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Interim Results For the six months ended 31 October 2010 8 December 2010. Interim Results 2010. Cautionary statement. This document is solely for use in connection with a briefing on Stagecoach Group plc (“the Group”).

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cautionary statement
Cautionary statement

This document is solely for use in connection with a briefing on 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.

slide4

Highlights

  • Adjusted earnings per share up 35.6%
    • Revenue and operating profit growth in all divisions
    • Strong organic growth with improving market conditions
    • Excellent operational performance and customer satisfaction
  • Interim dividend of 2.2p, up 10%
  • Positive outlook
slide6

Summary income statement

31 Oct 10

£m

31 Oct 09

£m

Change

£m

UK Bus (regional) operating profit

UK Bus (London) operating loss

North America operating profit incl megabus

North America joint ventures’ profit after tax

UK Rail operating profit

Virgin Rail Group profit after tax

Restructuring costs, group overheads and other items

Operating profit

Finance charges (net)

Tax

Profit excluding intangibles and exceptionals

Intangibles and exceptionals, net of tax

Reported profit from continuing operations

73.3

(0.1)

15.1

8.8

22.9

10.0

(5.3)

124.7

(16.0)

(21.5)

87.2

(1.2)

86.0

58.9

Nil

8.3

7.4

14.9

9.3

(5.3)

93.5

(18.0)

(11.1)

64.4

(7.7)

56.7

14.4

(0.1)

6.8

1.4

8.0

0.7

Nil

31.2

2.0

(10.4)

22.8

6.5

29.3

slide7

UK Bus (regional operations)

31 Oct 10

31 Oct 09

Change

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)

445.1

438.9

73.3

16.5%

334.7

163.2

433.0

429.2

58.9

13.6%

330.5

167.1

2.8%

2.3%

24.4%

290bp

1.3%

(2.3)%

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

slide9

North America

31 Oct 10

31 Oct 09

Change

237.3

45.4

282.7

23.1

13.9

37.0

13.1%

221.4

41.0

262.4

13.5

12.0

25.5

9.7%

7.7%

45.1%

340bp

Revenue – wholly owned (US$m)

Revenue – joint ventures (US$m)

Revenue – total (US$m)

Operating profit – wholly owned (US$m)

Operating profit – joint ventures (US$m)

Operating profit – total (US$m)

Operating margin (%)

slide10

UK Rail (wholly-owned)

31 Oct 10

31 Oct 09

Change

Revenue (£m)

Like-for-like revenue excluding tram (£m)

Operating profit (£m)

Operating margin (%)

Estimated passenger miles - South Western Trains (m)

Estimated passenger miles - East Midlands Trains (m)

525.0

505.6

22.9

4.4%

1,708.4

647.6

512.9

475.0

14.9

2.9%

1,635.6

584.8

2.4%

6.4%

53.7%

150bp

4.5%

10.7%

slide12

Virgin Rail Group

31 Oct 10

31 Oct 09

Change

Revenue - 49% share (£m)

Operating profit - 49% share (£m)

Operating margin (%)

Dividends received (£m)

Estimated Passenger miles (millions)

195.6

13.7

7.0%

7.3

1,790.5

170.4

12.8

7.5%

8.6

1,594.6

14.8%

7.0%

(50)bp

(15.1)%

12.3%

slide13

Miscellaneous income statement items

31 Oct 10

31 Oct 09

Change

Citylink joint venture (£m)

Group overheads (£m)

Restructuring costs (non-exceptional) (£m)

Intangible asset expenses (£m)

Post-tax exceptional items (£m)

1.1

(5.4)

(1.0)

(5.3)

(4.4)

21.2

0.9

(5.8)

(0.4)

(5.3)

(5.7)

1.0

0.2

0.4

(0.6)

Nil

1.3

20.2

  • Exceptional items:
  • £18.5m pre-tax gain – release of liabilities related to past business disposals
  • £4.6m pre-tax gain – pre-acquisition insurance provision no longer expected to be settled
  • £0.6m pre-tax loss – London Bus acquisition costs
slide14

Finance charges and credit ratios

31 Oct 10

31 Oct 09

Change

Net Group 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)

(15.9)

171.7

314.9

(313.4)

1.0x

10.8x

(17.9)

147.9

300.9

(343.1)

1.1x

8.3x

(11.2)%

16.1%

4.7%

(8.7)%

(0.1)x

2.5x

  • Strong financial position
  • Ongoing evaluation of capital structure

* excluding exceptional items

taxation
Taxation

31 Oct 2010

Pre-tax

Profit

£m

Tax

£m

Rate

%

Excluding intangible asset expenses and exceptional items

Intangible asset expenses

Exceptional items

Reclassify joint venture taxation for reporting purposes

Reported in income statement

Cash tax paid (net)

113.2

(4.4)

4.0

112.8

(4.5)

108.3

(26.0)

0.5

(1.3)

(26.8)

4.5

(22.3)

5.8

23.0%

11.4%

32.5%

23.8%

20.6%

slide16

Movement in net debt

31 Oct 10

£m

EBITDA from Group companies before exceptional items

Loss on disposal of plant and equipment

Equity-settled share based payment

Dividends from joint ventures

Movement in retirement benefit obligations

Working capital movements

Net interest paid

Tax paid

Net cash from operating activities

Net capital expenditure including new hire purchase and finance leases

Acquisitions /disposals of businesses, intangibles and investments

Token sales and redemptions/others

Cash generation

Foreign exchange/income statement movements

Share capital movements

Increase in net debt

Opening net debt

Closing net debt

147.4

0.7

2.3

15.5

(9.2)

(35.0)

(5.1)

(5.8)

110.8

(73.7)

(56.8)

(0.9)

(20.6)

5.7

(1.8)

(16.7)

(296.7)

(313.4)

capital expenditure
Capital expenditure

Cash spent on capex £m

New hire purchase and finance leases

£m

Impact of

capex on

net debt

£m

Disposal

proceeds

£m

Net

£m

UK Bus/Central

North America

UK Rail

47.8

10.9

19.3

78.0

5.3

-

-

5.3

53.1

10.9

19.3

83.3

(1.4)

(1.4)

(6.8)

(9.6)

51.7

9.5

12.5

73.7

slide18

Pensions

31 Oct 2010

Cash contributions

£m

31 Oct 2009

Cash contributions

£m

31 Oct 2010

Pension

expense

£m

31 Oct 2009

Pension expense

£m

16.6

0.5

14.2

31.3

16.7

0.5

11.2

28.4

UK Bus/Central

North America

UK Rail

9.4

0.5

12.2

22.1

11.8

0.6

8.1

20.5

  • Post-tax deficit of £80.6m (April 2010: £145.7m)
  • Accounting value of pension assets, liabilities and costs will continue to vary with market fluctuations and assumptions
  • Rail – risks mitigated with obligations limited to contributions payable over duration of franchises. Increase in contributions and expense reflects introduction of salary sacrifice scheme (with a corresponding reduction in salary costs)
  • Bus – schemes closed to new entrants and contributions have stabilised
slide19

Summary

  • Strong performance from all divisions
    • Reflected in adjusted earnings per share up 35.6% and dividend up 10.0%
  • Management action and financial discipline underpin a strong business emerging from recession
  • Positive outlook for second half of financial year
slide21

Overview

  • Strong financial position
  • Strong organic growth across Group portfolio
  • Improving economic environment
  • Clearer picture on UK public sector spending
  • Opportunities ahead:
    • Maximise opportunities from commercial bus model
    • Rail regulatory reform
    • megabus.com expansion in North America
growth strategy at uk bus
Growth strategy at UK Bus
  • Strong industry-leading margins and passenger growth
  • UK leader on commercial smartcard development
  • Turnaround plans at London bus
    • Overhead reductions
    • Business review
    • Efficiency improvements
rail recovery and reform
Rail recovery and reform
  • Strong revenue growth across all franchises
  • Cost control, operating performance and customer satisfaction
  • Significant opportunities from radical industry reform and better franchising
megabus com north america growth engine
megabus.com: North America growth engine
  • Growing footprint and volumes in US and Canada
  • Focus of investment and redeployment of resources
  • Extension of successful hub concept
  • Stabilisation of non-megabus.com revenue
slide25

Current trading and outlook

  • Current trading in line with management expectations
  • Improving trends continue
  • Continued focus on organic growth and shareholder value
slide28

Divisional income statements

Six months ended 31 October 2010

UK Bus

(regional)

£m

North America

£m

UK Rail

£m

VRG (100%)

£m

Revenue

Rail revenue support

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

Commissions payable

Material & consumables

Other costs

Operating profit

445.1

-

-

7.8

(220.0)

(55.5)

(16.4)

(29.7)

-

(5.3)

-

-

-

(17.2)

(35.5)

73.3

155.1

-

-

2.1

(63.3)

(15.7)

(13.7)

(10.7)

-

(3.8)

-`

-

-

(10.8)

(24.1)

15.1

525.0

41.5

(131.7)

37.2

(133.7)

(16.7)

(2.7)

(1.7)

(94.4)

(1.4)

(103.4)

(17.0)

(12.6)

(14.9)

(50.6)

22.9

399.2

11.8

(59.2)

13.2

(68.3)

(9.7)

(1.7)

(1.3)

(105.8)

-

(79.3)

(5.0)

(23.2)

(0.7)

(42.0)

28.0

slide29

UK Bus Revenue

31 Oct 2010

£m

31 Oct 2009

£m

Change

%

Like-for-like

Acquisitions:

Islwyn Borough Transport (acquired January 2010)

Start-ups:

Rail replacement South (started May 2009)

Preston Bus

Total reported

438.9

1.0

0.6

4.6

445.1

429.2

-

0.5

3.3

433.0

2.3%

2.8%

north america revenue breakdown
North America revenue breakdown

31 Oct 10

US$m

31 Oct 09

US$m

% Growth

96.7

48.3

38.0

15.0

198.0

3.0

201.0

36.3

237.3

45.4

282.7

94.3

49.6

39.6

14.3

197.8

3.5

201.3

20.1

221.4

41.0

262.4

2.5%

(2.6)%

(4.0)%

4.9%

0.1%

(14.3)%

(0.1)%

80.6%

7.2%

10.7%

7.7%

Scheduled service/line run/commuter

Charter

School bus & contract

Sightseeing & tour

Like-for-like revenue excl megabus

Closed operations and foreign exchange movements

Total North America excl megabus

megabus

Total North America incl. megabus

60% share of Twin America

Total North America incl Twin

slide31

Rail subsidy/(premia) profiles

South

Western

£m

East

Midlands

£m

West Coast

£m

Year to 31 March:

2010

2011

2012

2013

2014

2015

2016

2017

(161.6)

(224.9)

(309.6)

(394.9)

(448.6)

(526.4)

(609.2)

(582.4)

3.8

(33.5)

(81.8)

(117.3)

(124.8)

(186.3)

-

-

(101.0)

(147.8)

(206.9)

-

-

-

-

-

The above amounts are subject to future 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.

The amounts shown above reflect estimated changes arising from changes to Network Rail charges for Control Period 4, which began on 1 April 2009. These changes to the rail subsidy/premia amounts are not yet finalised.

slide32

Fuel Hedging

UK Bus

(regional)

UK Bus

(London)

North

America

UK Rail

2009/10 - average effective price (per litre)

2010/11 - % of forecast consumption hedged

- average hedge price (per litre)

2011/12 - % of forecast consumption hedged

- average hedge price (per litre)

2012/13 - % of forecast consumption hedged

- average hedge price (per litre)

2012/13 - % of forecast consumption hedged

- average hedge price (per litre)

Market price (per litre)

45.4p

98%

36.0p

78%

40.6p

50%

42.5p

-

-

41.3p

n/a

-

-

38%

41.5p

25%

42.4p

13%

43.5p

41.3p

76.6 cents

82%

50.5 cents

77%

57.7 cents

5%

62.4 cents

-

-

61.2 cents

32.5p

77%

31.3p

75%

40.4p

28%

41.0p

-

-

40.0p

Market prices are as at 30 November 2010

Prices excludes delivery margins, duty, taxes and Bus Services Operators Grant

fuel costs latest forecasts
Fuel costsLatest forecasts

Fuel costs

Volumes

2009/10

Actual

£m

2010/11

Forecast

£m

2011/12

Forecast

£m

2012/13

Forecast

£m

2013/14

Forecast

£m

2011/12

Forecast

Litres m

UK Bus (regional), excluding BSOG*

UK Bus (regional), BSOG*

UK Bus (London), excluding BSOG*

UK Bus (London), BSOG*

North America

South Western Trains

East Midlands Trains

Total

(201.2)

80.0

-

-

(38.7)

(5.0)

(21.3)

(186.2)

(184.8)

77.0

(24.5)

9.7

(29.9)

(6.2)

(21.4)

(180.1)

(196.8)

76.2

(46.0)

17.9

(32.4)

(6.4)

(25.8)

(213.3)

(199.0)

65.1

(46.1)

14.4

(33.5)

(6.4)

(25.7)

(231.2)

(197.8)

65.1

(46.1)

14.4

(33.5)

(6.4)

(25.6)

(229.9)

192.7

-

45.0

-

69.1

12.4

49.2

368.4

Market prices are as at 30 November 2010, when Brent Crude was US$86 per barrel

Forecast costs for the unhedged element of fuel are based on 30 November 2010 spot prices

Above costs include delivery margins, duty and taxes (duty forecast at current levels) and exclude 3rd party fuel costs

* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services. The forecasts are based on the latest announced BSOG rates and in the absence of any announcements, BSOG rates are assumed to remain constant.

slide34

Exchange rates

October 2010

October 2009

Closing rate

Average rate

Closing rate

Average rate

US$

C$

1.5988

1.6270

1.5301

1.5851

1.6484

1.7756

1.6207

1.7885

slide35

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.
  • Gross debt is borrowings as reported on the consolidated balance sheet, adjusted to exclude accrued interest, deferred gains on derivatives and the effect of fair value hedges on the carrying value of borrowings, and to include the effect of foreign exchange derivatives that synthetically convert an element of borrowings from one currency to another.
  • Net debt (or net funds) is the net of cash and gross debt.