Annual Results Year ended 29 April 2017 28 June 2017 2 Cautionary - PowerPoint PPT Presentation

1 Annual Results Year ended 29 April 2017 28 June 2017

2 Cautionary statement This document is solely for use in connection with a briefing on the group headed by 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 PATERSON FINANCE DIRECTOR

4 Adjusted earnings per share in line with expectations  Adjusted EPS 24.4p (2016: 27.7p), in line with our expectations  Basic EPS of 5.5p (2016: 17.1p) reflect exceptional charges  Full year dividend per share up 4.4% to 11.9p  Engaged in discussions with DfT on Virgin Trains East Coast ‒ £84.1m exceptional charge to provide for losses in next two years ‒ Expected to be profitable from 2019  Further investment in vehicles, technology and other assets ‒ £157.3m net capital expenditure  New rail franchise opportunities  Action taken in response to period of subdued revenue  No significant change to our 2017/18 adjusted EPS expectation

5 Virgin Trains East Coast Engaged with DfT  Making progress towards an agreement with DfT that recognises existing contractual rights and obligations  We expect: ‒ to operate franchise until 2023 ‒ franchise to be profitable from 2019  Now expecting losses for up to two years ‒ £84.1m provided now (pre-tax)  £44.8m non-cash impairment of intangible asset ‒ acceleration of “middle column” amortisation  £57.5m drawn of £165m shareholder loan commitment ‒ 10% Virgin  Continuing to deliver on customer improvements and financial commitments

6 Rail New opportunities Year to Year to 29 April 2017 30 April 2016 Change Revenue (£m) 2,160.7 2,129.1 1.5% Like-for-like revenue (£m) 2,160.7 2,118.0 2.0% Operating profit (£m) 31.0 66.7 (53.5)% Operating margin (%) 1.4% 3.1% (170)bp  Improved revenue trends in second half of 2016/17 ‒ Stagecoach UK Rail revenue growth ahead of sector ‒ but growth low versus recent history ‒ growth lowest on London commuter services ‒ weaker revenue trends in recent weeks  South West Trains franchise ends August 2017 ‒ handover planning progressing well ‒ c.£100m net debt increase  Good profit margin at East Midlands Trains – profit share payments for 2016/17  Shortlisted for: East Midlands, West Coast Partnership and South Eastern

7 UK Rail Trends by franchise Like-for-like Revenue growth Year to 29 April 2017 South West Trains 0.6% East Midlands Trains 3.3% Virgin Trains East Coast 3.2% Virgin Trains West Coast 6.0%

8 Virgin Rail Group (incorporates West Coast franchise) Good growth and profit margin versus rail sector Year to Year to 29 April 2017 30 April 2016 Revenue – 49% share (£m) 556.8 525.3 Operating profit – 49% share (£m) 31.5 32.6 Operating margin (%) 5.7% 6.2% Dividends received (£m) 28.1 27.1  Good revenue growth and profit margin versus rail sector  Record West Coast punctuality  Taxpayers benefitting from continued profit share payments  Direct award opportunity – April 2018 to at least March 2019

9 UK Bus (regional operations) High margin business Year to Year to 29 April 2017 30 April 2016 Change Revenue (£m) 1,015.7 1,032.8 (1.7)% Like-for-like revenue (£m) 1,008.3 1,023.7 (1.5)% Operating profit (£m) 121.1 137.3 (11.8)% Operating margin (%) 11.9% 13.3% (140)bp Estimated like-for-like passenger journeys* (m) 669.1 679.5 (1.5)%  High margin business – 12% overall; ranging from 8% upwards across our core operating companies  High customer satisfaction – 86% England; 90% Scotland  Like-for-like revenue growth ranging from –4% to +4% across our operating companies: ‒ local economies and road congestion having a greater effect than structural changes  Measured network, pricing and management changes in light of period of subdued revenue  No change to our expected 2017/18 operating profit * Excludes inter-city coach services operated as a sub-contractor

10 UK Bus (regional operations) Growth analysis Like-for-like growth Year to 29 April 2017 Revenue Journeys Implied yield megabus.com UK (0.8)% 6.7% (7.1)% Other commercial (0.7)% (1.1)% 0.3% Concessionary 0.2% (2.7)% 2.9% Tendered and school (9.4)% Contract revenue (1.3)% Hires and excursions (10.3)% Total (1.5)% (1.5)%

11 megabus.com Europe Realising value Year to Year to 29 April 2017 30 April 2016 Change Revenue (£m) 20.2 18.4 9.8% Operating loss (£m) (4.3) (24.1) (82.2)%  Sale of retail business completed and cash received  Planned transfer of vehicles largely completed with cash received  No ongoing operation of inter-city coach services in mainland Europe  No further losses expected

12 UK Bus (London) Significant value delivered since 2010 acquisition Year to Year to 29 April 2017 30 April 2016 Change Revenue (£m) 263.4 267.1 (1.4)% Like-for-like revenue (£m) 263.4 265.6 (0.8)% Operating profit (£m) 18.4 20.2 (8.9)% Operating margin (%) 7.0% 7.6% (60)bp  Significant value delivered from c.£60m acquisition in 2010  Lower operating profit expected in short-term  Driver wage pressure reducing margins on existing contracts  Strong competition for new contracts in parts of our network ‒ Transport for London five-year plan is for no growth in London bus mileage  Significant value in freehold property portfolio

13 North America Improving trends Year to Year to 29 April 2017 30 April 2016 Change Revenue (US$m) 632.3 647.7 (2.4)% Like-for-like revenue (US$m) 632.6 646.2 (2.1)% Operating profit (US$m) 25.0 28.4 (12.0)% Operating margin (%) 4.0% 4.4% (40)bp  Improving trends as fuel prices rise  megabus.com networks adjusted to reflect passenger demand  New contract wins – e.g. Bechtel  Low cost digital initiatives  Targeting profit growth in 2017/18

14 Stagecoach Group Good financial position Year to Year to 29 April 2017 30 April 2016 Change Net finance charges* (including share of net finance income of joint ventures) (£m) (33.6) (40.9) 7.3 EBITDA from continuing operations and joint ventures* (£m) 345.4 370.0 (24.6) Closing net debt (£m) (409.4) (399.3) (10.1) Net Debt/EBITDA * 1.2x 1.1x 0.1x EBITDA*/Net finance charges* (including share of net finance income of joint ventures) 10.3x 9.0x 1.3x * excluding exceptional items

15 MARTIN GRIFFITHS CHIEF EXECUTIVE

16 Summary  Diverse Group portfolio  Short-term macroeconomic challenges/political uncertainty  But strong business fundamentals: ‒ Operational excellence ‒ Focus on value for money and customer satisfaction ‒ Continued investment through business cycle ‒ Opportunities in each of our markets  Positive drivers of long-term public transport growth  Innovation outwith core operating divisions: TravelHero, Global Travel Ventures  Near term benefit from political focus on economic growth and addressing air quality

17 Delivering bus growth in UK Stagecoach expertise Sector opportunities Management actions  Operational excellence  Buses key part of solution to  Targeted action on local air quality crisis; management, networks and  Best in class value for money significant opportunity from fares  Strong stakeholder Clean Air Zones  Digital marketing strategy partnerships  Public transport seen as  Early engagement with new  Technology and fleet central to economic growth metro mayors aspirations of regional investment – new app;  Success in shaping Bus authorities contactless Services Act 2017  Good profit margins  Piloting new ideas, e.g. Little  Prudent approach to contract & Often bidding

18 Managing the cycle in rail Stagecoach expertise Sector opportunities Management actions  Good returns over 20+ years  Pipeline of UK franchise  Managing challenging short- opportunities term macroeconomic  Operational excellence conditions - East Midlands  Partnership working with  Effective contract Network Rail - West Coast Partnership management  High customer satisfaction - South Eastern  Constructive DfT engagement  Investing in customer  Planned franchise  Shaping future franchising experience improvement extensions/Direct Awards approach  Strong returns to taxpayer  Overseas opportunities