Interim Results Half-year ended 26 October 2019 11 December 2019 2 - PowerPoint PPT Presentation

1 Interim Results Half-year ended 26 October 2019 11 December 2019

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, regulatory 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 MARTIN GRIFFITHS CHIEF EXECUTIVE

4 Overview ▪ Solid financial results reflecting business initiatives and the reduction in the scale of the Group over the last eighteen months ‒ Adjusted earnings per share 10.0p (H1 2019: 12.9p) ‒ London Bus profit ahead of our start of year expectations and regional bus revenue growth recovering ‒ Net debt £392.6m (27 April 2019: £342.3m including IFRS 16 implementation) ▪ Exit from UK train operations complete ‒ Continuing unwind of contractual positions ▪ Positive outlook supported by political consensus on the need for action on climate change, government pro-bus policy and funding commitments ▪ Updated strategy with re-defined strategic objectives to pursue sustainable growth ▪ Continued investment in new vehicles and other assets ‒ £54.1m net capital expenditure ▪ Interim dividend maintained at 3.8p per share ▪ No change in our expected 2019/20 earnings per share

5 ROSS PATERSON FINANCE DIRECTOR

6 UK Bus (regional operations) Solid performance and positive long-term opportunities Half-year ended Half-year ended 27 Oct 2018 26 Oct 2019 (restated) Change Revenue (£m) 535.1 527.7 1.4% Like-for-like revenue (£m) 535.1 526.7 1.6% Operating profit (£m) 57.1 65.2 (12.4)% Operating margin (%) 10.7% 12.4% (170)bp Estimated like-for-like passenger journeys* (m) 321.2 325.9 (1.4)% ▪ Prior year period reflects 2018’s exceptionally good summer weather and revenue from operating bus services related to rail r e- signalling work in the Derby area ▪ Revenue per mile up 1.0%; revenue per journey up 3.0% ▪ Sales to fare paying customers through digital channels up 60.6% ▪ Regional variations in growth trends and profitability ▪ Higher revenue growth forecast for second half of year ▪ Major opportunity for modal shift: action on climate change, pro-bus public policy and government funding commitments ▪ Underpinned by high operating performance, strong employee engagement and customer satisfaction (90% England, 92% Scotland) * Excludes inter-city coach services operated as a sub-contractor

7 UK Bus (London) B etter than expected results reflecting actions taken earlier in year Half-year ended Half-year ended 26 Oct 2019 27 Oct 2018 Change Revenue and like-for-like revenue (£m) 120.6 128.6 (6.2)% Operating profit (£m) 5.1 6.1 (16.4)% Operating margin (%) 4.2% 4.7% (50)bp ▪ Higher than anticipated Quality Incentive Contract income reflecting good service performance ▪ Benefit of actions taken to improve efficiency ▪ Encouraging results from contract bids – net 5.3% increase in contracted peak vehicles from tender decisions since May 2019 ▪ Bidding strategy designed to support long-term sustainability of business

8 Rail Managed exit from rail franchises progressing well Half-year ended Half-year ended 27 Oct 2018 26 Oct 2019 (restated) Change Revenue (£m) 146.3 359.3 (59.3)% Operating profit (£m) 11.6 11.5 0.9% Operating margin (%) 7.9% 3.2% 470bp ▪ East Midlands franchise ended August 2019: worked collaboratively with new operator to ensure smooth transition ▪ Continuing unwind of South West, Virgin Trains East Coast and East Midlands rail businesses ▪ Sheffield Supertram is only continuing rail operation – concession to 2024 ▪ UK Rail profit includes cost of Commercial & Business Development team ▪ Pursuing claims against Secretary of State for Transport re disqualification of franchise bids ▪ No intention to bid for new UK rail franchises on risk profile currently offered

9 Virgin Rail Group (incorporates West Coast franchise) Strong financial performance in final months of franchise Half-year ended Half-year ended 26 Oct 2019 27 Oct 2018 Change Revenue – 49% share (£m) 316.5 303.2 4.4% Operating profit – 49% share (£m) 13.0 13.7 (5.1)% Operating margin (%) 4.1% 4.5% (40)bp ▪ Continued strong financial performance through to end of West Coast rail franchise on 8 December 2019

10 Stagecoach Group A well funded continuing business Exclude Pro forma Interest on Rail UK non- Reported North Rail net Share of EBITDA & rail Year to Exclude America liabilities Virgin Rail net Annualise Year to 26 Oct North cash (excl. Group net finance IFRS 16 26 Oct proceeds (4) 2019 America cash) assets charges effect 2019 Rolling 12-month EBITDA (1)(2) (£m) 288.2 (24.5) - - - (52.8) 13.0 223.9 Net finance charges (1)(2) (£m) (28.0) 1.7 2.0 - - (1.1) (1.3) (26.7) Net debt (3) (£m) (392.6) - - (110.5) 21.6 - - (481.5) EBITDA (1)(2) /Net finance charges (1)(2) 10.3 8.4 Net debt/EBITDA (1)(2) 1.4 2.2 - Excluding IFRS 16 1.1 2.0 ▪ Smaller but well funded business ▪ Rated investment grade by two major credit rating agencies ▪ Increase in reported net pension liability due to lower bond yields – managing continuing exposure to pension risks Notes (1) Includes share of joint ventures (2) Excludes separately disclosed items (3) Figures reflect adoption of IFRS 16, “Leases”, from 28 April 2019, which added £89.0m to net debt (4) Estimated effect of applying net cash sales proceeds to reduce net debt

11 Impact of IFRS 16, “Leases”: as at 28 April 2019 ▪ New accounting standard on leases, IFRS 16 ▪ Applied 2019/20 with no restatement of comparatives ▪ Results in a number of leases, previously accounted for as operating leases (rentals expensed), being capitalised within fixed assets as right of use assets (£88.1m) and depreciated over term of lease ▪ Increase in lease liability (£89.0m), depreciation charges and finance charges; reduction in operating lease expense. Lease liability decreases as rental payments made ▪ Accounting for rail leases not affected – all material rail leases expire in the current financial year ▪ No impact on net cash flow ▪ No immediate impact on our debt covenants ▪ No expected impact on our investment grade credit ratings

12 Impact of IFRS16, “Leases”: half -year ended 26 October 2019 Excluding separately disclosed items Excluding effect of IFRS 16 Effect of IFRS 16 As reported £m £m £m Adjusted EBITDA: UK Bus (regional operations) 97.0 3.5 100.5 UK Bus (London) 7.2 9.4 16.6 Other (inc. joint ventures) 20.2 0.1 20.3 124.4 13.0 137.4 Depreciation, amortisation & impairment UK Bus (regional operations) (40.2) (3.2) (43.4) UK Bus (London) (2.5) (9.0) (11.5) Other (inc. joint ventures) (0.4) - (0.4) (43.1) (12.2) (55.3) Operating profit 81.3 0.8 82.1 Net finance charges (inc. joint ventures) (11.4) (1.3) (12.7) Tax (inc. joint ventures) (13.5) 0.1 (13.4) Profit after tax 56.4 (0.4) 56.0 Net debt at 26 October 2019 (307.8) (84.8) (392.6)

13 MARTIN GRIFFITHS CHIEF EXECUTIVE

14 Strategic objectives We have identified three strategic objectives that will build a sustainable business, diversify our exposure to risk and create value for our stakeholders. Objectives Outcomes Maximise our core business’ potential in a changing market 1. Build a sustainable business 2. Diversify exposure to risk Manage change through our people and technology to make it simpler and better 3. Create value for our stakeholders Grow by diversifying to balance the portfolio and open new markets

15 Strategic overview To support these objectives we have identified 10 activities to deliver the change we are seeking. Objective 2 Objective 3 Objective 1 Manage change through our people Grow by diversifying Maximise our core business’ potential and technology Modernise retailing & fares to open up Develop sustainable vehicle new channels to market, increase Exit UK rail franchising technology to meet long-term needs retention and attract customers Streamline the back office to improve Grow the current UK portfolio Enter new international markets our business Implement our marketing & customer Upskill our people to improve service strategy to grow revenues delivery New products & services to fill gaps in the current UK portfolio Manage contractual & political uncertainty