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1 Annual Results 2003
Annual ResultsAnnual Results2525thth June 2003 June 2003
2 Annual Results 2003
Robert SpeirsRobert Speirs
ChairmanChairman
3 Annual Results 2003
Highlights
Continued profitability in all four key operating divisions
Strong cash generation across the Group
£214.6m (28%) debt reduction since April 2002
Free cash flow up 18%
c. £300m of disposals announced post year-end
US £136m; Hong Kong £176m
Good progress in restructuring Coach USA
Terms of new franchise at South West Trains agreed with SRA
Final dividend of 1.8p per share (giving full year dividend of 2.6p (2002: 2.6p))
4 Annual Results 2003
Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
5 Annual Results 2003
Turnover
Total operating (loss)/profit
- pre goodwill & exceptionals
(Loss)/profit before tax
- pre goodwill & exceptionals
Free cash flow*
Adjusted earnings per share
Dividend per share
2003£m
2002£m
2,076.6
(466.2)
146.4
(500.2)
112.9
217.8
6.4p
2.6p
2,111.4
96.5
166.6
42.0
106.8
184.3
6.3p
2.6p
Financial Highlights
* Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and associates, net cash outflow from returns on investments and servicing of finance, and taxation.
6 Annual Results 2003
EBITDA
UK BusCoach USAOverseas BusRailVirgin Rail Groupthetrainline.comRoad KingOthers
Overheads & restructuringEBITDA before exceptionals
2003£m
2002Restated
£m
112.049.551.840.9
7.2(4.3)10.5(0.8)
266.8(15.1)251.7
105.281.957.034.110.8(4.4)12.9(0.8)
296.7(17.4)279.3
7 Annual Results 2003
Opening net debtCash flows from operationsRoad King dividendsNet interest paidTax paidDividends paidNet capital expenditure and new hire purchase financeAcquisition/disposal of subsidiaries/investmentsNet token cashForeign Exchange and other movementsClosing net debt
£m(774.6)272.2
5.3(51.9)
(7.8)(27.6)(52.3)
(4.8)2.1
79.4(560.0)
Movement in Net Debt
8 Annual Results 2003
Coach USA Trading Results
Results in line with expectations set in December Turnover £603.0m (2002 - £682.3m) 3.4% like for like revenue decline*
0.4% like for like decline in coach and bus Operating profit** £14.0m (2002 - £38.4m)
strict cost control Insurance and claims costs up 38.2% in US$
Decline in taxicab sales and utilisation Results stated after all claims costs (one-off and recurring)
* Like for like revenue decline is measured as the change in revenue excluding the impact of acquisitions, disposals and foreign exchange movements
** Pre exceptional items and goodwill amortisation
9 Annual Results 2003
Coach USA – 2002/03 build-up
Businesses sold & closed in 2002/03Disposals announced since 30 April 2003:- West/South Central- Transit- New England
Disposals planned:- Taxi- South East- Canada
North East/North CentralTotal turnover
Turnover$m
41.7
215.9100.849.5
407.9
118.249.838.4
614.3324.7939.0
10 Annual Results 2003
UK Bus Trading Results
Sales and profit are growing Turnover growth 5.4% to £598.4m Underlying passenger growth 3.2% Strong contribution from London companies
13.7% revenue growth Improved operating margin
11.2% versus 11.0% in 2002 11.3% versus 11.0% excluding operating lease impact Delivered through revenue growth and operating
efficiencies
11 Annual Results 2003
Overseas Bus Trading Results
Turnover £183.7m (2002 - £ 194.7m)
Operating profit £30.3m (2002 - £33.4m)
Operating margin 16.5% (2002 - 17.2%)
Impact of SARS and sluggish Hong Kong economy on Citybus
Further sales and profit growth in New Zealand
New Zealand
Operating profit £11.2m (2002 - £9.0m)
Operating margin 22.0% (2002 - 21.3%)
Passenger volumes up 8.5%
12 Annual Results 2003
Rail Trading Results
Rail Subsidiaries
Turnover £413.6m (2002 - £402.8m)
Operating profit £38.2m (2002 - £31.0m)
Passenger volumes up 2.1% at SWT (0.9% excluding strike action in prior year)
Financial performance benefited from significant operational improvements at South West Trains
Operating profit stated after franchise bid costs
13 Annual Results 2003
Joint Ventures and Associates
Virgin Rail Group
Share of revenue £276.1m (2002 - £261.2m)
Share of operating profit £7.2m (2002 - £10.8m)
Trainline
Share of revenue £11.0m (2002 - £11.7m)
Share of operating loss £4.3m (2002 - £4.4m)
Road King
Share of operating profit £10.5m (2002 - £12.9m)
14 Annual Results 2003
Disposals announced
Disposals completed in year ended 30 April 2003
- Australia
- Coach USA – various units
Disposals announced since 30 April 2003
- Citybus
- Coach USA – South Central & West
- Coach USA – New England
- Coach USA – Transit
Gross consideration
£m
2.1
4.9
7.0
176.5
97.0
25.0
14.1
319.6
Deferredconsideration
£m
-
-
-
-
16.6
4.4
-
21.0
Reduction inconsolidated
net debt£m
2.1
4.9
7.0
176.5
80.4
20.6
14.1
298.6
Foreign currency amounts have been translated using the average exchange rate for the year ended 30 April 2003 for disposals completed in the year and using the 30 April 2003 rate for the other disposals
15 Annual Results 2003
As at 30 April 2003Disposals announced post year-endPro-forma net debt
£m(560.0)291.6
(268.4)
Balance sheet impact
Minimal net asset impact from disposals
No significant gain or loss
Net Debt
Pro-forma gearing – 84.6%
Significant improvement (i.e. reduction) in Net Debt/EBITDA
16 Annual Results 2003
Pensions
Increased employer and employee contributions
£31.2m total pension costs (2002 - £18.0m)
£26.9m cash paid (2002 - £19.5m)
FRS17 post-tax deficit of £156.2m for UK Bus/Group
Financial support in new SWT franchise allows for cost of funding the deficit for SWT
Managed as part of overall cost base
17 Annual Results 2003
Current Trading
Group trading in line with expectations Continuing revenue and profit growth in UK Bus SWT trading under the terms of the one-year franchise
extension Coach USA
restructuring ongoing no significant change in trading environment
Further growth in New Zealand Virgin Rail Group - one year SRA budget 2003/04
18 Annual Results 2003
Divisional StrategyDivisional Strategy
19 Annual Results 2003
Graham EcclesGraham Eccles
Director – Rail OperationsDirector – Rail Operations
20 Annual Results 2003
Rail
The new SWT Franchise
Prospects for Virgin Rail Group
Rail Business Development
21 Annual Results 2003
Brian SouterBrian Souter
Chief ExecutiveChief Executive
22 Annual Results 2003
Coach USA Reducing exposure to leisure
related businesses Realising value through sales
process Reducing management
stretch Retaining businesses with
geographically large units and more predictable revenue streams
Redeploying assets to maximise utilisation and eliminate unnecessary capital expenditure
30/70
70/30
23 Annual Results 2003
Hong Kong - Citybus Disposal
HK$2.2 billion enterprise value – compelling offer for the business Economic uncertainty Changing political landscape
Pressure to reduce fares Costly bus modifications relating to the environment, e.g.
catalytic convertors Pressure for market consolidation
Increasing capital spend to retain franchises New depot Fleet replacement
Competition – Railway extensions
24 Annual Results 2003
Other Overseas Interests New Zealand
Commercial structure Organic growth Dominant market share Strong management team
core part of the Stagecoach portfolio
Road King Sound underlying business but non core to
Stagecoach Group Would exit if the right opportunity arose
25 Annual Results 2003
UK Bus
Historic performance and trends Growth prospects
London Provincial companies
Organic growth in southern networks Refresh “tired” northern networks
New Products Taxibus Kick Start
26 Annual Results 2003
Summary
Coach USA sales programme and restructuring on schedule
Terms of new franchise at SWT agreed with SRA Ongoing discussions between VRG and the SRA to
re-negotiate the West Coast and Cross Country franchises
Operating margin improvement at UK Bus Continued organic growth in New Zealand US and Citybus disposals – substantial debt reduction Significant de-risking of the Group portfolio
27 Annual Results 2003
Where next for Stagecoach? Maximise shareholder value from existing Portfolio A portfolio now dominated by UK Bus and Rail businesses
Organic growth New products Maximise value from existing rail franchises
Residual US Portfolio Over US$300m of revenue More predictable $22m operating profit in 2002/03 can be sustained and grown despite
lower revenue base; EBITDA base of approximately $40m Organic growth opportunities/small bolt on acquisitions
Growth characteristics in New Zealand Strong cash generation
Further debt reduction Well placed for refinancing in 2004
Evaluate capital structure post US restructuring Progressive Dividend policy
28 Annual Results 2003
Annual ResultsAnnual Results2525thth June 2003 June 2003
29 Annual Results 2003
Appendices
30 Annual Results 2003
UK Bus Revenue Development
2001/02 Turnover
Passenger volumes outside London
London contract changes
Fares/tender prices/business mix
2002/03 Turnover
£m %
567.9
1.8
14.6
14.1
598.4
-
0.3%
2.6%
2.5%
5.4%
31 Annual Results 2003
144.2
454.2
598.4
10.5%
11.4%
11.2%
15.1
51.9
67.0
126.8
441.1
567.9
10.6%
11.2%
11.0%
13.5
49.2
62.7
UK Bus - London/Other
2003
Operating Operating
Turnover Profit Margin
£m £m %London
Other
2002Operating
Operating Profit
MarginTurnover Restated
Restated £m £m
%
32 Annual Results 2003
Overseas Bus Revenue Development
2001/02 TurnoverDisposal of Portugal and AustraliaWithdrawal of PRC servicesCurrency movementsVolumes
- Severe weather impact in prior year- Underlying growth
Impact of SARSFares2002/03 Turnover
Citybus£m
New Zealand
£m
148.6-
(0.1)(11.9)
0.9(2.3)(2.9)-
132.3
42.2--3.8
-4.6-0.4
51.0
Other£m
3.9(3.5)--
----0.4
Total£m
194.7(3.5)(0.1)(8.1)
0.92.3
(2.9)0.4
183.7
33 Annual Results 2003
Overseas BusSegmental results
148.6
42.2
3.9
194.7
17.0%
21.3%
-
17.2%
25.2
9.0
(0.8)
33.4
132.3
51.0
0.4
183.7
14.4%
22.0%
-
16.5%
19.1
11.2
-
30.3
2003
Operating Operating
Turnover Profit Margin
£m £m %Citybus
New Zealand
Other
Total
2002Operating
Operating Profit
MarginTurnover Restated
Restated £m £m
%
34 Annual Results 2003
Revenue
SARS effect - March
- April
Normalised revenue (excluding SARS)
2003HK$m
2002HK$m
1,607.4
7.3
27.6 34.9
1,642.3
1,660.3
Nil
Nil
1,660.3
Citybus – SARS Impact
May 2003 revenues 20% down on prior year
35 Annual Results 2003
133.2
63.5
485.6
682.3
12.7%
7.1%
3.5%
5.6%
16.9
4.5
17.0
38.4
91.4
64.7
446.9
603.0
5.1%
0.0%
2.1%
2.3%
4.7
-
9.3
14.0
Coach USASegmental results
2003
Operating Operating
Turnover Profit Margin
£m £m %Taxi
Transit
Coach & Bus
Total
2002Operating
Operating Profit
MarginTurnover Restated
Restated £m £m
%
36 Annual Results 2003
Capital Expenditure
UK BusCoach USAOverseas BusRail
Capital Expenditure
£m
DisposalProceeds*
£m
15.821.513.3
2.352.9
(13.9)(5.1)(1.1)
-(20.1)
2003 Net£m
1.916.412.2
2.332.8
2002Net£m
19.648.4
7.41.6
77.0
*excludes proceeds from selling businesses
37 Annual Results 2003
Interest/Debt Ratios
Finance charges* (net)
EBITDA pre-exceptionals
EBITDA pre-exc/Finance charges
Net Debt/EBITDA
2003£m
2002£m
33.5
251.7
7.5 times
2.2 times
59.8
279.3
4.7 times
2.8 times
* 2003 includes £13.1m net gain on early redemption of bonds and close out of interest rate swaps
38 Annual Results 2003
Taxation
Pre-goodwill and exceptionalsExceptional itemsGoodwill amortisation
Cash tax
Pre-tax£m
Tax£m
112.9(575.5)
(37.6)(500.2)
(28.8) Nil
3.8(25.0)(7.8)
%
25.5% Nil
10.1%5.0%
2003
33.4% effective rate excluding £575.0m Coach USA write-downs
39 Annual Results 2003
Annual ResultsAnnual Results2525thth June 2003 June 2003