Bus
Excellent performance – like-for-like revenue up 9.2%
Further increase in like-for-like passenger volumes – 4.1%
Consumer demand for good value transport options
Successful discount ticketing strategy
Resilient and flexible business model
Interim Results 200823
UK Rail
Growing commuter and inter-city Strong operational performance and delivery on franchise
commitments Planning for significant drop in Central London Employment Decisive management action plan to minimise risk and maximise
opportunities– Cost reduction programme– Revenue generation: new timetables, new stations, gating,
off-peak travel
Interim Results 200824
UK Rail/Virgin Rail GroupManagement action plan
Critical review of cost base Emphasis on sustainable savings at South Western Trains &
West Coast Trains Headcount reductions Reduction in management and staff headcount and overhead
costs Significant improvement in staff productivity and ongoing
investment in technology driven savings Focus on maximising revenue generation from new initiatives –
e.g. gates
Interim Results 200825
London Employment and Peak Arrivals Rail Trends 1988-1997
Passenger Volumes
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Ind
ex (
1988
= 1
)
Total Central London employment
South West peak arrivals
National Rail peak arrivals
Sources: Central London employment – Greater London AuthoritySouth West peak arrivals – South Western TrainsNational Rail peak arrivals – National Rail Trends
Interim Results 200826
North America
Solid growth across diverse portfolio
Commuter services benefiting from modal shift
Successful contract renewal season
Weaker leisure demand in United States
megabus.com ahead of expectations
– Increased product investment
– Expansion to new locations
– Attractive recession product
Interim Results 200827
Current trading and outlook
Current trading in line with management expectations Further growth expected in UK Bus and American
businesses Challenging environment for UK Rail 2009/10 BUT management action plan to address cost base
and maximise revenue opportunities Robust and diverse portfolio of businesses with strong
cash generation
Interim Results 200828
Interim ResultsInterim ResultsFor the six months ended 31 October 2008For the six months ended 31 October 2008
3 December 20083 December 2008
Interim Results 200829
Appendices
Interim Results 200830
UK Bus Revenue
Like-for-like
Acquisitions:Highland excluding Inverness (acquired 16 May 2008)Fens (acquired 28 March 2008)Rennies (acquired 14 March 2008)Bullocks (acquired 10 August 2008)
Stagecoach in Inverness*
Disposals:Darlington (disposed August 2007)Huddersfield (disposed April 2008)
Start-ups:Rail replacement (started May 2008)
Total reported
Change%
9.2%
11.8%
31 Oct 2008£m
31 Oct 2007£m
395.0
3.62.61.30.3
5.3
Nil Nil
2.3
410.4
361.6
Nil Nil Nil Nil
3.0
0.91.6
Nil
367.1
* Existing Inverness operations integrated with and now not distinguishable from Highland so Inverness excluded from like-for-like comparison
Interim Results 200831
North America
Excluding megabusmegabus- Midwest- California- North East
31 Oct 2008US$m
31 Oct 2007US$m
38.0
1.8 Nil
(2.6)37.2
36.2
(0.5)(1.7)
Nil34.0
Operating Profit
31 Oct 2008US$m
31 Oct 2007US$m
267.7
9.40.45.6
283.1
258.9
4.40.4
Nil263.7
Revenue
Interim Results 200832
Scheduled service/line run/commuterSightseeing & tourCharterSchool bus & contractLike-for-like revenue excl megabusClosed operations and foreign exchange movementsTotal North America excl megabusmegabusTotal North America
31 Oct 08US$m
31 Oct 07US$m
103.760.857.945.5
267.9(0.2)
267.715.4
283.1
100.360.854.941.0
257.01.9
258.94.8
263.7
% Growth
3.4% Nil
5.5%11.0%
4.2% n/a
3.4%220.8%
7.4%
North America revenue breakdown
Interim Results 200833
Divisional income statementsSix months ended 31 October 2008
UK Rail£m
486.4
70.3
31.7
(133.2)
(15.1)
(2.6)
(0.8)
(86.2)
(3.6)
(207.6)
(14.4)
(15.0)
(78.2)
31.7
UK Bus£m
North America£m
410.4
Nil
6.4
(206.4)
(53.7)
(13.9)
(22.5)
Nil
(4.3)
Nil
Nil
(17.3)
(37.8)
60.9
150.5
Nil
1.9
(60.6)
(18.6)
(9.0)
(8.7)
Nil
(2.2)
Nil
Nil
(11.1)
(22.4)
19.8
VRG (100%)£m
325.0
152.4
61.7
(69.8)
(1.5)
(1.9)
(0.2)
(106.0)
Nil
(242.7)
(10.0)
Nil
(67.4)
39.6
Revenue
Rail franchise support
Other operating income
Staff costs
Fuel costs (i.e. diesel)
Insurance and claims costs
Depreciation
Rolling stock costs – lease & maintenance
Other operating leases
Network Rail
Electricity for trains
Material & consumables
Other costs
Operating profit
Interim Results 200834
Rail subsidy/(premium) profiles
2009
2010
2011
2012
2013
2014
2015
2016
2017
South Western
£m
East Midlands
£m
20.9
(42.4)
(89.6)
(149.7)
(224.8)
(294.6)
(358.1)
(425.1)
(419.0)
117.4
89.2
54.7
12.8
(18.6)
(38.3)
(93.3)
n/a
n/a
West Coast£m
291.6
264.4
226.0
195.0
n/a
n/a
n/a
n/a
n/a
Year to 31 March:
The above amounts are subject to adjustment for: (1) various inflation measures (2) risks borne by the Department for Transport (3) called options and (4) changes in Regulated Network Rail charges. The amounts shown above are based on estimated inflation and options called to date.
Interim Results 200835
Exchange rates
US$C$
Closing rate Average rate
2.07741.9731
2.01332.1034
October 2007
Closing rate Average rate
1.61581.9645
1.88111.9767
October 2008
Interim Results 200836
Interim ResultsInterim ResultsFor the six months ended 31 October 2008For the six months ended 31 October 2008
3 December 20083 December 2008