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Annual ResultsYear ended 30 April 2013
26 June 2013
2
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.
3
ROSS PATERSONFINANCE DIRECTOR
4
A record of achievement...
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
• 2012/13 30.2p versus 2006/7 11.7p
− Dividend up 10.3% to 8.6p
− Underpinned by robust and growing UK Bus profit
* Ten years ended 30 April 2013
5
And significant opportunities ahead
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
Year to 30 April 2013(new IAS 19)
£m
Year to 30 April 2013(as reported)
£m
Year to 30 April 2012(as reported)
£m
UK Bus (regional) operating profit 143.2 165.0 162.7
UK Bus (London) operating profit 19.0 21.9 13.5
North America operating profit 13.4 13.3 19.7
North America joint ventures’ profit after tax 11.7 11.7 9.7
UK Rail operating profit 41.2 49.9 27.1
Virgin Rail Group profit after tax 8.3 9.8 15.9
Restructuring costs, Group overheads and other items (16.1) (15.3) (11.4)
Operating profit 220.7 256.3 237.2
Finance charges (net) (43.3) (37.4) (34.7)
Tax (36.3) (45.5) (40.4)
Profit excluding intangibles and exceptionals 141.1 173.4 162.1
Intangibles and exceptionals, net of tax (14.6) (14.6) 26.2
Reported profit from continuing operations 126.5 158.8 188.3
Adjusted earnings per share (pence) 24.6 30.2 25.4
7UK Bus (regional operations)Leading the sector
* Excludes inter-city coach services operated as a sub-contractor
Year to 30 April 2013
Year to 30 April 2012 Change
Revenue (£m) 966.7 909.7 6.3%
Like-for-like revenue (£m) 938.4 908.1 3.3%
Operating profit (£m) 165.0 162.7 1.4%
Operating margin (%) 17.1% 17.9% (80)bp
Estimated like-for-like passenger journeys* (m) 670.8 673.4 (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
8
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Average Capex/
Revenue %
Operating margin
UK Bus capital expenditure v operating margin
Stagecoach
Major operator 1
Major operator 2
Major operator 3
Continued investment drives good profit margins
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).
9Satisfied customers and good profitabilityLow fares, good quality, safe and reliable services
Customer satisfaction is based on Passenger Focus’ independent Bus Passenger Survey, March 2013. 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).
0%
5%
10%
15%
20%
25%
30%
77 78 79 80 81 82 83 84 85 86 87
Operating margin
Satisfaction
UK Bus passenger satisfaction v operating margin
Stagecoach
Major operator 1
Major operator 2
10
Developing further new products... with some free publicity
11UK Bus (London)Initial targets achieved
Year to 30 April 2013
Year to 30 April 2012 Change
Revenue and like-for-like revenue (£m) 232.7 230.5 1.0%
Operating profit (£m) 21.9 13.5 62.2%
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
12North AmericaA period of rapid expansion
Year to 30 April 2013
Year to 30 April 2012 Change
Revenue (US$m) 641.2 498.0 28.8%
Like-for-like revenue (US$m) 518.0 475.9 8.8%
Operating profit (US$m) 21.0 31.4 (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
13megabus.com in North AmericaA pathway to profitable growth
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
Maintain industry-leading safety record
Improved profitability from return to full operating capacity on all vehicles
Adverse weather 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
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
15UK RailThe right balance of risk and reward
Year to 30 April 2013
Year to 30 April 2012 Change
Revenue (£m) 1,201.3 1,140.7 5.3%
Like-for-like revenue (£m) 1,185.6 1,119.1 5.9%
Operating profit (£m) 49.9 27.1 84.1%
Operating margin (%) 4.2% 2.4% 180bp
Estimated passenger miles – S West (m) 3,600.7 3,535.5 1.8%
Estimated passenger miles – E Midlands (m) 1,380.5 1,344.7 2.7%
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
16Virgin Rail GroupMaintained incumbent position on West Coast franchise
Year to 30 April 2013
Year to 30 April 2012 Change
Revenue – 49% share (£m) 441.5 429.5 2.8%
Like-for-like revenue – 49% share (£m) 440.9 425.8 3.5%
Operating profit – 49% share (£m) 12.8 21.5 (40.5)%
Operating margin (%) 2.9% 5.0% (210)bp
Dividends received (£m) 13.2 15.7 (15.9)%
Estimated passenger miles (m) 3,723.3 3,691.9 0.9%
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 2017
£12.7m (Stagecoach share: £6.2m) of bid costs for aborted West Coast franchise competition now recovered from Government - £11.3m prior to 30 April 2013 and £1.4m since
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
Year to 30 April 2013
Year to 30 April 2012 Change
Net finance charges (including share of net finance income of joint ventures) (£m) (37.2) (34.4) (2.8)
EBITDA from continuing operations and joint ventures* (£m) 370.3 343.9 26.4
Year-end net debt (£m) (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 -
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
* excluding exceptional items
19
Strong conversion of profit to cash
Year ended 30 April2009£m
2010£m
2011£m
2012£m
2013£m
5 Year Total£m
Net cash flows from operating activities after tax 277.8 216.4 231.8 257.5 313.1 1,296.6
Profit after taxation for the year 133.5 111.7 176.4 188.3 158.8 768.7
Exclude:
Depreciation 72.1 77.2 90.3 99.9 110.0 449.5
Amortisation (including JV goodwill amortisation) 13.4 11.1 15.2 12.3 16.1 68.1
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 221.2 197.8 263.0 255.2 286.8 1,224.0
Conversion ratio 126% 109% 88% 101% 109% 106%
20
Strong performance and healthy outlook
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
MARTIN GRIFFITHSCHIEF EXECUTIVE
22
Proven, consistent strategy delivering for shareholders
Organic growth in commercial bus/coach
Selected rail franchises with the
right risk-return profile
Complementary acquisitions
10-year
total shareholder return: over
800%*
Strong financial position to capitalise on opportunities
Plan to grow in all four segments: UK Bus (regions), UK Bus (London), UK Rail, North America
* Ten years ended 30 April 2013
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
A focus on organic
passenger volume growth
Embedded in management approach
Sector-leading bus customer satisfaction
24
North America: transforming the inter-city coach market
Source: Chaddick Institute, De Paul University, Chicago
Changing level of inter-city bus service in United States, % annual growth/decline
25
Why UK rail?
Management expertise
Strength in contract bidding, contract management and operational delivery
Record of delivering high-quality services for customers
Close interaction with government on franchising model
The market opportunity is large UK Rail franchises – c.£8 billion of annualised passenger revenue
Financial returns Since 1997, substantial net cash flow from rail franchise entities
Strong returns for taxpayers and shareholders
Low cash injected into rail franchise entities Investment largely funded from the cash flows of the franchise entities
Low cash injected, meaning excellent returns on capital
Predictability improving
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
Experienced executive management team with strong track-record
Person Role Years at Stagecoach Years in industry
Gro
up
Martin Griffiths Chief Executive 16 16
Ross Paterson Finance Director 14 14
Steven Stewart Director of Corporate Communications 12 12
UK
Bu
s Robert Montgomery Managing Director 11 40
Mark Threapleton Managing Director, London 18 38
UK
Rai
l
Tim Shoveller Managing Director, South West Trains-Network Rail Alliance 6 22
David Horne Managing Director, East Midlands Trains 15 20
Margaret Kay Managing Director, Supertram 13 13
Graeme Hampshire Business Development Director 7 37
No
rth
A
me
rica
Dale Moser Chief Operating Officer 13 34
+ effective devolved management teams
27
Factors underpinning future growth
People: commercial/customer service appointments
New technology: smartcards, social media
Commercial focus: reduced dependence on public sector funding
Policy environment: influencing national/local transport decision-making through partnership
Maximise commercial opportunities
Drive improved customer service
Promote customer and taxpayer benefits
of private sector model
28
Growth opportunities across portfolio
Wh
at w
e h
ave
de
live
red
UK Bus UK Rail North America
Futu
re g
row
th
op
po
rtu
nit
ies
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
Maximise potential of bus to deliver modal shift, support economic growth, tackle road congestion and deliver carbon reduction
Alliance with Network Rail Passenger improvements: new
capacity, fleet renewals and station investment
Continued high performance and customer satisfaction
Immediate-term rail franchise opportunities
Shaping improved franchising model for long-term on right risk-reward profile
First mover benefits from Alliancing
Fastest growing division in the Group
Strong portfolio focused on megabus.com and scheduled/commuter services
Integration of acquired businesses into North America division
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
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
ANNUAL RESULTSYEAR ENDED 30 APRIL 2013
31
APPENDICES
32
Divisional income statements – Year ended 30 April 2013
UK Bus (Regional)
£m
UK Bus (London)
£m
North America
£mUK Rail
£m
Revenue 966.7 232.7 407.2 1,201.3
Rail franchise premia - - - (531.4)
Rail revenue support - - - 256.4
Other operating income 23.2 2.9 4.4 81.6
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 165.0 21.9 13.3 49.9
33
Rail premium profiles
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.
Year to 31 March:
South Western
£mEast Midlands
£m
2013 (395.2) (114.4)
2014 (465.4) (123.5)
2015 (518.9) (183.0)
2016 (606.8) -
2017 (594.7) -
34
Miscellaneous income statement items
Year to 30 April 2013
Year to 30 April 2012 Change
Twin America joint venture after tax* (£m) 11.7 9.7 2.0
Citylink joint venture after tax (£m) 1.3 2.0 (0.7)
Group overheads (£m) (14.9) (11.1) (3.8)
Restructuring costs (non-exceptional) (£m) (1.7) (2.3) 0.6
Intangible asset expenses (£m) (16.1) (12.3) (3.8)
Post-tax exceptional items (£m) (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
Year to 30 April 2013
Pre-tax profit£m
Tax£m
Rate%
Excluding intangible asset expenses and exceptional items 223.1 (49.7) 22.3%
Intangible asset expenses (16.1) 4.7 29.2%
Exceptional items (5.7) 2.5 43.9%
201.3 (42.5) 21.1%
Reclassify joint venture taxation for reporting purposes (5.5) 5.5
Reported in income statement 195.8 (37.0) 18.9%
Cash tax paid (net) (16.1)
36
New pensions accounting standard
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 19
− 5.6p or 19% lower than reported 30.2p
37
Pensions
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
Year ended 30 April
2013 Pension expense
£m
2012 Pension expense*
£m
2013Cash
contributions£m
2012 Cash
contributions£m
UK Bus/Central 1.1 9.8 30.3 34.4
North America 1.8 1.8 1.7 1.3
UK Rail 23.1 24.4 30.5 29.0
26.0 36.0 62.5 64.7
* excluding exceptional 2011/12 £38m curtailment gain
38
Movement in net debt – Year ended 30 April 2013
£523.8m£538.0m
£(313.1)m
£155.3m
£6.2m
£107.7m
£6.7m £0.3m
£51.1m
250.0
270.0
290.0
310.0
330.0
350.0
370.0
390.0
410.0
430.0
450.0
470.0
490.0
510.0
530.0
550.0
570.0
590.0
610.0
630.0
650.0
Net
de
bt
(£m
)
39
Fuel hedging
UK Bus (Regional) UK Bus (London)
North America (including
Coach America) UK Rail
2012/13 - % of consumption hedged 97% 51% 80% 77%
- 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) - 49.8p - 50.3p
2016/17 - % of forecast consumption hedged - 13% - -
- average hedge price (per litre) - 49.2p - -
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
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 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
ANNUAL RESULTSYEAR ENDED 30 APRIL 2013