Post on 15-Jan-2016
1 Annual Results 2004
Annual ResultsAnnual Results2323rdrd June 2004 June 2004
2 Annual Results 2004
Robert SpeirsRobert Speirs
ChairmanChairman
3 Annual Results 2004
Highlights Strong year of growth and delivery of strategic objectives
Turnover from continuing operations up 4.9%
Strong financial and operational performances at UK Bus and South West Trains
Restructuring of North American business successfully delivered
Net debt reduced to £67.6m from £560.0m last year
Final dividend of 2.0p per share (giving full year dividend of 2.9p (2003 - 2.6p)) – up 11.5%
Return of capital to shareholders – 18p per share
4 Annual Results 2004
Martin GriffithsMartin Griffiths
Finance DirectorFinance Director
5 Annual Results 2004
Financial Highlights Turnover from continuing businesses up 4.9%
£1,659.4m (2003 - £1,581.4m)
Up 5.9% at constant exchange rates
Operating margin enhancement in continuing divisions*
2004 2003 % %
Before goodwill amortisationand restructuring costs 8.4% 6.6%
Including goodwill amortisationand restructuring costs 7.0% 4.7%
* Excluding disposed Citybus, Road King and Trainline businesses but including all of North America; before exceptional items
6 Annual Results 2004
Turnover
Total operating profit/(loss)*- pre goodwill & exceptionals* (after restructuring costs)
Profit/(loss) before tax
- pre goodwill & exceptionals
Free cash flow**
Adjusted earnings per share
Dividend per share
2004£m
2003£m
1,792.3
129.7
147.5
95.8
120.2
209.5
6.7p
2.9p
2,076.6
(466.2)
146.4
(500.2)
112.9
217.8
6.4p
2.6p
Financial Summary
* After restructuring costs of £7.2m (2003 - £6.3m)** Free cash flow comprises net cash inflow from operating activities, dividends from joint ventures and associates, net cash inflow/(outflow) from returns on investments and servicing of finance, and taxation.
7 Annual Results 2004
2002/2003 Profit before taxOperating profit of retained businesses:- UK Bus- New Zealand- North America- Rail – underlying- Virgin Rail Group- Other JVs and associatesOverheadsReduction in underlying finance chargesExceptionals & goodwill
Rail – non-recurring liquidated damagesCitybus (disposed)Road King (disposed)Trainline (disposed)Restructuring costs2002/2003 gain on repurchase of bonds2003/2004 Profit before tax
Profit Reconciliation
(613.1)
--------
582.1(31.0)
-6.6----
(24.4)
(500.2)
7.8(0.5)0.8
14.46.30.41.0
21.3582.1133.4
(8.5)(11.5)
(3.5)1.9
(0.9)(15.1)95.8
112.9
7.8(0.5)0.8
14.46.30.41.0
21.3-
164.4(8.5)
(18.1)(3.5)1.9
(0.9)(15.1)120.2
Reported£m
Exceptionals & Goodwill
£m
Pre goodwill & exceptionals
£m
8 Annual Results 2004
EBITDA
UK BusNorth America (Coach USA)Overseas BusRailVirgin Rail GroupthetrainlineRoad KingOthers
Overheads & restructuringEBITDA before exceptionals
2004£m
2003£m
117.630.118.346.413.5(2.4)7.0
(0.4)230.1(15.4)214.7
112.049.551.840.9
7.2(4.3)10.5(0.8)
266.8(15.1)251.7
9 Annual Results 2004
Opening net debtCash flows from operationsRoad King dividendsNet interest receivedTax paidDividends paidNet capital expenditure and new hire purchase financeAcquisitions/disposals Foreign exchange and other movementsClosing net debt
£m(560.0)214.3
4.10.5
(9.4)(35.6)(78.8)364.2
33.1(67.6)
Movement in Net Debt
10 Annual Results 2004
UK Bus Trading Results
Turnover growth 8.7% to £650.2m Underlying passenger growth 1.4% outside London Strong contribution from London companies
19.1% turnover growth Improved operating margin
11.5% versus 11.2% in 2003 12.2% versus 11.3% excluding operating lease impact
and business development costs
11 Annual Results 2004
UK Bus Profit Analysis
TurnoverUnderlying profitMarginDeduct increased operating lease costsAdd saving in depreciation arising fromoperating leases
MarginDeduct Megabus & Taxibus start-upsOperating profit as reported
Margin as reported
30 April 2003£m
650.279.612.2%(5.0)
2.076.611.8%(1.8)74.8*
11.5%
598.467.611.3%(1.1)
0.567.011.2%
-67.0
11.2%
30 April 2004£m
*After £9.9m increase in pensions/NI costs
12 Annual Results 2004
North America Trading Results
Turnover £336.8m (2003 - £603.0m) 5.1% like for like turnover increase in second half*
0.3% like for like turnover increase for year* Operating profit** £14.8m (2003 - £14.0m)
US$25.4m (2003 – US$21.8m) strict cost control overhead reduction
* Like for like turnover increase is measured as the change in turnover from residual businesses excluding the impact of foreign exchange movements
** Pre restructuring costs, exceptional items and goodwill amortisation
13 Annual Results 2004
North America Turnover Breakdown
Residual businesses- North East- North Central- Canada
Residual taxi businesses to be disposed ofDiscontinuedTotal
£ equivalent
213.9109.641.8
365.317.3
193.8576.4
£m336.8
30 April 2004Turnover
$m
211.7110.238.4
360.317.0
561.7939.0
£m603.0
30 April 2003Turnover
$m
14 Annual Results 2004
New Zealand Trading Results
Turnover £58.3m (2003 - £51.0m)
1.6% turnover growth (excluding currency movements)
2003 revenue base includes impact of America’s Cup
Operating profit £10.7m (2003 - £11.2m)
NZ$29.5m (2003 – NZ$34.8m)
Operating margin 18.4% (2003 – 22.0%)
15 Annual Results 2004
Rail Trading Results
Rail Subsidiaries
Turnover £438.9m (2003 - £413.6m)
Operating profit £44.1m (2003 - £38.2m*)
Passenger volumes up 3.2% at SWT
Operating profit stated after franchise bid costs
*Included £8.5m of non-recurring liquidated damages
16 Annual Results 2004
Rail Profit Analysis
SWT operating profit per bid
Passenger income
Net Sch 7/Sch 8 performance payments
Electric current for trains
Staff costs
Other Costs
Revenue/Profit share to the SRA
Actual SWT operating profit
Other
Total Rail operating profit
30 April2004£m
25.2
15.3
4.7
5.9
2.5
18.5
(27.6)
44.5
(0.4)
44.1
17 Annual Results 2004
Joint Ventures and AssociatesVirgin Rail Group
Share of turnover £288.4m (2003 - £276.1m)
Share of operating profit £13.5m (2003 - £7.2m)
Out-performed budget set by SRA
Trainline
Disposed February 2004
Share of turnover £8.1m (2003 - £11.0m)
Share of operating loss £2.4m (2003 – loss of £4.3m)
Road King
Disposed January/February 2004
Share of operating profit £7.0m (2003 - £10.5m)
18 Annual Results 2004
Taxation
Pre goodwill and exceptionalsExceptional itemsGoodwill amortisationResult for the yearOne-off exceptional tax credit
Cash tax paid (net)
Pre-tax£m
Tax£m
120.2(6.6)
(17.8)95.8
-95.8
(32.3)(0.2)0.3
(32.2)41.0
8.89.4
%
26.9%3.0%1.7%
33.6% N/A
(9.2)%
2004
19 Annual Results 2004
Fuel Hedging
% of group fuel hedged
Average hedge price $/barrel
Average US$/£ rate
Average unhedged floating price $/barrel
Variable fuel costs of continuing businesses
2003/04 2004/05100%
$24
1.7115
$32
£31m
40%
$24
1.84
$38
£37m
2005/064%
$24
1.84
$38
£42m
Continuing businesses use 1.81m barrels of fuel a year (288m litres)Each $5 per barrel movement in crude oil price impacts variable fuel costs by approximately £5m if no hedging in place
2006/070%
N/A
1.84
$38
£43m
20 Annual Results 2004
Pensions
Increased employer and employee contributions
£32.9m total pension costs (2003 - £31.2m)
£36.2m cash paid (2003 - £26.9m)
FRS17 post-tax deficit of £115.8m for UK Bus/Group
Down £40.4m from £156.2m
Financial support in new SWT franchise allows for cost of funding the deficit for SWT
Managed as part of overall cost base
21 Annual Results 2004
Balance Sheet & Financing
Net debt down to £67.6m (2003 - £560.0m)
EBITDA*/Interest cover 7.9 times
Net Debt/EBITDA* 0.3 times
Progressive dividend policy
Evaluation completed of optimum balance sheet structure
Return of capital of approximately £250m
Investment grade rating confirmed after return of capital
New £440m 5 year bank facilities
* Before exceptional items
22 Annual Results 2004
Proposed Return of Capital
“B” Share Scheme
Shareholders receive for every 24 ordinary shares:
19 consolidated ordinary shares
24 “B” shares redeemable at 18p each
All shareholders treated equally
2004 final dividend payable per existing ordinary share
Approval at AGM – 27 August 2004
“B” shares issued – September 2004
Total return of approximately £250m
23 Annual Results 2004
Return of Capital - Example Shareholder “A” holds 1,000 ordinary shares Share price 87p
1,000 existing ordinary shares(share price 87p)
791 ordinary shares(share price 87p)
1,000 “B” shares redeemable at 18p each
Redeemed for cash of £180
% shareholding unchanged
VALUE = £870
VALUE = £868
24 Annual Results 2004
Current Trading & Outlook
Group trading in line with our expectations Expected revenue and profit growth in UK Bus and North
America SWT trading under the terms of the new three year
franchise New Zealand trading in line with expectations Virgin Rail Group
SRA budget 2004/05 Franchise negotiations progressing well
25 Annual Results 2004
Brian SouterBrian Souter
Chief ExecutiveChief Executive
26 Annual Results 2004
Group Strategy (1)
UK Bus – Margin Development Programme Solid foundations Kickstart
Commercial Government assisted
New Products Megabus Oxford Tube re-launch Envirox fuel additive Electric bus
What next? Commercial Park and Ride Optical Guidance
27 Annual Results 2004
Charter23%
Transit11%Scheduled
service/Line run/Commuter
28%
Taxi15%
School Bus & Contract
14%
Sightseeing & Tours (incl New York)
9%
Group Strategy (2)North America Restructured business – robust business model with more predictable
earnings Small add-on acquisitions Leisure upturn
Charter20%
Sightseeing & Tours (incl New York)
16%
Scheduled service/Line
run/Commuter46%
School Bus and Contract
18%
Year ended 30 April 2003 Residual businesses 2004
$939m $365m
28 Annual Results 2004
Group Strategy (3)
UK Rail Return to high volume growth Maximise potential from VRG Five year extension at SWT New franchise opportunities
Commuter Inter-city
29 Annual Results 2004
Summary
Strong trading performance across the Group with focused management
Strengthened balance sheet allowing return of capital and dividend growth
Current trading in line with our expectations
30 Annual Results 2004
Annual ResultsAnnual Results2323rdrd June 2004 June 2004
31 Annual Results 2004
Appendices
32 Annual Results 2004
UK Bus Revenue Development
2002/03 turnover
Passenger volumes
Tender wins/ contract amendments
Fare increases
2003/04 turnover
144.2
-
24.3
3.2
171.7
16.9%
2.2%
19.1%
London
£m %
454.2
6.4
-
17.9
478.5
1.4%
-
3.9%
5.4%
598.4
6.4
24.3
21.1
650.2
1.1%
4.1%
3.5%
8.7%
Outwith London
£m %
UK Bus
£m %
33 Annual Results 2004
171.7
478.5
650.2
9.7%
12.1%
11.5%
16.7
58.1
74.8
144.2
454.2
598.4
10.5%
11.4%
11.2%
15.1
51.9
67.0
UK Bus - London/Other
2004
Operating Operating
Turnover Profit Margin
£m £m %London
Other
2003
Operating OperatingTurnover Profit
Margin £m £m
%
34 Annual Results 2004
Overseas Bus Revenue Development
2002/03 TurnoverDisposal of Citybus and AustraliaCurrency movementsVolumesFares/Business mix2003/04 Turnover
Citybus£m
New Zealand
£m
132.3(107.5)
(4.5)(2.5)-
17.8
51.0-6.41.6
(0.7)58.3
Australia£m
0.4(0.4)----
Total£m
183.7(107.9)
1.9(0.9)(0.7)76.1
35 Annual Results 2004
Overseas BusSegmental results
132.3
51.0
0.4
183.7
14.4%
22.0%
-
16.5%
19.1
11.2
-
30.3
17.8
58.3
-
76.1
5.6%
18.4%
-
15.4%
1.0
10.7
-
11.7
2004
Operating Operating
Turnover Profit Margin
£m £m %Citybus
New Zealand
Australia
Total
2003
Operating Operating
Turnover Profit Margin
£m £m %
36 Annual Results 2004
North AmericaRevenue Development
2002/03 Turnover
Underlying growth – second half
Underlying decline – first half
US$/C$ currency impact
Impact of disposals and other movements on non-core
2003/04 Turnover
360.3
8.2
(7.0)
3.8
-
365.3
578.7
-
-
-
(367.6)
211.1
939.0
8.2
(7.0)
3.8
(367.6)
576.4
Core continuing*
US$mOtherUS$m
TotalUS$m
* North East, North Central & Canada
37 Annual Results 2004
Turnover of residual North American business
Scheduled service/Line run/CommuterCharterSchool Bus & ContractSightseeing & Tours (incl New York)2003/04 Turnover
North East$m
North Central
$m
126.121.124.142.6
213.9
18.335.440.515.4
109.6
Canada$m
19.418.2
2.71.5
41.8
Total$m
163.874.767.359.5
365.3
38 Annual Results 2004
Rail Revenue Development
2002/03 Turnover
SWT Passenger volumes
SWT Fares
Passenger Charter
Other
2003/04 Turnover
£m %
413.6
12.9
13.5
(2.5)
1.4
438.9
3.1%
3.3%
(0.6)%
0.3%
6.1%
39 Annual Results 2004
Interest/Debt Ratios
Finance charges* (net)
EBITDA pre-exceptionals
EBITDA pre-exceptionals/Finance charges
Net Debt/EBITDA
2004£m
2003£m
27.3
214.7
7.9 times
0.3 times
33.5
251.7
7.5 times
2.2 times
* 2003 includes £15.1m net gain on early redemption of bonds
40 Annual Results 2004
Gross debt & related derivativesCash on deposit
Joint ventures & associatesNon-utilisation/commitment feesAmortisation of bond issue costs/bank chargesInsurance letters of creditDiscount on insurance provisionsInterest received on Corporation Tax refundOther
Finance charges
£m
AnnualEffective rate
%
36.8(10.6)26.2(1.2)0.40.61.32.8
(2.1)(0.7)27.3
6.3%3.5%9.3%
Finance Charges
Average balance*
£m
584(301)
283
*Average of month end debt/interest earning £ and $ cash balances
41 Annual Results 2004
27.0----
27.0
45.323.1
6.94.43.3
83.0
(2.7)(0.9)(0.6)
--
(4.2)
42.622.2
6.34.43.3
78.8
18.323.1
6.94.43.3
56.0
Capital Expenditure
UK BusNorth AmericaNew ZealandDiscontinued - CitybusRail
Capex on new hire purchase
£m
Impact ofcapex onnet debt
£m
Disposalproceeds*
£mNet£m
Cash spent on
capex £m
*Excludes proceeds from selling businesses
Note: In addition to the above, vehicles with a capital value of £16.6m were acquired by UK Bus during the year on operating leases (2003 - £19.6m)
42 Annual Results 2004
Fuel Usage and Impact of Crude Price
UK Bus
North America
New Zealand
Usage litresUsagebarrels
190m
76m
22m
288m
1.2m
0.47m
0.14m
1.81m
US$ variablecosts based
on $38 a barrel
$45.6m
$17.9m
$5.3m
$68.8m
Each $5 per barrel movement in oil price impacts fuel cost by approximately $9m
43 Annual Results 2004
Exchange Rates
US$HK$*NZ$C$
Closing rate Average rate
1.598212.4648
2.85732.2929
1.557412.1464
3.10312.3985
April 2003
Closing rate Average rate
1.773413.8317
2.83502.4388
1.711513.3188
2.76002.2985
April 2004
* Average rate used for Citybus up to date of disposal – 12.7803
44 Annual Results 2004
Annual ResultsAnnual Results2323rdrd June 2004 June 2004