Interim Results Half-year ended 27 October 2018 5 December 2018 2 - PowerPoint PPT Presentation

1 Interim Results Half-year ended 27 October 2018 5 December 2018

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 Positioned for growth in bus and rail Financial  Adjusted EPS of 12.9p (H1 2018: 13.6p) – ahead of expectations  Basic EPS of (5.5)p (H1 2018: 13.6p) reflect exceptional charges  Interim dividend maintained at 3.8 pence per share  Full-year adjusted earnings will reflect the rail out-performance in the first half of the year Bus & Coach  Continuing innovation and leadership  Encouraging performance from UK Bus (regional operations) – revenue per vehicle mile up 4.4%  London contract renewal rates disappointing in challenging market  North America strategic review ‒ Underlying performance in North America in line with revised expectations, but £85.4m non- cash goodwill impairment recorded to reflect revised view of long-term profitability Rail  Involved in short-listed bids for three new UK franchises  Good profitability at East Midlands Trains; planned Direct Award through to at least August 2019  Opportunity for Williams review to deliver more customer-focused and sustainable model

5 UK Bus (regional operations) Encouraging first half performance Half-year ended Half-year ended 27 Oct 2018 28 Oct 2017 Change Revenue (£m) 527.1 512.4 2.9% Like-for-like revenue (£m) 526.1 508.6 3.4% Operating profit (£m) 65.2 61.6 5.8% Operating margin (%) 12.4% 12.0% 40bp Estimated like-for-like passenger journeys* (m) 325.3 328.1 (0.8)%  Passenger revenue growth – like-for-like revenue per vehicle mile up 4.4%  Journey trends in line with change in vehicle miles  Good first half result boosted by good summer weather  Contactless payment facilities on all our buses  Range of initiatives to protect and grow business * Excludes inter-city coach services operated as a sub-contractor

6 UK Bus (London) Actions to improve competitiveness and benefit from longer term opportunities Half-year ended Half-year ended 27 Oct 2018 28 Oct 2017 Change Revenue and like-for-like revenue (£m) 128.6 128.4 0.2% Operating profit (£m) 6.1 6.5 (6.2)% Operating margin (%) 4.7% 5.1% (40)bp  Disappointing tender results in year in increasingly competitive bidding environment  Holding our nerve – maintaining sustainable contract pricing  Reviewing bid models, financial forecasts, contract pricing and cost efficiency to identify opportunities to improve competitiveness  Good progress on cost reduction programme  Margin pressure expected to continue in short-term  Longer term opportunities from planned housing development

7 North America Focused on new opportunities Half-year ended Half-year ended 27 Oct 2018 28 Oct 2017 Change Revenue (US$m) 323.3 333.9 (3.2)% Like-for-like revenue (US$m) 323.9 333.9 (3.0)% Operating profit (US$m) 21.2 27.6 (23.2)% Operating margin (%) 6.6% 8.3% (170)bp  No significant change since September trading update in expected 2018/19 profit  Focus is on growing scheduled service (including megabus.com) and contract revenue business  Further reviewing cost base  Non-cash impairment charge of £85.4m, reflecting revised view of long-term profitability  Reviewing strategic options – in discussions regarding possible sale

8 Rail Good financial performance and new contract opportunities Half-year ended Half-year ended 28 Oct 2017 27 Oct 2018 (restated) Change Revenue (£m) 335.1 899.2 (62.7)% Like-for-like revenue (£m) 202.1 201.3 0.4% Operating profit (£m) 11.5 21.7 (47.0%) Operating margin (%) 3.4% 2.4% 100bp  Positive resolution of contractual matters for former South West Trains franchise  Good operational delivery and financial performance at East Midlands Trains  Reduction in reported revenue and operating profit reflects ends of South West Trains franchise (in August 2017) and Virgin Trains East Coast franchise (in June 2018)  Lower than usual like-for-like revenue growth reflects effects of Thameslink timetable changes and Derby re- signalling work on East Midlands Trains – profit contractually protected from adverse impact  Involved in short-listed bids for three UK franchises  Expected short-term East Midlands direct award from March 2019 until at least August 2019

9 Virgin Rail Group (incorporates West Coast franchise) Industry-leading innovations and strong financial performance Half-year ended Half-year ended 27 Oct 2018 28 Oct 2017 Change Revenue – 49% share (£m) 303.2 288.5 5.1% Operating profit – 49% share (£m) 13.7 14.8 (7.4)% Operating margin (%) 4.5% 5.1% (60)bp Estimated passenger miles (m) 2,410.3 2,387.4 1.0%  Continued strong financial performance ‒ margin slightly down reflecting new franchise terms  Customer-focused innovation – removing Friday peak-hour restrictions from London Euston  Digital enhancements include selling tickets through Amazon Alexa platform

10 Stagecoach Group Good financial position Half-year ended Half-year ended 27 Oct 2018 28 Oct 2017 Change Net finance charges (including share of net finance income of joint ventures) (£m) (16.0) (17.9) 1.9 EBITDA from continuing operations and joint ventures* (£m) 176.2 189.9 (13.7) Closing net debt (£m) (461.2) (482.8) 21.6 Net Debt/trailing 12-month EBITDA* 1.4x 1.4x - EBITDA*/Net finance charges (including share of net finance income of joint ventures) 11.0x 10.6x 0.4x * excluding exceptional items

11 MARTIN GRIFFITHS CHIEF EXECUTIVE

12 Overview  Good business fundamentals and strong financial position  Growth in core regional bus operations and well positioned in de-risked rail market  Clear understanding of changing dynamics and trends in our public transport markets  Focus on growing demand through data, technology, innovation + better policy  Leveraging technology and engaging with our people to make bus and rail services easier for customers, reduce costs and improve efficiency  Positive outlook from growing pressure on governments to address road congestion, air quality and maximise benefit of public transport to economy

13 Understanding the dynamics and trends in public transport markets - 1 Changes in bus patronage in England between 2011/12 and 2016/17 Compound Annual Growth Rate (“CAGR”) Metropolitan Non-metro London areas areas All England Factors driving bus patronage by 0.3%+ p.a. Population 0.6% 0.7% 1.0% 0.8% Bus journey times (1.0)% (0.6)% (0.2)% (0.7)% Bus fares (0.2)% (0.4)% (0.5)% (0.3)% Factors driving bus patronage by 0.2% p.a. Car ownership/use 0.2% (0.6)% (0.8)% (0.2)% Online services (0.2)% (0.2)% (0.3)% (0.2)% Rounding - - - (0.2)% Sub-total (0.6)% (1.1)% (0.8)% (0.8)% Other factors (0.1)% (0.3)% - (0.1)% 5-year CAGR (0.7)% (1.4)% (0.8)% (0.9)%  Stagecoach UK Bus (regional operations) Division delivered like-for-like volume growth CAGR of 0.1% in the five years from 2011/2012 and 2016/17 Source: Confederation of Passenger Transport UK; http://www.cpt-uk.org/_uploads/attachment/4639.PDF

14 Understanding the dynamics and trends in public transport markets - 2  Population growth is the biggest positive driver of bus patronage across England.  The biggest negative drivers of patronage are factors linked to road congestion: car ownership, increased bus journey times and higher bus fares  Public policy decisions have also negatively impacted bus use: ‒ Cuts to local authority supported services have reduced the scope of bus networks ‒ the Government’s decision to reduce the rate of Bus Service Operators Grant (fuel duty rebate) from April 2012 has increased bus operator costs and fares  Online services (e.g. online shopping and delivery services) have had a lesser adverse impact on bus use  The incremental impact from new taxi competition has been relatively modest

15 Future bus passenger trends: opportunities and risks Opportunities for growth Risks of decline   Measures to tackle road congestion and Increased taxi competition air quality, promote public transport  More use of online services  Stable public policy to minimise bus cost  Greater flexible (and at home) working increases  Stabilisation/growth in tendered bus services ex-London  Further improvements in bus quality  Benefits of operator use of data to grow patronage  Increased car costs (fuel prices, insurance)  Creating new reasons to travel, particularly to town centres  Population growth and urbanisation