Interim Results 2005 Interim Results 7 December 2005
Interim Results Robert Speirs Chairman
Interim Results Highlights Strong set of results for 6 months ended 31 October 2005 Increased operating profits* at continuing UK Bus, despite ongoing cost pressures Growth in operating margins in North American bus Revenue growth at South West Trains, despite London terrorist attacks Interim dividend up 10% to 1.1p per share (2004: 1.0p) Disposal of New Zealand in November 2005 for NZ$250.5m * References to the operating profit (or operating margin) of a particular business throughout this presentation mean operating profit (or operating margin) before intangible asset amortisation, exceptional items and restructuring costs.
Interim Results Martin Griffiths Finance Director
Interim Results Financial Highlights Revenue + from continuing businesses up 7.8% -£786.2m (2004: £729.1m) -Up 7.1% at constant exchange rates Operating profit pre intangibles and exceptionals £82.7m (2004: £80.7m) EBITDA (pre exceptionals and JVs) up 3.9% at £112.5m Adjusted EPS up 28.6% to 5.4p + excluding acquisition of Glenvale and disposed operations
Interim Results Revenue - continuing operations, excluding Glenvale Total operating profit* - pre intangibles & exceptionals Profit before tax - pre intangibles & exceptionals Net cash from operating activities Adjusted earnings per share Dividend per share October 2005 £m October 2004 £m p 1.1p p 1.0p Financial Summary * After restructuring costs of £0.7m (2004: £0.3m)
Interim Results EBITDA UK Bus- excluding Glenvale - Glenvale North America New Zealand Rail Group overheads & restructuring costs EBITDA from Group companies before exceptionals Virgin Rail Group Other joint ventures and associates Total EBITDA before exceptionals October 2005 £m October 2004 £m 62.2 (0.5) (5.7) Nil Nil (4.6) (0.2) 112.2
Interim Results Net cash inflow from operating activities Net interest paid Taxation Net cash from operating activities Net capital expenditure including new hire purchase finance Acquisitions of businesses and other investments Sale of businesses and other investments Token sales and redemptions Foreign exchange Reduction in net debt before cashflows with shareholders Repurchase of ‘B’ shares Equity dividends Other share capital movements Reduction in net debt Opening net debt Closing net debt October 2005 £m (12.5) (14.0) (42.0) (13.9) 4.6 (3.6) (11.1) 40.2 (13.9) (24.6) (214.6) (208.9) Movement in Net Debt
Interim Results UK Bus Trading Results Revenue growth 10.5% to £387.9m (2004: £351.1m) revenue growth 8.5%, excluding acquisition of Glenvale Strong contribution from London companies revenue growth 9.7% Underlying passenger growth of 1.5% outside London revenue growth 8.1%, excluding acquisition of Glenvale Operating margin 10.8% (2004: 11.5%), excluding acquisition of Glenvale
Interim Results UK Bus Revenue Development 2004 Revenue Glenvale Passenger volumes Tender wins/ contract amendments Fare increases megabus.com 2005 Revenue n/a 5.8% 3.5% 0.4% 9.7% London £m% % 1.5% 1.2% 4.8% 0.6% 10.8% % 1.1% 2.5% 4.4% 0.5% 10.5% Outwith London £m% UK Bus £m% Nil
Interim Results North America Trading Results Revenue £130.8m (2004: £123.6m) 11.0% increase in US$ revenue from continuing operations Operating margin up from 11.8% to 12.0% Operating profit £15.7m (2004: £14.6m) US$28.3m (2004: US$26.5m) excellent revenue growth strict cost control overhead reduction: consolidation of US regions
Interim Results Scheduled service/Line run/Commuter Charter Sightseeing & Tour School Bus & Contract Total October 2005 US$m October 2004 US$m % Growth 8.0% 10.1% 15.5% 13.3% 11.0% North America Continuing Revenue Breakdown By Product
Interim Results New Zealand Trading Results Revenue £28.7m (2004: £26.2m) Underlying revenue similar to last year (excluding currency movements) Operating profit £3.5m (2004: £3.9m) -NZ$9.1m (2004: NZ$10.9m) Operating margin 12.2% (2004: 14.9%) Disposal completed at NZ$250.5m enterprise value
Interim Results Rail Trading Results Rail Subsidiaries Revenue £245.6m (2004: £234.8m), up 4.6% Operating profit £24.4m (2004: £22.5m) Passenger volumes up 0.8% at SWT, adversely affected by terrorist attacks Revenue and profit share to SRA £27.8m (2004: £20.5m)
Interim Results Virgin Rail Group Share of profit after tax £4.5m (2004: £4.1m) New long-term commercial arrangements on West Coast – discussions with DfT ongoing CrossCountry – current franchise terminates on 10 November 2007 Share of operating profit includes £29.8m for additional subsidy claims
Interim Results Taxation Pre intangibles and exceptionals* Exceptional items Intangible asset amortisation Result for the period* Cash tax paid (net) Pre-tax £m Tax £m 74.5 (4.0) (13.2) 57.3 (16.5) (13.7) 14.0 % 22.1% 42.5% 8.3% 23.9% October 2005 * Adjusted for our share of VRG’s tax, classified within operating profit under IFRS
Interim Results Balance Sheet & Financing Net debt + £208.9m (2004: £214.6m) EBITDA*/Interest cover 11.0 times Further debt reduction from New Zealand disposal Progressive dividend policy + UK GAAP definition * Before exceptional items
Interim Results Brian Souter Chief Executive
Interim Results Group Strategy Quality operations driving strong results Excellent operational performance Strong financial results Bus operator of the Year Train operator of the Year South West Trains punctuality now over 90% Improved punctuality at Virgin Rail Group UK Bus reliability 99.3% Adjusted EPS up 28.6% Revenue from continuing operations up 7.8% Absorbing increased fuel costs UK Bus margins bucking peer group trend Dividend up 10.0% ↓
Interim Results Group Strategy – UK Bus Kickstart wins –Stagecoach schemes secured £8.1m of DfT funding for 2005/06 out of total awards budget of £19.9m Organic growth in Southern companies Business Development opportunities –megabus.com/Citylink joint venture in Scotland –megabus.com
Interim Results Group Strategy UK Bus Passenger Growth Passenger growth by operating company – excluding London October 2005 v October 2004 Overall passenger growth 1.5% 3% + 0-3% <0%
Interim Results Group Strategy – Rail Good results and management credentials Awaiting DfT decisions on Greater Western and Thameslink/Great Northern Strong and experienced bid team focused on South Western franchise Renegotiation of West Coast Mainline franchise New franchise opportunities in next 18 months –East Midlands –West Midlands –CrossCountry
Interim Results Group Strategy – North America Revenue and margin growth –Contract wins in Canada –Strong leisure bounce-back continues Charter: revenue up 10.1% Sightseeing & tour: revenue up 15.5% –Steady growth in line run and contract Underpins North American business Park and ride in New York
Interim Results Current Trading and Outlook Current trading in line with our expectations Continued focus on organic growth and bolt-on acquisitions Good potential for further growth
Interim Results 2005 Interim Results 7 December 2005
Interim Results Appendices
Interim Results North America Revenue Development 2004 Revenue Impact of disposals and other movements on discontinued turnover US$/C$ currency impact Underlying growth 2005 Revenue Discontinued US$m Total US$m 12.0 (12.0) Nil Continuing US$m Nil (12.0)
Interim Results Rail Revenue Development 2004 Revenue SWT Passenger volumes SWT Fares/yield SWT Other Island Line/Supertram 2005 Revenue £m % (1.3) % 4.3% (0.6)% 0.1% 4.6%
Interim Results Finance charges ratios Finance charges (net) EBITDA pre-exceptionals EBITDA pre-exceptionals/finance charges October 2005 £m October 2004 £m times times
Interim Results Gross debt & related derivatives Interest bearing cash balances Non-utilisation/commitment fees Amortisation of bond issue costs/bank charges Insurance letters of credit Discount on insurance provisions Other Finance charges £m Annual Effective rate % 11.3 (2.7) (0.6) % 4.6% Finance Charges Average balance* £m *Average of month end debt and cash balances
Interim Results Fuel Hedging % of Group fuel hedged/capped at present Average hedge price US$/barrel Average US$/£ rate Average unhedged crude price US$/barrel Crude oil fuel costs of continuing businesses (total volume times crude price) Total fuel cost (includes cap premiums/diesel margin/ tax/delivery) Forecast 2005/06 89% US$ US$60 £52m £91m Forecast 2006/07 15% US$ US$57 £60m £99m Continuing bus divisions use 1.8m barrels of fuel a year (276m litres) Each US$10 per barrel movement in crude oil price impacts variable fuel costs by approximately US$18m if no hedging in place Actual 2004/05 97% US$ US$50 £35m £72m
Interim Results Fuel Usage and Impact of Crude Price UK Bus North America Annual Usage litres Annual Usage Barrels (m) 200m 76m 276m US$ variable costs based on $57 a barrel $80m $25m $105m
Interim Results Nil (2.4) (0.2) Nil (2.8) Capital Expenditure UK Bus North America New Zealand Rail Capex on new hire purchase £m Impact of capex on net debt £m Disposal proceeds* £m Net £m Cash spent on capex £m *Excludes proceeds from selling businesses Note: No new vehicles were acquired by UK Bus during the six months on operating leases (2004:capital value of £23.5m).
Interim Results Exchange Rates US$ NZ$ C$ Closing rateAverage rate October 2004 Closing rateAverage rate October 2005
Interim Results 2005 Interim Results 7 December 2005