Annual Results. Year ended 30 April June 2013

Transcription

1 1 Annual Results Year ended 30 April June 2013

2 Cautionary statement 2 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 forwardlooking 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.

3 3 ROSS PATERSON FINANCE DIRECTOR

4 A record of achievement... 4 Stagecoach continues to deliver 2012/13 results ahead of expectations adjusted EPS up 19% to over 30p Adjusted EPS of 2.6 times pre-recession level 2012/ p versus 2006/7 11.7p Dividend up 10.3% to 8.6p Underpinned by robust and growing UK Bus profit

5 And significant opportunities ahead 5 Development of further new products e.g. UK sleepercoach Continued confidence in the prospects for megabus.com Deliver further value from UK Rail extensions and bids Strong financial position enables us to seize the opportunities

6 Summary income statement 6 Year to 30 April 2013 (new IAS 19) Year to 30 April 2013 (as reported) Year to 30 April 2012 (as reported) UK Bus (regional) operating profit UK Bus (London) operating profit North America operating profit North America joint ventures profit after tax UK Rail operating profit Virgin Rail Group profit after tax Restructuring costs, Group overheads and other items (16.1) (15.3) (11.4) Operating profit Finance charges (net) (43.3) (37.4) (34.7) Tax (36.3) (45.5) (40.4) Profit excluding intangibles and exceptionals Intangibles and exceptionals, net of tax (14.6) (14.6) 26.2 Reported profit from continuing operations Adjusted earnings per share (pence)

7 UK Bus (regional operations) Leading the sector 7 Year to 30 April 2013 Year to 30 April 2012 Change Revenue () % Like-for-like revenue () % Operating profit () % Operating margin (%) 17.1% 17.9% (80)bp Estimated like-for-like passenger journeys* (m) (0.4)% Sector-leading profit margin underpinned by operational performance, low fares, continued investment Over 5% commercial revenue growth Profit growth notwithstanding c. 22m increase in fuel costs, net of duty rebate c. 4m operating profit from Olympics and Paralympics contracts Reducing reliance on under-pressure Government funding * Excludes inter-city coach services operated as a sub-contractor

8 Continued investment drives good profit margins % UK Bus capital expenditure v operating margin Stagecoach Major operator 1 Major operator 2 Major operator % 8.0% Average Capex/ Revenue % 6.0% 4.0% 2.0% 0.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Operating margin UK Bus (regional and London) additions to property, plant and equipment over the last reported five years have been measured as a percentage of revenue and then compared to the most recently reported operating margin (after applying any unallocated group overheads proportionate to revenue).

9 Satisfied customers and good profitability Low fares, good quality, safe and reliable services 9 UK Bus passenger satisfaction v operating margin Stagecoach Major operator 1 Major operator 2 30% 25% 20% Operating margin 15% 10% 5% 0% Satisfaction Customer satisfaction is based on Passenger Focus independent Bus Passenger Survey, March That is then compared to the most recently reported UK Bus (regional and London) operating margin (after applying any unallocated group overheads proportionate to revenue).

10 Developing further new products... with some free publicity 10

11 UK Bus (London) Initial targets achieved 11 Year to 30 April 2013 Year to 30 April 2012 Change Revenue and like-for-like revenue () % Operating profit () % Operating margin (%) 9.4% 5.9% 350bp Successful turnaround of business acquired in 2010 for 59.5m Targets set at time of acquisition now achieved Cost savings from synergies Restructured cost base enables business to effectively compete for new contracts Better use of depot capacity Market remains competitive Focus turns to retaining tight control of costs and growing through new contract wins

12 North America A period of rapid expansion 12 Year to 30 April 2013 Year to 30 April 2012 Change Revenue (US$m) % Like-for-like revenue (US$m) % Operating profit (US$m) (33.1)% Operating margin (%) 3.3% 6.3% (300)bp Building for the future through acquisition and strong organic growth July 2012 acquisitions from Coach America added over US$160m of annualised revenue 32% growth in megabus.com revenue Annualised revenue (including share of joint venture) now over US$750m Time to pause for breath at megabus.com and drive up profitability Some development of services Cleveland re-launch; Megabus Gold; Sleepercoach Potential for significant step up in profit in 2013/14 Full year effect of July 2012 acquisitions Improved megabus.com profit

13 megabus.com in North America A pathway to profitable growth 13 Features of 2012/13 Outlook for 2013/14 Increased price competition from other operators Not assuming any lessening of price competition Start-up losses from new and fast-growing services Fewer new services to be added in 2013/14 Improved profitability of existing services Precautionary measures following unrelated major accidents in first half of 2012/13 Adverse weather Maintain industry-leading safety record Improved profitability from return to full operating capacity on all vehicles Opportunity if weather is more normal Lower load factors during winter Developing new timetables for winter 2013/14 Improved profitability from improved load factors OVERALL Potential for significant step up in profitability

14 14 Successful integration of businesses acquired in 2012 Good progress integrating businesses acquired from Coach America Revised network and restructured cost base at two businesses affected by competitor action post-acquisition Progressing potential sale of one small business unit Acquired depot infrastructure in Georgia, Texas, California and Ohio supporting megabus.com services

15 UK Rail The right balance of risk and reward 15 Year to 30 April 2013 Year to 30 April 2012 Change Revenue () 1, , % Like-for-like revenue () 1, , % Operating profit () % Operating margin (%) 4.2% 2.4% 180bp Estimated passenger miles S West (m) 3, , % Estimated passenger miles E Midlands (m) 1, , % c.4% operating margin from lower risk (revenue support), low cash invested franchises Full year of revenue support at East Midlands Trains Significant opportunities to add value

16 Virgin Rail Group Maintained incumbent position on West Coast franchise 16 Year to 30 April 2013 Year to 30 April 2012 Change Revenue 49% share () % Like-for-like revenue 49% share () % Operating profit 49% share () (40.5)% Operating margin (%) 2.9% 5.0% (210)bp Dividends received () (15.9)% Estimated passenger miles (m) 3, , % Terms of West Coast franchised re-based from March 2012 and again, from December 2012 West Coast Trains management contract profit before tax of 1% of revenue Discussions continuing to move to a more risk-based contract through to April m (Stagecoach share: 6.2m) of bid costs for aborted West Coast franchise competition now recovered from Government m prior to 30 April 2013 and 1.4m since

17 17 Significant value opportunities in UK Rail over next two years West Coast Trains (through Virgin Rail Group joint venture) Planned extension from Nov 2014 to Apr 2017 Significant upside from current 1% management contract Virgin Rail Group in discussions with Department for Transport South Western Trains Capital projects in Alliance from Apr 2013 Planned extension from Feb 2017 to Apr 2019 Alignment with Network Rail Control Period 5 ( CP5 ) Aiming to agree terms of extension by Apr 2014 (when CP5 begins) East Midlands Trains Planned extension from Apr 2015 to Oct 2017 Thameslink Shortlisted for new franchise to start Sep 2014 Docklands Light Railway Shortlisted for new franchise to start Sep 2014 New franchises New model for UK rail franchising emerging More appropriate allocation of risk Significant new opportunities beginning with East Coast, due to start Feb 2015

18 A strong financial position 18 Year to 30 April 2013 Year to 30 April 2012 Change Net finance charges (including share of net finance income of joint ventures) () (37.2) (34.4) (2.8) EBITDA from continuing operations and joint ventures* () Year-end net debt () (538.0) (523.8) (14.2) Net Debt/EBITDA* 1.5x 1.5x - EBITDA*/Net finance charges* (including share of net finance income of joint ventures) 10.0x 10.0x - * excluding exceptional items Good bank relationships c. 350m of committed bank facility headroom (available for loans) and unrestricted cash Re-financing of acquisition from Coach America USPP diversifies funding sources and extends average debt maturity at attractive cost Objective to maintain an investment grade credit rating Strong financial position supports pursuit of growth opportunities

19 Strong conversion of profit to cash 19 Year ended 30 April 2009 Net cash flows from operating activities after tax ,296.6 Profit after taxation for the year Exclude: Depreciation Amortisation (including JV goodwill amortisation) Non-cash pensions curtailment gain, net of taxation (28.2) - (28.2) Non-cash losses/(gains) on disposed businesses and fixed assets 2.2 (2.2) (18.9) (17.1) 1.9 (34.1) Profit after taxation excluding significant non-cash items ,224.0 Conversion ratio 126% 109% 88% 101% 109% 106% Year Total

20 Strong performance and healthy outlook 20 Stagecoach s record of short and long-term delivery Good 2012/13 results Current trading as expected Significant opportunities to add value Extensions and new franchises in UK Rail Further strong growth in North America New products Strong financial position

21 21 MARTIN GRIFFITHS CHIEF EXECUTIVE

22 Proven, consistent strategy delivering for shareholders year Organic growth in commercial bus/coach Selected rail franchises with the right risk-return profile Complementary acquisitions total shareholder return: over 800%* Plan to grow in all four segments: UK Bus (regions), UK Bus (London), UK Rail, North America Strong financial position to capitalise on opportunities * Ten years ended 30 April 2013

23 23 UK Bus Stagecoach formula for growth Devolved management Strong operational delivery Consistent investment Value-for-money travel High quality of service New product development Effective partnerships Sector-leading bus customer satisfaction Embedded in management approach A focus on organic passenger volume growth

24 North America: transforming the inter-city coach market 24 Changing level of inter-city bus service in United States, % annual growth/decline Source: Chaddick Institute, De Paul University, Chicago

25 25 Why UK rail? Management expertise The market opportunity is large Financial returns Low cash injected into rail franchise entities Predictability improving Strength in contract bidding, contract management and operational delivery Record of delivering high-quality services for customers Close interaction with government on franchising model UK Rail franchises c. 8 billion of annualised passenger revenue Since 1997, substantial net cash flow from rail franchise entities Strong returns for taxpayers and shareholders Investment largely funded from the cash flows of the franchise entities Low cash injected, meaning excellent returns on capital Revenue support on existing franchises means profit and cash flows are more predictable Majority of macroeconomic risk resting with Government should mean future franchises are also more predictable But not risk free!

26 North America UK Rail UK Bus Group Experienced executive management team with strong track-record 26 Person Role Years at Stagecoach Years in industry Martin Griffiths Chief Executive Ross Paterson Finance Director Steven Stewart Director of Corporate Communications Robert Montgomery Managing Director Mark Threapleton Managing Director, London Tim Shoveller Managing Director, South West Trains-Network Rail Alliance 6 22 David Horne Managing Director, East Midlands Trains Margaret Kay Managing Director, Supertram Graeme Hampshire Business Development Director 7 37 Dale Moser Chief Operating Officer effective devolved management teams

27 Factors underpinning future growth 27 People: commercial/customer service appointments New technology: smartcards, social media Commercial focus: reduced dependence on public sector funding Policy environment: influencing national/local transport decisionmaking through partnership Maximise commercial opportunities Drive improved customer service Promote customer and taxpayer benefits of private sector model

28 Future growth opportunities What we have delivered Growth opportunities across portfolio 28 UK Bus UK Rail North America Growing customer base and modal shift driven by value fares strategy Sector-leading profit margin and good financial returns Resilient business, less dependent on Government spending London Bus turnaround strategy delivered Alliance with Network Rail Passenger improvements: new capacity, fleet renewals and station investment Continued high performance and customer satisfaction Fastest growing division in the Group Strong portfolio focused on megabus.com and scheduled/commuter services Integration of acquired businesses into North America division Maximise potential of bus to deliver modal shift, support economic growth, tackle road congestion and deliver carbon reduction Immediate-term rail franchise opportunities Shaping improved franchising model for long-term on right riskreward profile First mover benefits from Alliancing Profitable growth from expanded megabus.com footprint Huge scope for modal shift Scheduled/commuter services Supported by strong financial position

29 Current trading and outlook: building on track record 29 Current trading in line with expectations Positive outlook for all divisions Public transport key to economic growth, global environmental targets and future of communities Continue to focus on opportunities to deliver value to shareholders

30 30 ANNUAL RESULTS YEAR ENDED 30 APRIL 2013

31 APPENDICES 31

32 Divisional income statements Year ended 30 April UK Bus (Regional) UK Bus (London) North America Revenue ,201.3 Rail franchise premia (531.4) Rail revenue support Other operating income Staff costs (459.7) (139.8) (168.4) (283.4) Fuel costs (i.e. diesel) (134.6) (28.5) (57.3) (49.8) Insurance and claims costs (28.8) (4.5) (26.8) (4.9) Depreciation (62.2) (6.0) (31.3) (10.3) Rolling stock costs lease & maintenance (201.9) Other operating leases (12.5) (13.9) (11.2) (2.1) Network Rail (211.5) Electricity for trains (31.3) Commissions payable (31.0) Materials & consumables (36.8) (12.5) (30.9) (28.9) Other costs (90.3) (8.5) (72.4) (102.9) Operating profit UK Rail

33 Rail premium profiles 33 Year to 31 March: South Western East Midlands 2013 (395.2) (114.4) 2014 (465.4) (123.5) 2015 (518.9) (183.0) 2016 (606.8) (594.7) - 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, and exclude revenue support.

34 Miscellaneous income statement items 34 Year to 30 April 2013 Year to 30 April 2012 Change Twin America joint venture after tax* () Citylink joint venture after tax () (0.7) Group overheads () (14.9) (11.1) (3.8) Restructuring costs (non-exceptional) () (1.7) (2.3) 0.6 Intangible asset expenses () (16.1) (12.3) (3.8) Post-tax exceptional items () (3.2) 36.1 (39.3) Good trading performance at joint ventures Share price strength drives higher share based payment expenses in Group overheads Increase in intangible asset expenses from US acquisitions Exceptional items: Refund of West Coast franchise bid costs Provision for Twin America legal fees * excluding exceptional items

35 Taxation 35 Pre-tax profit Year to 30 April 2013 Excluding intangible asset expenses and exceptional items (49.7) 22.3% Intangible asset expenses (16.1) % Exceptional items (5.7) % Tax Rate % (42.5) 21.1% Reclassify joint venture taxation for reporting purposes (5.5) 5.5 Reported in income statement (37.0) 18.9% Cash tax paid (net) (16.1)

36 New pensions accounting standard 36 New IAS 19 applicable from 2013/14 No effect expected on: Cashflow Covenants Credit ratings Improved net assets position due to revised determination of rail deficits Reduced profit offset by increased other comprehensive income 2012/13 adjusted EPS would be 24.6p under new IAS p or 19% lower than reported 30.2p

37 37 Pensions Year ended 30 April 2013 Pension expense 2012 Pension expense* 2013 Cash contributions 2012 Cash contributions UK Bus/Central North America UK Rail Post-tax deficit of 121.5m (2012 restated: 92.3m) 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 Bus defined benefit schemes closed to new entrants and contributions have stabilised Expense and contributions includes 8.6m (2012: 6.9m) for defined contribution arrangements * excluding exceptional 2011/12 38m curtailment gain

38 Net debt () 38 Movement in net debt Year ended 30 April m (313.1)m 155.3m 6.2m 107.7m 6.7m 0.3m 51.1m 538.0m

39 Fuel hedging 39 UK Bus (Regional) UK Bus (London) North America (including Coach America) 2012/13 - % of consumption hedged 97% 51% 80% 77% UK Rail - average effective price (per litre) 47.7p 49.4p 78.3 cents 49.1p 2013/14 - % of forecast consumption hedged 97% 50% 75% 76% - average hedge price (per litre) 50.0p 49.3p 77.3 cents 51.3p 2014/15 - % of forecast consumption hedged 36% 38% 30% 61% - average hedge price (per litre) 49.9p 51.1p 77.3 cents 49.5p 2015/16 - % of forecast consumption hedged - 25% - 5% - average hedge price (per litre) p p 2016/17 - % of forecast consumption hedged - 13% average hedge price (per litre) p - - Market price (per litre) 48.4p 48.4p 72.6 cents 48.7p Market prices are as at 31 May 2013 Prices exclude delivery margins, duty, taxes and Bus Services Operators Grant

40 Definitions 40 Like-for-like amounts are derived, on a constant currency basis, by comparing the relevant yearto-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 or loss for a particular business unit or division within the Group refers to profit or loss 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 or loss 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, the effect of fair value hedges on the carrying value of borrowings and unamortised gains on the early settlement of interest rate swaps. Net debt (or net funds) is the net of cash and gross debt.

41 41 ANNUAL RESULTS YEAR ENDED 30 APRIL 2013