06/12/2001
Financial Highlights
- Group continuing turnover £957.9m up from £928.4m
- Total operating profit* £106.7m (2000 - £128.7m)
- Profit before tax* £75.1m (2000 - £91.8m)
- Earnings per share* 4.1p (2000 – 5.1p)
- Interim dividend held at 1.3p (2000 - 1.3p)
Operational Highlights
- Action taken to reduce Coach USA cost base post 11 September - $25m (£17m) annualised overhead reduction
- Fleet reduction and business closures
- Streamlining of senior management
- Negotiations continue as preferred bidder for 20-year franchise at South West Trains
- Constructive discussions between VRG, Department of Transport, Local Government and the Regions ("DTLR") and the SRA regarding the upgrade of the West Coast Main Line
- £3 billion new rolling stock for Virgin Trains and South West Trains progressing well
* excluding goodwill amortisation and exceptional items
Brian Souter, Stagecoach Chairman said: "Despite the uncertain economic environment, we have a sound portfolio of businesses underpinned by strong cash flow generation and I am confident about their future prospects. I believe it is essential for the UK Rail industry that the train operating companies take an active role in finding a solution to the current problems that the industry faces and winning customer confidence."
Keith Cochrane, Stagecoach Chief Executive said: "We have retained a clear focus on the continued development of our existing businesses, and we continue to pursue revenue growth initiatives. In light of a reduction in revenue at Coach USA after 11 September, we have taken action to address the cost base."
Stagecoach Group plc - Interim results for the six months ended 31 October 2001
CHAIRMAN'S STATEMENT
The tragic events on 11 September in the USA have had a significant impact on the lives of many and we wish to express our deepest sympathy with the injured and bereaved. We are committed to the efforts by the Mayor and all New Yorkers to rebuild the spirit of New York City. The spirit and dedication of Coach USA's people during these difficult times has been tremendous and I would like to personally thank all of our people for their efforts over the last three months.
The impact of the events on 11 September, with their concentration on key areas of our operations in and around New York, has affected the short-term financial performance of Coach USA and this is reflected in the Group's results for the period.
Group turnover, excluding discontinued operations, has increased by 3.2% to £957.9m (2000 - £928.4m). Total operating profit (before goodwill amortisation and exceptional items), was £106.7m (2000 - £128.7m) and adjusted earnings per share on an equivalent basis were 4.1 pence (2000 - 5.1 pence).
The directors have declared an interim dividend of 1.3p per share (2000 - 1.3p). The interim dividend is payable to shareholders on the register at 15 February 2002 and will be paid on 13 March 2002.
Prior to 11 September we were greatly encouraged that Coach USA was moving forward positively and our priority now is to regain that momentum. Market conditions in the USA, however, continue to be difficult. Whilst our taxi, transit and scheduled line run businesses have proved to be very robust and have bounced back quickly, the immediate outlook for our tour, charter and airport dependent businesses is more uncertain. We have therefore implemented measures that will reduce the annualised cost base of the division by approximately $25 million (£17m) and see Coach USA withdraw from a number of operations which, in the current climate, we do not see as sufficiently robust. We remain firmly of the view that the US business will recover and that there will be significant opportunities arising from our strong position in the market place.
Our UK Bus division continues to generate strong cash flows. It has benefited from a strong performance in London underpinned by new and renewed tenders at rates reflecting the significant investment that we have made in these operations. Our Overseas Bus operations in Hong Kong and New Zealand are still achieving underlying organic volume growth and, like the UK Bus division, are strong cash contributors for the Group.
At South West Trains and Virgin Rail Group, financial and operating performance has been impacted by continued infrastructure unreliability. The recent administration of Railtrack has created further uncertainty. Whilst there are clearly challenges ahead, we at Stagecoach believe that there are considerable opportunities for our Group. We have recently approached the Transport Secretary, Stephen Byers, outlining our views for a radical change in the structure for running Britain's railways that would see much closer integration between train operations and infrastructure maintenance and renewal but which would leave ownership of the network with Railtrack or its successor company. We believe that it is essential that the train operating companies take an active role in finding a solution to the current structural problems that the industry faces.
We are continuing our discussions with the Strategic Rail Authority to finalise a new franchise agreement for South West Trains. Our £1 billion new trains order for South West Trains is proceeding on time with the first unit due to be tested in the near future. At Virgin Rail Group, passengers are already benefiting from new investment with the introduction of the new Voyager train on the CrossCountry Franchise. The first Pendolino "tilting" train is due into service on the West Coast Main Line in 2002. We are working closely with our partners at Virgin Group to deliver the Virgin Rail Group business plan in the post-Hatfield environment and remain encouraged about the future.
In September we were pleased to welcome Iain Duffin to our Board as an independent non-executive director. Iain has considerable management experience on both sides of the Atlantic and I am sure the Group will benefit from this in the future.
Our Group is operating in an uncertain economic environment and each of our divisions faces its own opportunities and challenges. The cost reduction programme and business disposals in the USA that we have already implemented are a reflection of the current operating environment. However, we have a sound and complementary portfolio of businesses underpinned by strong cash flow generation that continue to show good growth prospects. We anticipate further growth opportunities in North America which we will pursue from a leaner and more efficient base. While there is clearly some uncertainty in UK Rail at the current time, Stagecoach is well placed to negotiate a long-term position at South West Trains as a new railway structure in the UK emerges. In addition we are confident that any changes agreed to the timing and scope of the West Coast Main Line infrastructure upgrade project will recognise the interests of all the parties and protect the interests of Virgin Rail Group.
We remain focused on our core bus and rail businesses in our selected geographic markets and remain fully committed to generating value for shareholders.
BRIAN SOUTER
Chairman
6 December 2001
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