Summer- autumn 2019 Investor presentation Includes Half Year financial results to 30 June 2019
Cautionary statement This Review is intended to focus on matters which are relevant to the interests of shareholders in the Company. The purpose of the Review is to assist shareholders in assessing the strategies adopted and performance delivered by the Company and the potential for those strategies to succeed. It should not be relied upon by any other party or for any other purpose. Forward looking statements are made in good faith, based on a number of assumptions concerning future events and information available to Directors at the time of their approval of this report. These forward looking statements should be treated with caution due to the inherent uncertainties underlying any such forward looking information. The user of these accounts should not rely unduly on these forward looking statements, which are not a guarantee of performance and which are subject to a number of uncertainties and other facts, many of which are outside of the Company’s control and could cause actual events to differ materially from those in these statements. No guarantee can be given of future results, levels of activity, performance or achievements For a full list of definitions, please refer to the Glossary of Alternative Performance Measures on page 22 of the Half Year results statement. 2
Contents o Investment case, business model & strategic priorities o Our markets o Financial results half year 2019 o Business review half year 2019 o Strategic review half year 2019 o Appendix 3
Investment case, business model & strategic priorities 4
Investment case Diversity is our strength… International diversified transport company with strong cash flow supporting multiple growth opportunities & an attractive dividend yield o Leading international public transport operator with best in class margins o Internationally diversified portfolio with over 70% of earnings outside of UK o Stable & growing revenues o Disciplined capital allocation – targeted returns at least 15% o Strong sustainable cash flow generation driving growth both organically & via acquisitions o Sustainable compounding growth o Stable, long-term financing & commitment to investment grade rating o Strong dividend: medium-term dividend cover of at least 2.0x Group earnings o Strong ESG credentials 5
Business model Internationally diversified & balanced portfolio What we do Where & what we operate Sources of revenue Student Transportation (North America school bus) o USA £982m 40% Revenue £775m (2017: £770m) o Spain £684m 27% o UK £577m 24% o Urban Bus (UK bus, North America transit, ALSA urban bus) Canada £79m 3% Revenue £710m (2017: £670m) o Germany £68m 3% o Morocco £49m 2% o Switzerland £12m 1% Regional/long haul coach (ALSA regional & long haul, UK coach) Revenue £655m (2017: £620m) Total £2451m Sources of revenue Charter & other (North America, ALSA & UK) Revenue £245m (2017: £180m) o Contract revenues 49% o Passenger revenues 38% o Private hire 6% Rail (German Rail) o Grants & subsidies 3% Revenue £70m (2017: £80m) o Other revenues 4% *Data above rounded to nearest £5m 6
Strategic priorities Driving our business forward through our three strategic priorities Growing our Delivering business through Deployment of operational acquisitions & technology excellence market diversification We utilise technology to raise We continue to look to grow our We aim to be the safest, most customer & safety standards, unique portfolio of international reliable, convenient & best value drive efficiencies in our business bus, coach & rail businesses transport provider in the modes & facilitate growth through selective bolt-on we operate acquisitions & diversification into complementary markets 7
Our strategy is delivering To reinvest in Industry-leading Delivering strong Converting to growing the margins & sustainable strong free cash business & converting to revenue growth flow return to record profits shareholders Generated over Built a $0.5bn o o Transit bus 5 year revenue 5 year operating £785m* of FCF o o CAGR 7.1%* profit CAGR 8.2%* over last 5 years business in 6 years Robust organic Gearing reduced 5 year EPS CAGR o o o Acquisitions growth boosted by 11.4% to 2.3x after o delivering 15% acquisitions £506m* of Group operating investment in the returns o business since margin up 50 bps 2014 DPS up 48.6%* over last 5 years o over last 5 years *To 31 Dec 2018 8
Capital allocation Sustainable compounding growth £500m + EBITDA Less £200m - £250m CAPEX Less c.£100m tax, interest & working cap £150m-£200m FCF Invest in the Manage gearing Return to (2.5x 2.0x) business shareholders at at 15% ROIC 2.0x cover 9
Delivering on our strategy Strong track record of profitable growth Focus on operational excellence is delivering sustainable & growing returns Free Cash Flow (£m) ROCE (%) Revenue (£m) 198.6 2451 12.4 2321 2094 146.4 1745 11.9 138.6 11.9 111 11.7 2018 2018 2018 2015 2016 2017 2015 2016 2017 2015 2016 2017 Dividend per share (p) Normalised operating profit (£m) Earnings per share (p) 257.7 32.9 241.5 14.86 29.1 217.5 13.51 26.3 12.28 190.6 23.4 11.33 2018 2017 2015 2016 2015 2016 2017 2018 2015 2016 2017 2018 10
Key financial and valuation metrics Attractive valuation for a company with stable & growing revenues, strong cash generation & compounding growth 2018 Operating IG debt rating: EV/EBITDA* 2018 Dividend margin Moodys Baa2 7.1x 14.86p 10.5% Generated Fitch BBB- over £785m of Up 48.6% FCF over last over 5 years 5 years 2018 EPS 32.9p FCF yield* PE* 5 year CAGR Dividend yield* 8.5% 12.0x 11.4% 3.9% *Prospective 2019 based on consensus forecasts compiled by Nasdaq as at 1/8/2019, closing price 420p at 31/7/2019 11
Our markets 12
Our markets Attractive markets with opportunity for growth Rail ALSA North UK bus UK coach America Spain, Morocco & Regional Bus Germany Scheduled Coach Switzerland € 9bn £4.8bn market £350m market School Bus & Transit Bus & Coach (excluding London) regional & urban 60% share $24bn school bus € 4bn market in Spain market 80% local market market share 30% market share in $25bn transit market Spain 13% school bus market share Capital intensive………….............................. Capital Light 13
Our markets ALSA – Spain, Morocco & Switzerland Market size • € 4bn in Spain Features • Regulated & highly segmented market with 3 levels of Government regulation; national, regional & urban • Each concession is exclusive to the operator Competition • Intercity competition from state-backed rail & low cost airlines • Concessions awarded through competitive public tender, up to 10 years Growth drivers • Concession renewals, urban contract wins in Spain & Morocco, selective acquisitions • Recent entry into Switzerland – building scale in discretionary travel & ski transfer markets ALSA has leading position in a highly fragmented market National Express adding value through quality of service - ALSA the top rated transport company in Spain – and the implementation of RMS is sustaining competitive advantage 14
Our markets North America Market size • $24bn School Bus – c. 1/3 outsourced, $25bn Transit c. 1/3 outsourced Features • Fragmented school bus market with top 4 players accounting for nearly 50% • Low barriers to entry but hard to get scale • Local relationships are key Competition • Bigger players - access to capital, geographical reach, scale advantages & investment in technology • Top 6 players – First Student, National Express, STA, Illinois Central, Krapf, Cook Illinois Growth drivers • Price increases on renewal & market share shift - organic & acquisitions • Significant growth opportunities in charter services & greater utilisation of fleet National Express is second largest player with 13% market share & best in class margins National Express adding value through utilising class-leading technology to drive customer service, safety & efficiency, resulting in industry leading retention rates 15
Our markets UK bus Market size • £4.8bn Features • Primarily de-regulated with low barriers to entry Competition • National & local bus operators, car & rail • Top 5 players – Stagecoach, FirstGroup, Go-Ahead, Arriva, National Express Growth drivers • Increasing passenger volumes through modal shift, attractive fares in our low fare zones & more convenient payment options including mobile apps & contactless pay Largest 5 operators represent around 70% of UK de-regulated bus market National Express adding value through our pioneering partnership approach with local transport authority, working together in passengers’ interests 16
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