Interim Results 2005 Interim Results 7 December 2005

Interim Results 2005

Interim ResultsInterim Results7 December 20057 December 2005

2 Interim Results 2005

Robert SpeirsChairman


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.


Martin GriffithsFinance Director


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


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

October2004£m

793.0

786.2

69.5

82.7

54.9

72.1

106.2

5.4p

1.1p

735.7

729.1

74.1

80.7

59.3

70.6

128.8

4.2p

1.0p

Financial Summary

* After restructuring costs of £0.7m (2004: £0.3m)


EBITDA

UK Bus - excluding Glenvale- Glenvale

North AmericaNew ZealandRailGroup overheads & restructuring costsEBITDA from Group companies before exceptionalsVirgin Rail GroupOther joint ventures and associatesTotal EBITDA before exceptionals

October2005£m

October2004£m

62.2(0.5)23.5

6.027.0(5.7)

112.54.5

Nil117.0

61.5 Nil

21.75.9

23.8(4.6)

108.34.1

(0.2)112.2


Net cash inflow from operating activitiesNet interest paidTaxationNet cash from operating activitiesNet capital expenditure including new hire purchase financeAcquisitions of businesses and other investments Sale of businesses and other investmentsToken sales and redemptionsForeign exchangeReduction in net debt before cashflows with shareholdersRepurchase of ‘B’ sharesEquity dividendsOther share capital movementsReduction in net debtOpening net debtClosing net debt

October 2005£m

132.7(12.5)(14.0)106.2(42.0)(13.9)

4.6(3.6)

(11.1)40.2

(13.9)(24.6)

4.05.7

(214.6)(208.9)

Movement in Net Debt


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


UK Bus Revenue Development

2004 Revenue

Glenvale

Passenger volumes

Tender wins/ contract amendments

Fare increases

megabus.com

2005 Revenue

n/a

n/a

5.8%

3.5%

0.4%

9.7%

London

£m %

249.9

6.8

3.7

3.0

12.0

1.5

276.9

2.7%

1.5%

1.2%

4.8%

0.6%

10.8%

351.1

6.8

3.7

8.9

15.5

1.9

387.9

1.9%

1.1%

2.5%

4.4%

0.5%

10.5%

Outwith London

£m %

UK Bus

£m %

101.2

Nil

Nil

5.9

3.5

0.4

111.0


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


Scheduled service/Line run/CommuterCharterSightseeing & TourSchool Bus & ContractTotal

October 2005

US$m

October2004

US$m

89.055.755.035.7

235.4

82.450.647.631.5

212.1

% Growth

8.0%10.1%15.5%13.3%11.0%

North America Continuing Revenue Breakdown

By Product


New Zealand Trading Results

Revenue £28.7m (2004: £26.2m)

Underlying revenue similar to last year (excluding currency movements)


- NZ$9.1m (2004: NZ$10.9m)

Operating margin 12.2% (2004: 14.9%)

Disposal completed at NZ$250.5m enterprise value


Rail Trading Results

Rail Subsidiaries

Revenue £245.6m (2004: £234.8m), up 4.6%


Passenger volumes up 0.8% at SWT, adversely affected by terrorist attacks

Revenue and profit share to SRA £27.8m (2004: £20.5m)


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


Taxation

Pre intangibles and exceptionals*Exceptional itemsIntangible asset amortisationResult for the period*

Cash tax paid (net)

Pre-tax£m

Tax£m

74.5(4.0)

(13.2)57.3

(16.5)1.71.1

(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


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


Brian SouterChief Executive


Group StrategyQuality 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%

↓


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


Group StrategyUK Bus Passenger Growth

Passenger growth by operating company – excluding London

October 2005 v October 2004

Overall passenger growth 1.5%

3% +

0-3%

<0%


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


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


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




Appendices


North America Revenue Development

2004 Revenue

Impact of disposals and other movements on discontinued turnover

US$/C$ currency impact

Underlying growth

2005 Revenue

DiscontinuedUS$m

TotalUS$m

12.0

(12.0)

Nil

Nil

Nil

ContinuingUS$m

212.1

Nil

2.9

20.4

235.4

224.1

(12.0)

2.9

20.4

235.4


Rail Revenue Development

2004 Revenue

SWT Passenger volumes

SWT Fares/yield

SWT Other

Island Line/Supertram

2005 Revenue

£m %

234.8

1.9

10.0

(1.3)

0.2

245.6

0.8%

4.3%

(0.6)%

0.1%

4.6%


Finance charges ratios

Finance charges (net)

EBITDA pre-exceptionals

EBITDA pre-exceptionals/finance charges

October2005£m

October2004£m

10.6

117.0

11.0 times

10.1

112.2

11.1 times


Gross debt & related derivativesInterest bearing cash balances

Non-utilisation/commitment feesAmortisation of bond issue costs/bank chargesInsurance letters of creditDiscount on insurance provisionsOther

Finance charges

£m

AnnualEffective rate

%

11.3(2.7)8.60.50.20.41.5

(0.6)10.6

6.2%4.6%

Finance Charges

Average balance*

£m

363.0118.0

*Average of month end debt and cash balances


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)

Forecast2005/06

89%

US$48

1.75

US$60

£52m

£91m

Forecast2006/07

15%

US$57

1.75

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

Actual2004/05

97%

US$35

1.85

US$50

£35m

£72m


Fuel Usage and Impact of Crude Price

UK Bus

North America

Annual Usagelitres

Annual Usage

Barrels (m)

200m

76m

276m

1.30

0.45

1.75

US$ variablecosts based

on $57a barrel

$80m

$25m

$105m


5.7 Nil Nil Nil

5.7

34.14.43.33.0

44.8

(2.4)(0.2)(0.2)

Nil

(2.8)

31.74.23.13.0

42.0

28.44.43.33.0

39.1

Capital Expenditure

UK BusNorth AmericaNew ZealandRail

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: No new vehicles were acquired by UK Bus during the six months on operating leases (2004:capital value of £23.5m).


Exchange Rates

US$NZ$C$

Closing rate Average rate

1.83232.67842.2350

1.81312.79852.4114

October 2004

Closing rate Average rate

1.77032.52952.0881

1.79892.57062.1836

October 2005



Documents

Interim Results 2005 Interim Results 7 December 2005