TIDMFGP
Embargoed until 07:00hrs on Wednesday 4 November 2009
FIRSTGROUP PLC
HALF-YEARLY RESULTS
FOR THE SIX MONTHS TO 30 SEPTEMBER 2009
GOOD PERFORMANCE UNDERPINNED BY DIVERSE, RESILIENT PORTFOLIO AND COST REDUCTION
PROGRAMME
* Robust results against a tough economic backdrop
* 50% of Group revenues contract backed - greater insulation against fast
changing economy
* Cost reduction actions largely mitigate impact on operating profit of
increased fuel costs and reduced Greyhound revenues
* Increase in hedged fuel costs this year c.GBP100m - set to recover in 2010/11
* Cost reduction programme implemented - annual savings of at least GBP200m
* Demonstrated ability to flex operating models to match changing demand
* On course to achieve cash generation targets - GBP100m per annum to reduce
net debt
* Debt duration now extended to 6.4 yrs, no major re-financing requirement
until 2012
* Actions taken ensure Group is well placed for future economic recovery
NORTH AMERICA - 75% OF REVENUES FROM CONTRACT BUSINESSES
* First Student:
+ Strong contract retention >90%
+ Good progress with margin improvement programme
* First Transit:
+ Good margin development and new contract wins
GREYHOUND - FLEXING BUSINESS MODEL TO PROTECT REVENUE PER MILE
* Revenue trends stabilising, beginning to show some improvement towards end
of Q2
* Matching supply to demand through flexible business model - mileage reduced
by 13%
UK BUS - STEADY PERFORMANCE, CONTINUED REVENUE GROWTH
* Like-for-like passenger revenue growth up 2.4%
* Management actions ensure profits in line with our expectations
* Flexible operating model mitigating changing demand - mileage reduced by 4%
UK RAIL - PASSENGER REVENUE GROWTH, BALANCED MIX OF FRANCHISES
* Like-for-like passenger revenue growth up 1.7% despite clear impact of
economy
* Revenue trends stabilising over period, particularly in Q2
* Unique position of revenue support provides substantial insulation
FINANCIAL SUMMARY
* Revenue GBP2,902.6m (2008: GBP2,768.5m)
* Adjusted EBITDA2 GBP319.4m (2008: GBP306.0m)
* Operating profit GBP123.1m (2008: GBP128.5m)
* Adjusted operating profit1 GBP166.5m (2008: GBP181.2m)
* Profit before taxation GBP30.3m (2008: GBP54.4m)
* Adjusted profit before taxation1 GBP69.7m (2008: GBP107.1m)
* Basic earnings per share 3.9p (2008: 5.0p)
* Adjusted basic earnings per share 9.3p (2008: 15.6p)
* Interim dividend per share up 10% to 6.65p (2008: 6.05p)
1 Before amortisation charges, hedge ineffectiveness on financial derivatives,
non-recurring bid costs, other non-recurring items and loss on disposal of
properties, as shown in the condensed consolidated income statement on p.21.
2 Adjusted operating profit as defined plus depreciation.
Commenting on the results for the six months to 30 September 2009, FirstGroup's
Chief Executive, Sir Moir Lockhead said:
"The Group has delivered a good performance in the first half against a tough
economic backdrop and increased fuel costs. During the full year the Group will
absorb a significant increase of approximately GBP100m in its hedged fuel costs
which is set to recover in 2010/11.
"The successful implementation of our cost reduction plan, which will achieve
annual savings of at least GBP200m in this financial year, and the action we have
taken to mitigate changing patterns of passenger demand have ensured that we
remain on course to achieve our earnings targets and cash generation of GBP100m
per annum to reduce net debt.
"Our strategy to build a diverse portfolio of operations in the UK and North
America, that are well balanced between contract-backed and passenger revenues,
underpins the strength and resilience of the Group and provides greater
insulation against a fast changing economic environment. In those areas of our
business where we are dependent on passenger demand we have demonstrated our
ability to flex the operating models to respond rapidly to changing market
conditions.
"While the current economic environment presents a number of challenges for the
transport industry, the Board remains confident in the underlying strength and
resilience of the Group. The actions we have taken across the business to
reduce costs will ensure the Group is well placed to benefit from future
economic recovery and has a robust and efficient base from which to continue to
deliver long-term value for shareholders. After a resilient performance in the
first half of the year, overall trading remains in line with our expectations."
Enquiries FirstGroup plc:
Sir Moir Lockhead, Chief Executive
Jeff Carr, Finance Director
Tel: +44 207 291 0512
Rachael Borthwick, Corporate Communications Director
Tel: +44 207 291 0508 / +44 7771 945432
A CONFERENCE CALL OF THE PRESENTATION TO ANALYSTS WILL BE HELD AT 9:00AM
FOR DETAILS PLEASE CONTACT FIRSTGROUP TEL: 020 7291 0507
PHOTOGRAPHS FOR THE MEDIA ARE ALSO AVAILABLE
FIRSTGROUP PLC
NOTES TO EDITORS
FirstGroup plc is the leading transport operator in the UK and North America
with annualised revenues of over GBP6 billion a year. We employ more than 130,000
staff and transport some 2.5 billion passengers a year.
UK Bus
The Group is Britain's largest bus operator running more than one in five of
all local bus services. A fleet of nearly 8,500 buses carries approximately 3
million passengers a day in more than 40 major towns and cities. We also
operate Greyhound UK providing regular services each way between London and
Portsmouth and London and Southampton.
UK Rail
The Group operates one quarter of the UK passenger rail network, with a
balanced portfolio of intercity, commuter and regional services, carrying over
280 million passengers per annum.
* We are the UK's largest rail operator with four passenger franchises -
First Capital Connect, First Great Western, First ScotRail and First
TransPennine Express - and one open access operator, First Hull Trains.
* We provide rail freight services through First GBRf and operate the London
Tramlink network on behalf of Transport for London carrying nearly 28
million passengers a year.
North America contract businesses
Headquartered in Cincinnati, FirstGroup America Inc. operates across the US and
Canada. The Group's contract businesses include Yellow School Buses (First
Student), Transit Contracting and Management Services (First Transit), Vehicle
Fleet Maintenance and Support Services (First Services).
* First Student is the largest provider of student transportation in North
America with a fleet of approximately 60,000 yellow school buses, carrying
nearly 4 million students every day across the US and Canada.
* First Transit is one of the largest private sector providers of transit
management and contracting, managing public transport systems on behalf of
city transit authorities. It is one of the largest providers of airport
shuttle bus services in the US and also manages call centres, paratransit
operations and other light transit activities.
* First Services is the largest private sector provider of vehicle
maintenance and ancillary support services in the US. Providing fleet
maintenance for public sector customers such as the Federal Government and
fire and police departments it also provides support services to public and
private sector clients.
Greyhound
Greyhound is the only national provider of scheduled intercity coach services
in the US and Canada. Based in Dallas, Greyhound provides scheduled passenger
services to approximately 3,800 destinations throughout the US and Canada
carrying approximately 22 million passengers annually.
Europe
In mainland Europe we operate some 150 buses in south west Germany and, with
our partner DSB, we operate the Øresund rail franchise which includes routes in
and between Denmark and Sweden.
Chairman's statement
While there can be no doubt that the current global economic climate presents a
number of challenges I am pleased that our management team has demonstrated
their ability to respond swiftly to changing demand and take the necessary
action to reduce our cost base. Our strategy to build a balanced, diverse
portfolio of operations in the UK and North America, with some 50% of Group
revenues underpinned by medium term contracts, has provided stability and
insulation against a fast changing economic environment and ensured that the
Group is not dependent on one particular market.
We are committed to providing safe, high quality and reliable services. The
safety and security of our passengers and employees is our chief priority and a
continued focus was rigorously applied to this key area during the period as we
strive to advance our industry-leading programmes and initiatives.
We have made further progress in realising our strategy to extend the maturity
profile of the Group's debt and reduce reliance on bank borrowings. Following
the issue of GBP350m 12-year bonds in April, we issued GBP200m of 15-year bonds in
September, both of which were substantially oversubscribed. The proceeds were
used to repay existing bank debt and our average debt duration has been
extended to 6.4 years. We are delighted by the continued support from fixed
income investors demonstrating confidence in the strength and resilience of the
Group.
In line with our commitment to increase dividends, the Board has proposed an
interim dividend of 6.65p (2008: 6.05p) an increase of 10%. It will be paid on
3 February 2010 to shareholders on the register on 8 January 2010.
During the period we added further strength and experience to the Group with the appointment of two new executive directors. Ellis Watson was appointed to the Board as Business Development and Marketing Director in July 2009. In September 2009, Jeff Carr joined the Board as Finance Director. Both bring considerable experience together with a track record of achievement in their respective careers and I am confident they will make a significant contribution to the ongoing success of the Group. This has been a period of considerable change for our employees. On behalf of the Board I would like to extend sincere thanks to all our staff across the Group for their continued commitment and dedication to providing safe, high quality and reliable services. There is no doubt that the weaker economic environment and the process of change can create a sense of uncertainty for staff. However, the action taken by management has provided a strong foundation for the Group to continue to build and benefit from economic recovery in the future. Looking ahead the Group will continue to benefit from a diverse revenue stream that is well balanced between contract-backed and passenger revenues. In those areas of our business that are dependent on passenger revenues we have responded quickly to match supply to demand and reduce our cost base. This action, combined with a rigorous focus on budgetary control, has ensured that we remain on course to achieve our cash generation and earnings targets. The Board remains confident in the underlying strength and resilience of the business and its ability to continue to deliver long-term value for our shareholders. Martin Gilbert Chairman * Operating profit referred to throughout this document refers to operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/ profit on disposal of properties. EBITDA is adjusted operating profit plus depreciation. Chief Executive's operating review OVERVIEW Safety The safety and security of our customers and our employees is at the heart of our business and underpins everything we do. While we have made significant progress in achieving our aim to embed a rigorous culture of safety throughout the Group, there is still more to be done. A zero tolerance approach to unsafe acts and practices is supported by the industry-leading initiatives, such as Injury Prevention, that we have firmly established across the Group. Despite this good progress we are never complacent and constantly seek new ways to ensure that we achieve the safest possible way of conducting our business for our customers and our staff. Results I am pleased to report a good performance during the first half of the year particularly against the backdrop of continued global economic weakness and significant cost headwinds. Group revenue was GBP2,902.6m (2008: GBP2,768.5m), an increase of 4.8% in Sterling terms after GBP230.2m of favourable foreign exchange movements. Operating profit reduced to GBP166.5m (2008: GBP181.2m) as a result of increased fuel costs and the impact of the recession on Greyhound's revenue but was significantly mitigated by the positive impact of our cost reduction actions. Statutory profit before taxation was GBP30.3m (2008: GBP54.4m) reflecting the lower operating profit and higher net finance costs as a result of the issue of bonds in September 2008 and April 2009. Adjusted basic earnings per share was 9.3p (2008: 15.6p). EBITDA rose by 4.4% to GBP319.4m (2008: GBP306.0m). The good performance is underpinned by the Group's diverse portfolio of operations together with prompt actions we have taken, particularly in UK Bus and Greyhound, to utilise the flexible business models that exist and match supply to demand. The cost actions we have taken across all areas of the Group will deliver annual savings of at least GBP200m starting this year. As part of this cost reduction programme we have reduced headcount by 4,400 throughout the Group. During this year the Group will absorb a significant increase of approximately GBP100m in its hedged fuel costs which we anticipate will recover in 2010/11. We have outlined our key priorities to continue to deliver strong cash generation and reduce the Group's leverage. The actions we have taken have ensured that we remain on course to achieve our cash generation targets of GBP 100m per annum in this current financial year and for 2010/11, which will be applied to reduce net debt. NORTH AMERICA The Group is the leading provider of transport services in North America. First Student is the largest provider of student transportation with approximately 60,000 yellow school buses operating every day across the US and Canada. We operate a transit contracting and management business in North Americaand providevehicle fleet maintenance and support services. Contract Businesses In our North American division approximately 75% of revenues derive from the less cyclical contracted businesses of Student, Transit and Services. Revenue from our contract businesses was marginally reduced to $1,649.9m or GBP 1,047.1m (2008: $1,730.1m or GBP895.9m) however operating profit increased to $89.1m or GBP60.2m (2008: $83.9m or GBP44.4m) reflecting the positive impact of the cost reduction actions and margin improvement programme, which has more than offset the increase in hedged fuel costs. EBITDA grew to $208.9m or GBP135.4m (2008: $192.8m or GBP100.7m). It is now two years since we completed the acquisition of Laidlaw and I am very pleased with the excellent progress made in integrating the contract businesses of both companies. While the initial synergy target has already been achieved we continue to drive out opportunities for further cost and operating efficiencies throughout the North American operations. The actions we have taken across our North American contract businesses will ensure that the operations remain resilient and in a strong position for future growth through unrivalled quality, a greater range of products, operating and cost efficiencies and significant scale benefits. First Student We are the largest operator of school transportation with a fleet of approximately 60,000 yellow buses providing home to school transport on behalf of school boards and authorities across the US and Canada. The resilient school bus market is estimated to be worth some $22 billion per annum and is backed by a local government requirement for schools to provide transportation through the provision of contracts averaging approximately three to five years in length. I am pleased to report that our focus on customer service and operational performance, together with the sustainable economies that we can pass on to customers, has delivered another period of strong contract retention of over 90%. In the current recessionary environment we have seen school districts under pressure to reduce their budgets and, as a result, scale back on the level of organic growth, primarily new services added to an existing contract, we would expect in a normal year. Against this backdrop, we expect that the number of buses operated to be similar to last year. After adjusting for the impact of movements in the US Dollar:Canadian Dollar exchange rate and the lower number of operating days in the current year, US Dollar revenue was reduced by 3.3%. This is largely as a result of our business in the Fort McMurray area now being reported as part of First Transit and the progress made with our margin enhancement programme, which saw First Student exit a number of contracts where an acceptable margin could not be secured. First Student is uniquely placed to pass on its significant scale benefits to new and existing customers through cost and operating efficiencies and procurement savings. We continue to develop the opportunities to win new contracts including `converting' those that were previously operated within the public sector. Our expectation is that despite the pressures on public spending and increased expressions of interest in outsourcing, conversions will remain slow to materialise. We continue to focus on improving operational performance and delivered a successful `start up' for the new school year supported by good staff availability. We were pleased to commence operation of a number of contracts including in Cincinnati, Ohio where we won the tender to become the sole provider of services for a contract that was previously operated by three separate contractors. During the period we advanced the roll-out of GPS equipment to our fleet which will help us to deliver greater customer service, improved operating performance and continue to deliver increased efficiencies in scheduling and routing. Notwithstanding the challenges of the current economic climate, we believe that the North American school bus market provides a significant opportunity for future growth. Our scale efficiencies, together with the actions we have taken to reduce our cost base and drive out greater efficiencies, will provide a strengthened base from which to continue to grow, particularly as the economy recovers. First Transit Our Transit division has delivered another successful period of growth with US Dollar revenue increased by 2.2%. The operating margin increased to 5.9% (2008: 3.2%), having been impacted last year by additional costs incurred in respect of a small number of Services contracts that expired during the period and the loss of a legal dispute. Strong contract retention rates of over 90% were achieved and we continued to increase our share of the outsourced transit market with a number of new contract wins including the provision of transit management services in New York and Connecticut. In line with our strategy to grow our presence in the typically higher margin light transit markets we were delighted to win a number of new contracts to provide shuttle bus services at the Universities of Alabama, Chicago and Louisiana and at Savannah College.
During the period First Services won a further contract to provide support and ancillary services on behalf of the US military. GREYHOUND Greyhound is the only national provider of intercity coach transportation services in the US and Canada. Greyhound provides scheduled passenger services to approximately 3,800 destinations throughout the US and Canada carrying some 22 million passengers annually. As previously indicated Greyhound continues to be impacted by the weak economic environment and increased unemployment in North America. Revenue was $493.5m or GBP309.4m (2008: $632.9m or GBP326.0m), a reduction of 20.1%, at constant US Dollar:Canadian Dollar exchange rates. Revenue trends stabilised over the period and began to show some improvement towards the end of the second quarter. We are encouraged that the trends continue to improve. Greyhound contributes less than 10% of the Group's operating profit. Its unique characteristics, in particular the highly flexible business model, have enabled us to take prompt, direct action to mitigate the impact of recession. Approximately 60% of the cost base is variable therefore we have been able to rapidly match supply to demand and reduce overheads to protect revenue per mile. We have reduced mileage by 13% in the US and by 10% in Canada. We have also taken a number of actions to considerably reduce our operating costs including the integration of several back office functions with existing FirstGroup America operations. It has also been necessary to implement a programme to substantially decrease headcount which has now reduced by 1,845. Despite the actions to moderate the impact of the economy and to modernise Greyhound's operating model, our focus on customer service and reliability has remained a key priority. I am pleased to report that On Time Performance has continued to improve across both Greyhound's US and Canadian operations. BoltBus, our low cost, high quality, point to point coach service from New York to Boston, Washington and Baltimore continues to attract new customers and grow new markets. The response from customers continues to be extremely positive and we are developing opportunities to expand BoltBus to new city pair destinations. While the economy remains weak we are delaying any major capital investment for Greyhound and will continue to dynamically manage the business to moderate the impact of recession. The measures we have taken at Greyhound have transformed the operating model and will ensure that the business has a stronger foundation for future growth and well placed to benefit from economic recovery. UK BUS The Group is the largest bus operator in the UK with a market share of approximately 23%. Our fleet of approximately 8,500 buses carries 3 million passengers every day. Our UK Bus division has delivered a robust performance during the period despite challenging economic conditions. Total revenue increased by 1.2% to GBP 585.6m (2008: GBP578.6m) and like-for-like passenger revenue increased by 2.4%. Passenger volumes were reduced by approximately 1% as a result of the challenging economic climate and increased unemployment. The increase to our hedged fuel costs impacted operating profit which was reduced by 15.3% to GBP 50.8m (2008: GBP60.0m). UK Bus, outside of London, has a highly flexible operating model. In response to the current economic environment we are matching our services to changes in demand to protect revenue per mile and as a result have reduced mileage by 4% during the period. This together with the cost reduction programme we have implemented has ensured that profitability has remained on course. Driver turnover has continued to improve and has now reduced to approximately 17%. As well as our initiatives to promote retention, the current labour market conditions and in particular higher levels of unemployment have contributed to the low levels of staff turnover. We recognise that value for money is a key driver for our customers in this current economic climate and we continue to introduce ticketing and travel initiatives designed to promote the cost and environmental benefits of bus travel. Our focus remains on improving service quality and operational performance. Punctuality and reliability has improved during the period with further reductions in lost mileage. Despite the recessionary pressures, we have continued to invest in our people and our business to maintain our industry leading position. During the period we made selected investment and targeted capital expenditure on the major towns and cities where our partnerships with local authorities have delivered passenger growth including new environmentally friendly vehicles for our operating companies in West and North Yorkshire, Bristol, Somerset and Avon, Glasgow and Hampshire and Dorset. We also invested in 14 new buses for the five Chester Park and Ride services. We are pleased to renew this contract and with our continued good performance in winning Park and Ride contracts across the UK. Following successful trials at depots in London, Bradford and Glasgow we are installing new `DriveGreen' technology across our entire bus fleet to improve driving styles and reduce the carbon footprint of our buses through greater fuel efficiency. The rollout will be complete by the summer of 2010. This summer we launched our `Staycations' marketing campaign to promote bus travel by linking with local attractions to provide travel and entry offers to our customers. The major public transport groups also launched `Greener Journeys', a campaign encouraging people to get out of their cars and onto buses and coaches. The campaign aims to reduce carbon emissions by changing travel behaviour and by switching one in 25 journeys from car to bus or coach. This would mean one billion fewer car journeys on our roads over the next three years. In September we launched Greyhound UK, operating high quality, low cost services between London and the two cities of Portsmouth and Southampton with yield managed fares starting from as low as GBP1 plus booking fee. We are encouraged by the early progress of this new initiative. We believe that voluntary quality partnerships offer the most effective way to increase public transport usage, meet the carbon challenge and reduce congestion in towns and cities. We continue to work with local authorities across the UK on joint initiatives to improve the punctuality and reliability of bus services and to promote bus services to car users. We support Greater Manchester Passenger Transport Executive's (GMPTE) plans to improve three major routes into and through Manchester city centre including highway, bus priority and congestion management measures. Our customers want punctual and reliable journeys and GMPTE's proposals would ensure that large numbers of bus passengers in Greater Manchester benefit from more reliable bus journey times and quicker cross-city journeys. Working closely with Strathclyde Partnership for Transport we continue to develop our network in Greater Glasgow with new services to work, retail and leisure centres and the launch of new `Hampden Express' services which offer a premium fare express route to large events at Scotland's national stadium. We are also developing key commuter markets through investments in services including the `Lanarkshire Express' and a new express service from Cumbernauld to Glasgow city centre. In September we officially launched our ftrmetro project in Swansea. Our long term partnership with the City and County of Swansea and the Welsh Assembly Government has delivered a GBP14m package to improve public transport in Swansea including dedicated infrastructure and new vehicles as well as upgrading the engineering and parking facilities at our depot. ftrmetro will encourage modal shift by providing state of the art vehicles and punctual and reliable journeys as a result of the many priority measures on its route through Swansea city centre via the railway station. In May we completed the integration of Truronian into our Devon and Cornwall business to improve the network for our Cornish customers with changes that will deliver increased frequency and more capacity. In October we extended the `ugobus' network in Plymouth with four new routes. The changes build on the success of the network launched in April 2008 to provide our customers with simplified routes, timetables and fares. We were pleased to officially open our new state-of-the-art bus depot in Aberdeen in October. The new depot includes many features to lessen its environmental impact and provides improved facilities for customers and staff. In June, our partnership with Bath and North East Somerset Council successfully delivered the transition to the new bus station in Bath which is now providing customers with better facilities and easier connections to Bath Spa railway station. UK RAIL Our UK Rail division operates passenger and freight services. Passenger rail franchises consist of First Capital Connect, First Great Western, First ScotRail and First TransPennine Express. We also operate Hull Trains, a non-franchised open access intercity passenger train operator, and provide rail freight services through First GBRf. We are the UK's largest rail operator carrying over 280 million passengers per annum. Results The weaker economy and increased unemployment has had a clear impact on the UK's railways. Despite this we continue to deliver growth with like-for-like passenger revenue increased by 1.7% during the period. We are substantially insulated from the effects of the recession on passenger demand through the unique position of our contractual revenue support and share arrangements. We are currently receiving revenue support at the highest level of 80% for both of our London based passenger rail franchises. Revenue from our UK Rail division was GBP949.1m (2008: GBP960.6m) reflecting a
change in the Network Rail access charging regime which reduced revenue by GBP 81.5m with no impact on operating profit. Operating profit increased to GBP50.8m (2008: GBP48.3m). As we anticipated demand for services slowed during the period, particularly in the London commuter market, as a result of higher unemployment and lower levels of economic activity. However, trends remained relatively stable over the period particularly in the second quarter. We have a diverse range of rail franchises including London commuter, intercity and regional, which provide a balanced mix of operations and mitigate reliance on any one specific market. We experienced strong demand for advance purchase and other discounted tickets with weaker demand for First Class fares reflecting the recessionary pressures our customers are facing. We continue to focus on operating performance and all of our rail franchises are achieving a Public Performance Measure (PPM) score of over 90% on a moving annual average. First ScotRail We were pleased to record an overall customer satisfaction score of 89% in the National Passenger Survey and continue to deliver further improvements to the franchise. In May we introduced a new timetable with additional East Coast commuter services and improvements to services in Fife, the Highlands and the West Coast. We also launched a new direct morning commuter service from Alloa to Edinburgh to build on the successful reintroduction of passenger services to Alloa. We were delighted that Laurencekirk station reopened in May after 42 years providing a real boost to the local community, improving access to jobs, education and leisure. The number of passengers using the station is higher than predicted. In partnership with Transport Scotland we are launching a new timetable in December to introduce a new hourly service between Glasgow and Edinburgh via Shotts, a much improved service between Glasgow and Kilmarnock and better connections from Ayr and Gourock into Glasgow and between Dumfries and Carlisle and North Berwick and Edinburgh for early morning services to London. We are working with Transport Scotland and other partners to deliver a new fleet of 38 Class 380 electric trains to run between Glasgow Central, Ayrshire, Inverclyde and Renfrewshire. The GBP200m investment by Transport Scotland will add 9,000 seats to Scotland's rail network from September 2010. We are also trialling smartcard technology on the Edinburgh-Glasgow route and plan to issue 10,000 smartcard tickets over the next two years with the roll out to customers planned for the autumn. We are delighted that First ScotRail won Passenger Operator of the Year at the National Rail Awards in September, the only Train Operating Company to receive the award for two consecutive years. First ScotRail was also named Public Transport Operator of the Year at the National Transport Awards in July. First TransPennine Express During the period First TransPennine Express delivered its best ever levels of train punctuality and reliability improving PPM, on a moving annual average basis, to almost 92%. For 11 weeks over the summer we had significant engineering work on our route between Doncaster and Cleethorpes to allow Network Rail to remove a severe temporary speed restriction in place on our network. The work was completed on time and we have welcomed customers back with a fares promotion. In December we will provide two additional Monday to Friday services between Manchester Airport and Scotland, increasing service provision to 11 trains in each direction. These additional services will improve our competitive position and allow us to stimulate further the high passenger demand that exists on this corridor. We continue to promote rail travel to and from Manchester Airport and we have seen continued passenger journey growth to the airport despite falling numbers of air passengers. With some of the UK's leading tourist destinations on our network including the Lake District and many seaside resorts we continue to target our marketing efforts on leisure promotions and special offers including `Kids go Free' and `Club 55'. We strengthened key services to popular leisure destinations including earlier and additional weekend services to Windermere and Scarborough and increased capacity on trains to Blackpool. We also added capacity to services for key events such as the Edinburgh Festival and provided effective promotion of these events and opportunities to travel. First Great Western First Great Western's operational improvement has continued during the period and our PPM, on a moving annual average basis, is over 92%. Our customers have welcomed the improved punctuality and reliability of our services and reflected this in the National Passenger Survey where 81% of customers were satisfied, a nine point improvement on results in the same period last year. We have continued to invest in improving customer service and introduced a new Customer Information System to a number of smaller stations. Feedback from customers has been extremely positive and we are installing enhanced Help Points at ten more stations on the Severn Beach Line in Bristol. As part of our initiative to improve on-board catering for longer distance services, we introduced the first of our fleet of 19 Express Cafes in June. The remaining buffet carriages are being introduced progressively and the programme is expected to complete early next year. We are also updating the buffet carriages on a further ten of our High Speed Trains. The branch lines on our Devon and Cornwall services have seen significant growth as a result of our successful partnerships with local authorities and community groups to promote use of the routes. We were delighted that some of this work was recognised at the Community Rail Awards in September with a large number of winners and highly commended initiatives from across our network. In addition we were pleased to be presented with the Operations Award at the Railway Industry Innovation Awards in June. First Capital Connect The Thameslink Programme continues with work progressing well at Blackfriars and Farringdon stations in London. Our campaign to communicate the Thameslink Programme to customers won two awards at the Railway Industry Innovation Awards in July and was highly commended in the `Putting Passengers First' category at the National Rail Awards in September. However, the late delivery of the new fleet of Class 377 trains by Bombardier and ongoing reliability problems are affecting operational performance on our Thameslink route. The continued delivery of the additional trains will enable us to add a further 900 seats in December and help reduce overcrowding on the route. Punctuality and reliability on the Great Northern route has been consistently above 95% during the period and in May we implemented `Seats for You', a major timetable change on the route. Five extra trains and changes to stopping patterns created over 5,000 additional seats, which we targeted at some of the most overcrowded services in the UK. The changes were implemented as a result of our Peterborough and Cambridge Capacity Study and our work with Network Rail and the Department for Transport. We introduced a new Super Off-Peak ticket offering 25% off weekend travel to London from mid-June to September. Following the success of the campaign, our Super Off-Peak fares are now permanent. We continue to build our partnerships with airlines operating at both Gatwick and Luton airports. First Hull Trains We introduced two successful marketing campaigns during the period. Our family campaign led to an increase in bookings from Hull to London over the summer. Our ongoing `London for less than a tenner' campaign promotes our `evening express' services and has continued to increase passenger loadings on our new seventh path. First GBRf In April we signed new contracts with Network Rail to continue to operate and manage its Whitemoor terminal and to run infrastructure trains in the south east of England. We also signed a contract with MSC to run intermodal trains from the Port of Felixstowe and, in September, extended our services at the port with an agreement to move containers to the Birmingham Intermodal and Doncaster Europort freight terminals. We continue to build our share of the coal market with a five year deal with EDF and an extension of our contract with Drax. We also signed a new contract with Lafarge Aggregates to move materials across the Midlands. In September we introduced new services to carry mail order returns for Royal Mail. GROUP OUTLOOK The Group has delivered a good performance in the first half against a tough economic backdrop and increased fuel costs. During the full year the Group will absorb a significant increase of approximately GBP100m in its hedged fuel costs which is set to recover in 2010/11. The successful implementation of our cost reduction plan, which will achieve annual savings of at least GBP200m in this financial year, and the action we have taken to mitigate changing patterns of passenger demand, have ensured that we remain on course to achieve our earnings targets and cash generation of GBP100m per annum to reduce net debt. Our strategy to build a diverse portfolio of operations in the UK and North America, that are well balanced between contract-backed and passenger revenues, underpins the strength and resilience of the Group and provides greater insulation against a fast changing economic environment. In those areas of our business where we are dependent on passenger demand we have demonstrated our ability to flex the operating models to respond rapidly to changing market conditions. While the current economic environment presents a number of challenges for the transport industry, the Board remains confident in the underlying strength and resilience of the Group. The actions we have taken across the business to
reduce costs will ensure the Group is well placed to benefit from future
economic recovery and has a robust and efficient base from which to continue to
deliver long-term value for shareholders. After a resilient performance in the
first half of the year, overall trading remains in line with our expectations.
Sir Moir Lockhead
Chief Executive
3 November 2009
Finance Director's review
Overview
We are pleased to announce a good set of half year numbers despite the economic
headwinds that have continued to affect certain parts of the business.
Additionally, we have experienced increased hedged fuel costs across our
businesses most of which will reverse in 2010/11.
To counter the effects of the economic weakness and increased fuel costs we
continue to focus on the delivery of our GBP200m cost reduction programme. In the
period headcount reductions of 2,700 were implemented bringing the total
headcount reductions to 4,400 which represents significant progress in
achieving the full benefits of the programme.
Headcount reductions: UK Bus UK Rail North Greyhound Total
America
Period to 31 March 2009 390 215 170 925 1,700
Six months to 30 740 395 645 920 2,700
September 2009
Total 1,130 610 815 1,845 4,400
In addition to cost reductions our UK Bus and Greyhound businesses have
flexible models and we have been reviewing and optimising our networks. As a
consequence mileage reductions of 4% and 13% have been implemented at UK Bus
and Greyhound respectively. Similarly, in our First Student business we have
adopted a policy of either improving or exiting low margin contracts which has
resulted in a small reduction in growth rates.
During the period we continued our strategy to extend the maturity profile of
our debt whilst at the same time reducing reliance on the banking market. In
April 2009 we issued GBP350m of 12-year bonds and in September 2009 we issued GBP
200m of 15-year bonds. Both of these bonds were significantly oversubscribed.
As a result of these actions our average debt duration has increased to 6.4
years (full year 2009: 4.6 years). Group leverage continues to improve and
liquidity headroom under committed bank facilities was increased further to GBP
826m at 30 September 2009.
Results
Group revenue rose to GBP2,902.6m (2008: GBP2,768.5m), an increase of 4.8% in
Sterling terms after GBP230.2m of favourable foreign exchange movements.
Operating profit was GBP166.5m (2008: GBP181.2m), a reduction of 8.1% principally
due to Greyhound revenue weakness and higher hedged fuel costs across the Group
of GBP74m. We anticipate that the additional hedged fuel costs for the current
financial year will be approximately GBP100m which we expect to reverse in 2010/
11.
6 months to 6 months to Year to
30 September 2009 30 September 2008 31 March 2009
Divisional Revenue Operating Operating Revenue Operating Operating Revenue Operating Operating
results
GBPm Profit1 margin1 GBPm profit1 margin1 GBPm profit1 margin1
GBPm % GBPm % GBPm %
UK Bus 585.6 50.8 8.7 578.6 60.0 10.4 1,182.0 134.0 11.3
UK Rail 949.1 50.8 5.4 960.6 48.3 5.0 2,121.5 94.2 4.4
North America 1,047.1 60.2 5.7 895.9 44.4 5.0 2,224.1 246.1 11.1
Greyhound 309.4 13.9 4.5 326.0 41.6 12.8 642.4 48.5 7.5
Group2 11.4 (9.2) - 7.4 (13.1) - 17.3 (25.3) -
Total Group 2,902.6 166.5 5.7 2,768.5 181.2 6.5 6,187.3 497.5 8.0
1Before amortisation charges, hedge ineffectiveness on financial derivatives,
non-recurring bid costs, other non-recurring items and (loss)/profit on
disposal of properties.
2Tram operations, German Bus, central management and other items.
North American contract business revenue was GBP1,047.1m or $1,649.9m (2008: GBP
895.9m or $1,730.1m), an increase of 16.9% in Sterling terms but a reduction of
4.6% in US Dollar terms. Operating profit was GBP60.2m or $89.1m (2008: GBP44.4m or
$83.9m), an increase of 35.6% in Sterling terms and 6.2% in US Dollar terms.
Our North America contract businesses performed well over the period with high
contract retention rates of over 90%. The reduction in US Dollar revenues
includes a lower number of First Student operating days in the current half
year and the impact of movements in the US Dollar:Canadian Dollar exchange
rate. Excluding these effects revenue was down 1.2% in US Dollar terms.
Additionally we are seeing the positive results of our margin enhancement
programme, where we aim to improve margins on or exit low margin contracts, in
both First Student and First Transit.
Greyhound revenue was GBP309.4m or $493.5m (2008: GBP326.0m or $632.9m) and
operating profit was GBP13.9m or $23.5m (2008: GBP41.6m or $81.1m). Revenue has
fallen as a result of the weak US economy and increased unemployment. In
constant currency terms revenue fell by approximately 20% during the first six
months with bus miles operated being reduced by 13% in order to protect revenue
per mile. Additional management actions will further reduce the cost base and
increase efficiencies while continuing to focus on improving customer service
and On Time Performance. Greyhound now has a stronger foundation on which to
build and is well placed to benefit from economic recovery when it arises.
UK Bus continues to grow, albeit at lower rates than previously achieved.
Revenue was GBP585.6m (2008: GBP578.6m), an increase of 1.2%. Operating profit was
GBP50.8m (2008: GBP60.0m), a reduction of 15.3% principally due to higher fuel
costs. Like-for-like passenger revenues grew by 2.4% however passenger volumes
decreased by approximately 1% largely as a result of the recession. We expect
like-for-like passenger revenue growth for the full year to be between 1% and
2%. We have utilised the flexible operating model outside of London by
optimising our network and matching our services to the reduction in demand to
protect operating margins. Consequently we have reduced mileage by 4% during
the period, while ensuring a continued focus on service quality, operational
performance and cost efficiencies. This, together with our cost reduction
programme, has ensured that profitability has remained in line with our
expectations. We expect that there will be a positive impact on the second half
margin as the cost initiatives are fully realised.
UK Rail revenue was GBP949.1m (2008: GBP960.6m), a decrease of 1.2%. A change in
the Control Period (CP4) arrangements with Network Rail meant an GBP81.5m
reduction in both DfT grant revenue and Network Rail charges with no impact on
operating profit. Operating profit was GBP50.8m (2008: GBP48.3m), an increase of
5.2%. Like-for-like passenger revenue growth across all TOCs was 1.7%. Despite
the clear impact of the weaker economy on the UK's railways, we are
substantially insulated from the full effects of the recession by the
contractual revenue support mechanisms in place. We are currently receiving
revenue support at the highest level of 80% for both First Great Western and
First Capital Connect. In addition, significant progress was made during the
period to deliver cost savings in the addressable cost base. We anticipate that
second half passenger revenues will be broadly flat compared to last year with
regulated fares reducing by 0.4% from January 2010.
Net Group costs were GBP9.2m (2008: GBP13.1m) with the improvement being due to
lower central costs as a result of headcount reductions and a lower share-based
payment charge as the performance criteria on certain executive share
incentives, which were set prior to the current economic decline, are now
considered unlikely to be achieved.
Non-recurring items and amortisation charges
Six months Six months Year to
to 30 to 30
September September 31 March
2009 2008 2009
GBPm GBPm GBPm
North America and Greyhound integration costs 7.0 34.5 70.1
Fuel hedge provision 4.8 - 23.1
UK Rail restructuring costs 0.1 - 10.3
North America and Greyhound restructuring 5.8 - 9.9
costs
UK Bus restructuring costs 3.6 - 2.1
European bid costs - 1.5 3.5
Other non-recurring costs 3.8 0.4 -
Total non-recurring items 25.1 36.4 119.0
Amortisation charges 17.1 13.5 33.1
42.2 49.9 152.1
Loss/(profit) on disposal of properties 1.2 2.8 (25.7)
Hedge ineffectiveness on financial (4.0) - -
derivatives
39.4 52.7 126.4
North America and Greyhound integration costs
North America and Greyhound integration costs were GBP7.0m (2008: GBP34.5m). These
reflect major IT integration projects and the conclusion of the Greyhound
back-office consolidation which commenced last year.
Fuel hedge provision
Fuel hedge provision was GBP4.8m (2008: GBPnil) and represents a reduction in 2009/
10 fuel requirements due to changes to contractual terms in certain First
Student and First Transit contracts whereby the Group now has less "at risk"
fuel.
Restructuring costs
Restructuring costs were GBP9.5m (2008: GBPnil) and represent redundancy costs in
respect of the headcount reductions across all businesses as part of the GBP200m
cost reduction action plan.
Other non-recurring costs
The GBP3.8m charge includes the non-capital costs of the roll out of a new
vehicle tracking system in the North American contract businesses.
Amortisation charges
Amortisation charges were GBP17.1m (2008: GBP13.5m) with the increase mainly due to
foreign exchange movements.
Property
Losses on disposals of GBP1.2m (2008: GBP2.8m) were incurred during the period and
relate to minor property disposals in both the UK and North America.
Hedge ineffectiveness on financial derivatives
Due to the ineffective element of the fair value movements on cross-currency
swaps there was a GBP4.0m credit to the income statement during the period (2008:
GBPnil). Any future ineffectiveness on these financial instruments will be
disclosed in this way.
Finance costs and investment income
The net finance cost was GBP92.8m (2008: GBP74.1m) with the increase principally
due to the September 2008 and April 2009 long term bond issues and foreign
exchange on US Dollar denominated interest cost.
Profit before tax
Adjusted profit before tax was GBP69.7m (2008: GBP107.1m) due principally to lower
operating profit and higher net finance costs. Exceptional costs of GBP39.4m
(2008: GBP52.7m) resulted in statutory profit before tax of GBP30.3m (2008: GBP
54.4m).
Tax
The tax charge, on adjusted profit before tax, for the period was GBP17.0m (2008:
GBP26.0m) and is based on the estimated effective rate for the full year of 24.4%
(2008: 24.3%). Amortisation charges, hedge ineffectiveness on financial
derivatives, non-recurring bid costs, other non-recurring items and loss on
disposal of properties amounting to GBP39.4m generated a tax credit of GBP13.6m
that reduced the total tax charge to GBP3.4m (2008: total tax charge GBP23.1m).
Last year there was a one-off deferred tax charge due to an increase in the UK
deferred tax liability arising on the abolition of Industrial Buildings
Allowances.
The actual tax paid during the period was GBP1.3m (2008: GBP6.6m). North American
cash tax remains low due to tax losses brought forward and tax depreciation in
excess of book depreciation. We believe this will remain low for the medium
term. The UK cash cost of tax remains low due to pension payments exceeding
pension charges and tax relief on interest payments.
Dividends
The interim dividend of 6.65 pence (2008: 6.05 pence) per ordinary share
represents an increase of 10%. The interim dividend will be paid on 3 February
2010 to shareholders on the register of members at the close of business on 8
January 2010
EPS
The adjusted basic EPS, before amortisation charges, hedge ineffectiveness on
financial derivatives, non-recurring bid costs, other non-recurring items and
loss on disposal of properties was 9.3 pence (2008: 15.6 pence), a reduction of
40.4%. Basic EPS was 3.9 pence (2008: 5.0 pence), a reduction of 22.0%.
EBITDA
Adjusted EBITDA by division is set out below:
6 months to 6 months to Year to
30 September 2009 30 September 2008 31 March 2009
Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1
GBPm GBPm % GBPm GBPm % GBPm GBPm %
UK Bus 585.6 88.5 15.1 578.6 96.1 16.6 1,182.0 205.4 17.4
UK Rail 949.1 74.5 7.8 960.6 66.3 6.9 2,121.5 137.2 6.5
North 1,047.1 135.4 12.9 895.9 100.7 11.2 2,224.1 374.2 16.8
America
Greyhound 309.4 28.3 9.1 326.0 53.9 16.5 642.4 76.6 11.9
Group 11.4 (7.3) - 7.4 (11.0) - 17.3 (21.2) -
Total Group 2,902.6 319.4 11.0 2,768.5 306.0 11.1 6,187.3 772.2 12.5
1Operating profit before amortisation charges, hedge ineffectiveness on
financial derivatives, non-recurring bid costs, other non-recurring items and
(loss)/profit on disposal of properties plus depreciation.
Operating Cash flow
Cash generated by operations was GBP164.4m (2008: GBP175.7m) with the improved
operating cash flow offset by adverse working capital, principally the CP4
charging mechanism changes in UK Rail.
Net debt
The Group's net debt at 30 September 2009 was GBP2,373.8m (2008: GBP2,195.1m; full
year 2009: GBP2,503.5m) and was comprised as follows:
Analysis of net debt Fixed Variable Total
GBPm GBPm GBPm
Cash - (126.7) (126.7)
UK Rail ring-fenced cash and deposits - (175.8) (175.8)
Other ring-fenced cash and deposits - (23.4) (23.4)
Sterling bond (2013)1 297.4 - 297.4
Sterling bond (2018)2 327.4 - 327.4
Sterling bond (2019)2 - 274.8 274.8
Sterling bond (2021)3 331.7 - 331.7
Sterling bond (2024)1 198.9 - 198.9
Sterling bank loans and overdrafts - 33.0 33.0
US Dollar bank loans and overdrafts4 - 806.5 806.5
Canadian Dollar bank loans and overdrafts 1.6 132.2 133.8
Euro and other bank loans and overdrafts - 47.0 47.0
HP contracts and finance leases 120.9 117.8 238.7
Loan notes 8.7 1.8 10.5
Interest rate swaps 1,097.1 (1,097.1) -
Total 2,383.7 (9.9) 2,373.8
1 excludes accrued interest
2 stated excluding accrued interest, swapped to US Dollars and adjusted for
movements on associated derivatives
3 stated excluding accrued interest, partially swapped to US Dollars and
adjusted for movements on associated derivatives
4 includes GBP46.2m of Euro bank loans swapped into US Dollars
Average debt maturity at the end of the period was 6.4 years (full year 2009:
4.6 years). Headroom under committed revolver facilities at 30 September 2009
was GBP826m (2008: GBP474m).
We remain focused on continuing to reduce our leverage. At 30 September 2009
net debt to EBITDA, calculated on a rolling 12 monthly basis, stood at 3.0
times (March 2009: 3.2 times).
Shares in issue
As at the period end there were 479.9m (2008: 480.8m) shares in issue,
excluding treasury shares and shares held in trust for employees. The number of
treasury shares and shares held in trust for employees at 30 September 2009 was
2.2m (2008: 1.3m). The weighted average number of shares in issue for the
purpose of EPS calculations (excluding treasury shares and shares held in trust
for employees) was 480.9m (2008: 468.9m).
Total equity
Total equity has decreased by GBP125.4m since the start of the period. The
principal reasons for this are actuarial losses on defined benefit pension
schemes, net of deferred tax, of GBP142.4m, adverse foreign exchange movements of
GBP148.8m and dividends paid of GBP65.7m partly offset by favourable movements on
derivative hedging instruments, net of deferred tax, of GBP205.4m and profit for
the period of GBP26.9m.
Foreign exchange
The most significant exchange rates to Sterling for the Group are as follows:
6 months to 6 months to Year to
30 September 2009 30 September 2008 31 March 2009
Closing Effective Closing Effective Closing Effective
rate rate rate rate rate rate
US Dollar 1.60 1.53 1.84 1.91 1.43 1.63
Canadian Dollar 1.77 1.88 1.90 1.97 1.78 1.95
Fuel hedging
In the UK, 100% of the Group's current year exposure to crude oil prices (2.6m
barrels p.a.) is hedged at $111 per barrel. In North America 100% of current
year "at risk" volumes (1.9m barrels p.a.) are hedged at $116 per barrel and
relate only to those requirements not covered by pass through or escalation
clauses in contracts.
For 2010/11 in the UK, 82% of the Group's exposure is hedged at $76 per barrel
and 82% of North American "at risk" volumes are hedged at $89 per barrel.
Pensions
The Group has updated the pension assumptions as at 30 September 2009 for the
defined benefit schemes in the UK and North America. As a result, the net
pension deficit of GBP169m at the beginning of the period has moved to a net
pension deficit of GBP345m at the end of the period principally due to the
reduction in the discount rate used from 6.75% to 5.45%, partly offset by
improvements in asset returns over the period.
The main factors that influence the balance sheet position for pensions and the
sensitivities to their movement are set out below:
Movement Impact
Discount rate + 0.1% Reduce deficit by GBP30m
Inflation + 0.1% Increase deficit by GBP19m
Seasonality
The First Student business generates lower revenues and profits in the first
half of the year than in the second half of the year as the school summer
holidays fall into the first half. Greyhound operating profits are typically
higher in the first half of the year due to demand being strongest in the
summer months.
Principal risks and uncertainties for the remaining six months of the financial
year
There are a number of risks and uncertainties facing the Group in the remaining
six months of the financial year. These are considered to be the same as
disclosed in the 2009 Annual Report. The principal risks and uncertainties,
which are set out in detail on pages 38 to 40 of the Annual Report and Accounts
2009, are:
* Economy in the UK and North America
* Pensions
* Competitive pressures
* Legislation and regulation
* Labour costs and employee relations
* Fuel costs
* Treasury risks and insurance costs
* Terrorism
* Rail franchise agreements
* Retention of key management
* Customer service and contract retention
* Environmental
Responsibility statement
We confirm that to the best of our knowledge:
* the condensed set of financial statements has been prepared in accordance
with IAS 34 "Interim Financial Reporting";
* the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the
remaining six months of the year); and
* the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
Jeff Carr
Finance Director
3 November 2009
Condensed consolidated income statement
Notes Adjusted Adjustments2 Unaudited Adjusted Adjustments2 Unaudited Audited
results1 6 months to Total results1 6 months to Total Total
6 months 30 September 6 months 6 months 30 September 6 months year to
to to to to
2009 2008 31 March
30 30 30 30
September GBPm September September GBPm September 2009
2009 2009 2008 2008 GBPm
GBPm GBPm GBPm GBPm
Revenue 2 2,902.6 - 2,902.6 2,768.5 - 2,768.5 6,187.3
Operating costs before (2,736.1) (42.2) (2,778.3) (2,587.3) (49.9) (2,637.2) (5,841.9)
(loss)/profit on
disposal of properties
Operating profit 166.5 (42.2) 124.3 181.2 (49.9) 131.3 345.4
before (loss)/profit
on disposal of
properties
Amortisation charges - (17.1) (17.1) - (13.5) (13.5) (33.1)
Non-recurring bid - - - - (1.5) (1.5) (3.5)
costs
Other non-recurring - (25.1) (25.1) - (34.9) (34.9) (115.5)
items
- (42.2) (42.2) - (49.9) (49.9) (152.1)
(Loss)/profit on - (1.2) (1.2) - (2.8) (2.8) 25.7
disposal of properties
Operating profit 2 166.5 (43.4) 123.1 181.2 (52.7) 128.5 371.1
Investment income 3 1.0 - 1.0 3.8 - 3.8 7.9
Finance costs 3 (97.8) 4.0 (93.8) (77.9) - (77.9) (179.0)
Profit before tax 69.7 (39.4) 30.3 107.1 (52.7) 54.4 200.0
Tax 4 (17.0) 13.6 (3.4) (26.0) 2.9 (23.1) (43.0)
Profit for the period 52.7 (25.8) 26.9 81.1 (49.8) 31.3 157.0
Attributable to:
Equity holders of the 44.5 (25.7) 18.8 73.1 (49.7) 23.4 143.3
parent
Minority interest 8.2 (0.1) 8.1 8.0 (0.1) 7.9 13.7
52.7 (25.8) 26.9 81.1 (49.8) 31.3 157.0
Basic earnings per 6 3.9p 5.0p 30.2p
share
Diluted earnings per 6 3.9p 4.9p 30.0p
share
All results relate to continuing operations.
Dividends of GBP61.1m were paid during the period (2008: GBP55.5m; full year 2009:
GBP84.6m). Dividends of GBP32.0m were proposed for approval during the period
(2008: GBP29.1m; full year 2009: GBP61.1m) per note 5.
1Adjusted trading results before items noted in 2 below.
2Amortisation charges, hedge ineffectiveness on financial derivatives,
non-recurring bid costs, other non-recurring items and (loss)/profit on
disposal of properties and tax thereon.
Condensed consolidated balance sheet
Notes Unaudited Unaudited Audited
30 30 31 March
September September
2009
2009 2008
GBPm
GBPm GBPm
Non-current assets
Goodwill 7 1,662.6 1,416.9 1,820.0
Other intangible assets 8 403.6 381.4 456.7
Property, plant and equipment 9 2,280.0 2,062.2 2,398.1
Deferred tax assets 43.1 - 50.2
Retirement benefit assets 19 3.8 114.3 111.5
Derivative financial instruments 13 51.0 46.1 24.8
Investments 4.6 4.3 5.1
4,448.7 4,025.2 4,866.4
Current assets
Inventories 98.1 87.1 110.0
Trade and other receivables 10 592.5 654.0 610.3
Financial assets - cash and cash 325.9 227.6 322.5
equivalents
Assets classified as held for sale 11 4.3 5.6 4.2
Derivative financial instruments 13 16.6 69.1 3.1
1,037.4 1,043.4 1,050.1
Total assets 5,486.1 5,068.6 5,916.5
Current liabilities
Trade and other payables 12 1,084.1 1,011.5 1,124.7
Tax liabilities 45.3 57.9 47.2
Financial liabilities - bank overdrafts 1.6 30.4 210.7
and loans
- bonds 36.3 20.7 36.0
- obligations under HP contracts
and finance leases 38.6 26.7 34.3
Derivative financial instruments 13 183.9 39.4 304.5
1,389.8 1,186.6 1,757.4
Net current liabilities 352.4 143.2 707.3
Non-current liabilities
Financial liabilities - bank loans 1,018.7 1,471.8 1,408.1
- bonds 1,411.4 840.8 870.2
- obligations under HP contracts
and finance leases 200.1 71.0 194.6
- loan notes 10.5 10.5 10.5
Derivative financial instruments 13 124.8 37.5 243.6
Retirement benefit liabilities 19 348.8 139.7 280.2
Deferred tax liabilities 6.7 130.3 20.6
Provisions 14 296.4 302.8 327.0
3,417.4 3,004.4 3,354.8
Total liabilities 4,807.2 4,191.0 5,112.2
Net assets 678.9 877.6 804.3
Equity
Share capital 16 24.1 24.1 24.1
Share premium account 676.4 676.4 676.4
Hedging reserve (147.4) 55.9 (352.8)
Other reserves 4.6 4.6 4.6
Own shares (8.0) (5.7) (3.4)
Translation reserve 189.0 (13.5) 337.4
Retained earnings (82.4) 116.3 98.5
Equity attributable to equity holders of 656.3 858.1 784.8
the parent
Minority interests 22.6 19.5 19.5
Total equity 678.9 877.6 804.3
Condensed consolidated statement of comprehensive recognised income
Unaudited Unaudited Audited
6 months 6 months Year to
to to
31 March
30 30
September September 2009
2009 2008
GBPm
GBPm GBPm
Derivative hedging instrument movements 263.1 (1.2) (539.6)
Deferred tax on derivative hedging instrument (57.7) 7.4 137.1
movements
Exchange differences on translation of foreign (148.8) 57.8 409.6
operations
Unrealised losses on executive deferred (0.4) (1.4) (3.1)
compensation plans
Actuarial losses on defined benefit pension (193.6) (141.1) (308.3)
schemes
Deferred tax on actuarial losses on defined 51.2 43.7 102.2
benefit pension schemes
Net expense recognised directly in equity (86.2) (34.8) (202.1)
Profit for the period 26.9 31.3 157.0
Total recognised income and expense for the (59.3) (3.5) (45.1)
period
Attributable to:
Equity holders of the parent (67.0) (12.4) (60.7)
Minority interests 7.7 8.9 15.6
(59.3) (3.5) (45.1)
Condensed consolidated statement of changes in equity
Share Share Hedging Other Own Trans-lation Retained Total Minority Total
capital
premium reserve reserves shares reserve earnings GBPm interests equity
GBPm
account GBPm GBPm GBPm GBPm GBPm GBPm GBPm
GBPm
Balance at 1 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5 784.8 19.5 804.3
April 2009
Profit for - - - - - - 18.8 18.8 8.1 26.9
the period
Exchange - - - - - (148.4) - (148.4) (0.4) (148.8)
differences
on
translation
of foreign
operations
Actuarial - - - - - - (193.6) (193.6) - (193.6)
loss on
defined
pension
schemes
Deferred tax - - - - - - 51.2 51.2 - 51.2
on actuarial
losses on
defined
benefit
schemes
Unrealised - - - - - - (0.4) (0.4) - (0.4)
losses on
executive
deferred
compensation
plans
Derivative - - 263.1 - - - - 263.1 - 263.1
hedging
instrument
movements
Deferred tax - - (57.7) - - - - (57.7) - (57.7)
on derivative
hedging
instrument
movements
Total - - 205.4 - - (148.4) (124.0) (67.0) 7.7 (59.3)
comprehensive
income for
the period
Dividends - - - - - - (61.1) (61.1) (4.6) (65.7)
paid
Movement in - - - - (4.6) - - (4.6) - (4.6)
EBT and
treasury
shares
Share-based - - - - - - 2.7 2.7 - 2.7
payments
Deferred tax - - - - - - 1.5 1.5 - 1.5
on
share-based
payments
Balance at 30 24.1 676.4 (147.4) 4.6 (8.0) 189.0 (82.4) 656.3 22.6 678.9
September
2009
Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5 691.6 13.2 704.8
April 2008
Profit for - - - - - - 23.4 23.4 7.9 31.3
the period
Exchange - - - - - 56.8 - 56.8 1.0 57.8
differences
on
translation
of foreign
operations
Actuarial - - - - - - (141.1) (141.1) - (141.1)
loss on
defined
pension
schemes
Deferred tax - - - - - - 43.7 43.7 - 43.7
on actuarial
losses on
defined
benefit
schemes
Unrealised - - - - - - (1.4) (1.4) - (1.4)
losses on
executive
deferred
compensation
plans
Derivative - - (1.2) - - - - (1.2) - (1.2)
hedging
instrument
movements
Deferred tax - - 7.4 - - - - 7.4 - 7.4
on derivative
hedging
instrument
movements
Total - - 6.2 - - 56.8 (75.4) (12.4) 8.9 (3.5)
comprehensive
income for
the period
Issue of 2.2 228.6 - - - - - 230.8 - 230.8
share capital
Dividends - - - - - - (55.5) (55.5) (2.6) (58.1)
paid
Movement in - - - - 1.9 - (1.5) 0.4 - 0.4
EBT and
treasury
shares
Share-based - - - - - - 3.1 3.1 - 3.1
payments
Current tax - - - - - - 0.1 0.1 - 0.1
on
share-based
payments
Balance at 30 24.1 676.4 55.9 4.6 (5.7) (13.5) 116.3 858.1 19.5 877.6
September 200
8
Condensed consolidated statement of changes in equity (continued)
Share Share Hedging Other Own Trans-lation Retained Total Minority Total
capital
premium reserve reserves shares reserve earnings GBPm interests equity
GBPm
account GBPm GBPm GBPm GBPm GBPm GBPm GBPm
GBPm
Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5 691.6 13.2 704.8
April 2008
Profit for - - - - - - 143.3 143.3 13.7 157.0
the period
Exchange - - - - - 407.7 - 407.7 1.9 409.6
differences
on
translation
of foreign
operations
Actuarial - - - - - - (308.3) (308.3) - (308.3)
loss on
defined
pension
schemes
Deferred tax - - - - - - 102.2 102.2 - 102.2
on actuarial
losses on
defined
benefit
schemes
Unrealised - - - - - - (3.1) (3.1) - (3.1)
losses on
executive
deferred
compensation
plans
Derivative - - (539.6) - - - - (539.6) - (539.6)
hedging
instrument
movements
Deferred tax - - 137.1 - - - - 137.1 - 137.1
on derivative
hedging
instrument
movements
Total - - (402.5) - - 407.7 (65.9) (60.7) 15.6 (45.1)
comprehensive
income for
the period
Issue of 2.2 228.6 - - - - - 230.8 - 230.8
share capital
Dividends - - - - - - (84.6) (84.6) (9.3) (93.9)
paid
Movement in - - - - 4.2 - (3.9) 0.3 - 0.3
EBT and
treasury
shares
Share-based - - - - - - 6.3 6.3 - 6.3
payments
Deferred tax - - - - - - (1.7) (1.7) - (1.7)
on
share-based
payments
Current tax - - - - - - 0.1 0.1 - 0.1
on
share-based
payments
Current tax - - - - - - 2.7 2.7 - 2.7
on foreign
exchange
movements
Balance at 31 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5 784.8 19.5 804.3
March 2009
Condensed consolidated cash flow statement
Note Unaudited Unaudited Audited
6 months to 6 months Year to
to
30 31 March
September 30
2009 September 2009
GBPm 2008 GBPm
GBPm
Net cash from operating activities 17 74.9 93.2 494.4
Investing activities
Interest received 1.0 4.6 9.0
Proceeds from disposal of property, 21.5 2.8 54.7
plant and equipment
Purchases of property, plant and (93.1) (176.2) (320.2)
equipment
Acquisition of businesses - (2.4) (6.5)
Net cash used in investing activities (70.6) (171.2) (263.0)
Financing activities
Shares purchased by Employee Benefit (1.4) - -
Trust
Monies received on exercise of options 1.4 0.5 0.5
Dividends paid (61.1) (55.5) (84.6)
Dividends paid to minority shareholders (4.6) (2.6) (9.3)
Proceeds from bond issues 550.0 300.0 300.0
Proceeds from new bank facilities - 225.5 436.1
Proceeds from existing bank facilities 46.0 126.0 6.4
Repayment of bank debt (509.4) (724.9) (1,062.4)
Repayments under HP contracts and (11.3) (17.9) (43.3)
finance leases
Repayment of loan notes - (4.6) (4.6)
Fees for bank facility amendments and (4.5) (5.7) (10.4)
bond issue costs
Proceeds from sale and finance - - 70.3
lease-back of buses
Net proceeds on issue of shares - 230.8 230.8
Net cash from financing activities 5.1 71.6 (170.5)
Net increase/(decrease) in cash and cash 9.4 (6.4) 60.9
equivalents before foreign exchange
movements
Cash and cash equivalents at beginning 322.5 239.7 239.7
of period
Foreign exchange movements (6.0) (5.7) 21.9
Cash and cash equivalents at end of 325.9 227.6 322.5
period per condensed consolidated
balance sheet
Cash and cash equivalents for the purposes of the condensed consolidated cash
flow statement comprise cash at bank and in hand and other short-term highly
liquid investments with a maturity of three months or less.
Notes to the half-yearly financial report
1 Basis of preparation
This half-yearly financial report does not constitute statutory accounts within
the meaning of section 435 of the Companies Act 2006. The statutory accounts
for the year ended 31 March 2009 have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under section 237(2) or (3) of the Companies Act 1985.
The figures for the six months to 30 September 2009 include the results of the
rail businesses for the period ended 19 September 2009 and the results for the
other businesses for the 26 weeks ended 26 September 2009.
The accounting policies used in the half-yearly financial report are consistent
with International Financial Reporting Standards. The same accounting policies,
presentation and methods of computation are followed in the condensed set of
financial statements as applied in the Group's latest annual audited financial
statements, except for as described below.
In the current financial year, the Group has adopted International Financial
Reporting Standard (IFRS) 8 "Operating Segments" and International Accounting
Standard (IAS) 1 "Presentation of Financial Statements" (revised 2007). As a
result of the adoption of IFRS 8 total assets are disclosed by segment. As a
result of the adoption of IAS 1, a condensed consolidated statement of changes
in equity has been included in the primary statements, showing changes in each
component of equity for each period presented.
The Directors have revised the balance sheet presentation of assets classified
as held for sale as current assets and retirement benefit assets and deferred
tax assets are included as non-current assets. The Directors have revised the
condensed consolidated cash flow statement for the year to 31 March 2009 to
show proceeds from bond issues on a gross basis with an equal increase in fees
for bond issue costs. The Directors have also revised the presentation of
minority interests in the condensed consolidated statement of comprehensive
recognised income to include foreign exchange gains and losses on translation
of foreign minority interests. This has not impacted the Group's net assets or
the minority interests in the Group.
The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as adopted by the European Union.
These results are unaudited but have been reviewed by the auditors. The
comparative figures for the six months to 30 September 2008 are unaudited and
are derived from the half-yearly financial report for the six months ended 30
September 2008, which was also reviewed by the auditors.
The Group has continued to extend the maturity profile of debt as discussed in
the Finance Director's review. There continues to be no significant repayments,
other than finance leases, until 2012. After taking this into account and
making enquiries and reviewing the outlook for 2010/11 and medium term plans,
the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly they continue to adopt the going concern basis in preparing the
half-yearly financial report.
This half-yearly financial report will be available to all shareholders in
November 2009 and will also be available to the public at the Registered Office
of the Company, 395 King Street Aberdeen AB24 5RP.
This half-yearly financial report was approved by the Board on 3 November 2009.
2 Segment information
For management purposes, the Group is currently organised into four operating
divisions - UK Bus, UK Rail, North America and Greyhound. These divisions are
the basis on which the Group reports its primary segment information. The
principal activities of these divisions are set out in the Chief Executive's
operating review.
The First Student business generates lower revenues and profits in the first
half of the financial year than in the second half as the school summer
holidays fall into the first half. Greyhound profits are typically higher in
the first half of the financial year due to demand being stronger in the summer
months.
The segment results for the six months to 30 September 2009 are as follows:
UK Bus UK Rail North Grey- Group Total
America items
GBPm GBPm hound GBPm
GBPm GBPm
GBPm
Revenue 585.6 949.1 1,047.1 309.4 11.4 2,902.6
Segment results1 50.8 50.8 60.2 13.9 (9.2) 166.5
Amortisation charges - (3.3) (12.3) (1.5) - (17.1)
Non-recurring items (3.6) (0.1) (14.0) (7.0) (0.4) (25.1)
(Loss)/profit on disposal (1.3) - - 0.1 - (1.2)
of properties
Operating profit 45.9 47.4 33.9 5.5 (9.6) 123.1
Investment income 1.0
Finance costs (97.8)
Hedge ineffectiveness on 4.0
financial derivatives
Profit before tax 30.3
Tax (3.4)
Profit for the period 26.9
The segment results for the six months to 30 September 2008 are as follows:
UK Bus UK Rail North Grey- Group Total
America items
GBPm GBPm hound GBPm
GBPm GBPm
GBPm
Revenue 578.6 960.6 895.9 326.0 7.4 2,768.5
Segment results1 60.0 48.3 44.4 41.6 (13.1) 181.2
Amortisation charges - (3.2) (9.1) (1.2) - (13.5)
Non-recurring bid costs - - - - (1.5) (1.5)
Other non-recurring items - - (33.3) (1.2) (0.4) (34.9)
Loss on disposal of (1.8) - (1.0) - - (2.8)
properties
Operating profit 58.2 45.1 1.0 39.2 (15.0) 128.5
Investment income 3.8
Finance costs (77.9)
Profit before tax 54.4
Tax (23.1)
Profit for the period 31.3
1Before amortisation charges, hedge ineffectiveness on financial derivatives,
non-recurring bid costs, other non-recurring items and (loss)/profit on
disposal of properties.
2 Segment information (continued)
The segment results for the year to 31 March 2009 are as follows:
UK Bus UK Rail North Grey- Group Total
America items
GBPm GBPm hound GBPm
GBPm GBPm
GBPm
Revenue 1,182.0 2,121.5 2,224.1 642.4 17.3 6,187.3
Segment results1 134.0 94.2 246.1 48.5 (25.3) 497.5
Amortisation charges - (7.1) (23.1) (2.9) - (33.1)
Non-recurring bid costs - - - - (3.5) (3.5)
Other non-recurring items (9.5) (12.7) (70.1) (23.2) - (115.5)
Profit on disposal of 9.2 - 3.0 13.5 - 25.7
properties
Operating profit 133.7 74.4 155.9 35.9 (28.8) 371.1
Investment income 7.9
Finance costs (179.0)
Profit before tax 200.0
Tax (43.0)
Profit for the period 157.0
1Before amortisation charges, hedge ineffectiveness on financial derivatives,
non-recurring bid costs, other non-recurring items and profit on disposal of
properties.
Total assets 30 September 30 September 31 March
2009 2008
2009
GBPm GBPm
GBPm
United Kingdom 5,010.7 4,754.9 4,680.2
North America 3,923.6 4,557.0 5,121.9
Eliminations (3,491.3) (4,243.3) (3,935.8)
Unallocated corporate items 43.1 - 50.2
5,486.1 5,068.6 5,916.5
3 Investment income and finance costs
6 months to 6 months to Year to
30 September 30 31 March
2009 September
2008 2009
GBPm
GBPm GBPm
Investment income (1.0) (3.8) (7.9)
Bonds 39.6 14.9 44.9
Bank Borrowings 44.7 50.3 106.6
Loan notes 0.5 0.6 1.2
Finance charges payable in respect of HP 4.2 3.2 7.5
contracts and finance leases
Notional interest on provisions 8.8 8.9 18.8
Hedge ineffectiveness on financial (4.0) - -
derivatives
Finance costs 93.8 77.9 179.0
Net finance costs 92.8 74.1 171.1
4 Tax 6 months to 6 months to Year to
30 30 31 March
September September 2009
2009 2008
GBPm
GBPm GBPm
Corporation tax 2.2 6.1 7.3
Deferred tax 1.2 1.8 20.5
Non-recurring deferred tax charge - 15.2 15.2
Tax on profit on ordinary activities 3.4 23.1 43.0
The tax effect of amortisation charges, hedge ineffectiveness on financial
derivatives, non-recurring bid costs, other non-recurring items and (loss)/
profit on disposal of properties was a credit of GBP13.6m (2008: credit of GBP
18.1m; full year 2009: credit of GBP53.8m).
5 Dividends 6 months 6 months Year to
to to
31
30 30 March
September September
2009 2009
2008
GBPm GBPm
GBPm
Final dividend paid for the year ended 31 March 61.1 55.5 55.5
2009 of 12.7p (2008: 11.55p) per share
Interim dividend paid for the year ended 31 March - - 29.1
2009 of 6.05p (2008: 5.5p) per share
Amounts recognised as distributions to equity 61.1 55.5 84.6
holders in the period
Proposed interim dividend for the year ended 31 32.0 29.1 -
March 2010 of 6.65p (2009: 6.05p) per share
The proposed interim dividend will be paid on 3 February 2010 to shareholders
on the register of members at the close of business on 8 January 2010. The
proposed interim dividend has not been included as a liability as at 30
September 2009.
6 Earnings per share (EPS)
Basic EPS is based on post-tax earnings of GBP18.8m (2008: GBP23.4m; full year
2009: GBP143.3m) and on a weighted average number of ordinary shares in issue
(excluding own shares held in trust for employees and treasury shares) of
480.9m (2008: 468.9m; full year 2009: 474.8m).
6 Earnings per share (EPS) (continued)
The adjusted basic EPS and adjusted cash EPS as set out below are intended to
demonstrate recurring elements of the results of the Group and as such are
calculated before amortisation charges, hedge ineffectiveness on financial
derivatives, non-recurring bid costs, other non-recurring items and (loss)/
profit on disposal of properties. A reconciliation of the earnings used in the
alternative bases is set out below:
6 months to 6 months to Year to
30 September 30 September 31 March 2009
2009 2008
GBPm EPS (p) GBPm EPS (p) GBPm EPS (p)
Profit for EPS calculation 18.8 3.9 23.4 5.0 143.3 30.2
Amortisation charges1 17.0 3.5 13.4 2.9 32.9 6.9
Hedge ineffectiveness on (4.0) (0.8) - - - -
financial derivatives
Non-recurring bid costs - - 1.5 0.3 3.5 0.7
Other non-recurring items 25.1 5.2 34.9 7.5 115.5 24.3
Loss/(profit) on disposal of 1.2 0.3 2.8 0.6 (25.7) (5.4)
properties
Tax effect of above adjustments (13.6) (2.8) (18.1) (3.9) (53.8) (11.3)
Non-recurring deferred tax - - 15.2 3.2 15.2 3.2
charge on abolition of
Industrial Buildings Allowances
Profit for adjusted EPS 44.5 9.3 73.1 15.6 230.9 48.6
calculation
Depreciation2 152.5 31.7 124.4 26.5 273.6 57.7
Profit for adjusted cash EPS 197.0 41.0 197.5 42.1 504.5 106.3
calculation
1Amortisation charges of GBP17.1m (2008: GBP13.5m; full year 2009: GBP33.1m) per note
2 less GBP0.1m (2008: GBP0.1m; full year 2009: GBP0.2m) attributable to equity
minority interests.
2Depreciation charge of GBP152.9m (2008: GBP124.8m; full year 2009: GBP274.7m) per
note 9 less GBP0.4m (2008: GBP0.4m; full year 2009: GBP1.1m) of depreciation
attributable to equity minority interests.
Diluted EPS is based on the same earnings and on a weighted average number of
ordinary shares of 482.3m (2008: 473.0m; full year 2009: 478.0m). The
difference in the number of shares between the basic calculation and the
diluted calculation represents the weighted average number of potentially
dilutive ordinary shares from share options.
Diluted EPS 6 months to 6 months to Year to
30 September 30 September 31 March
2009 2008 2009
Pence Pence Pence
Diluted EPS 3.9 4.9 30.0
Adjusted diluted EPS 9.2 15.5 48.3
7 Goodwill GBPm
Cost
At 1 April 2009 1,820.0
Additions -
Foreign exchange movements (157.4)
At 30 September 2009 1,662.6
Accumulated impairment losses
At 1 April 2009 and 30 September 2009 -
Carrying amount
At 30 September 2009 1,662.6
At 31 March 2009 1,820.0
At 30 September 2008 1,416.9
8 Other intangible assets Customer Greyhound UK Rail Total
contracts
brand and franchise GBPm
GBPm
trade name agreements
GBPm GBPm
Cost
At 1 April 2009 412.1 65.9 56.3 534.3
Foreign exchange movements (35.1) (5.1) - (40.2)
At 30 September 2009 377.0 60.8 56.3 494.1
Amortisation
At 1 April 2009 44.6 5.0 28.0 77.6
Charge for period 12.3 1.5 3.3 17.1
Foreign exchange movements (3.9) (0.3) - (4.2)
At 30 September 2009 53.0 6.2 31.3 90.5
Carrying amount
At 30 September 2009 324.0 54.6 25.0 403.6
At 31 March 2009 367.5 60.9 28.3 456.7
At 30 September 2008 298.3 50.9 32.2 381.4
Contracts acquired through the purchases of businesses and subsidiary
undertakings, are amortised on a straight-line basis over their useful lives
which are between nine and twenty years.
The rail franchise agreements intangible asset represents the part of the
economic benefit derived from the rail franchise agreements that is realised as
a result of recognising our share of the rail pension deficit and is amortised
on a straight-line basis over the term of the franchise.
9 Property, plant and Land and Passenger Other Total
equipment
buildings carrying plant and GBPm
GBPm vehicle equipment
fleet
GBPm
GBPm
Cost
At 1 April 2009 531.5 2,598.1 514.4 3,644.0
Additions 12.8 134.2 28.2 175.2
Disposals (0.4) (49.4) (5.2) (55.0)
Reclassified as held for - (9.0) - (9.0)
sale
Foreign exchange movements (25.0) (133.8) (14.3) (173.1)
At 30 September 2009 518.9 2,540.1 523.1 3,582.1
Depreciation
At 1 April 2009 51.6 974.7 219.6 1,245.9
Charge for period 6.7 114.3 31.9 152.9
Disposals (0.2) (32.2) (3.6) (36.0)
Reclassified as held for - (6.6) - (6.6)
sale
Foreign exchange movements (1.8) (44.8) (7.5) (54.1)
At 30 September 2009 56.3 1,005.4 240.4 1,302.1
Carrying amount
At 30 September 2009 462.6 1,534.7 282.7 2,280.0
At 31 March 2009 479.9 1,623.4 294.8 2,398.1
At 30 September 2008 421.0 1,362.4 278.8 2,062.2
10 Trade and other receivables 30 September 30 31 March
2009 September
2008 2009
GBPm
GBPm GBPm
Amounts due within one year
Trade receivables 442.5 459.6 453.0
Other receivables 67.2 98.2 67.2
Prepayments and accrued income 82.8 96.2 90.1
592.5 654.0 610.3
11 Assets classified as held for sale 30 September 30 31 March
2009 September
2008 2009
GBPm
GBPm GBPm
Assets classified as held for sale 4.3 5.6 4.2
Assets classified as held for sale comprise principally First Student buses
which are surplus to requirement and are being actively marketed on the
Internet. Gains or losses arising on the disposal of such assets are included
in arriving at operating profit in the income statement.
12 Trade and other payables 30 September 30 September 31 March
2009 2008
2009
GBPm GBPm
GBPm
Amounts falling due within one year
Trade payables 265.3 261.3 314.5
Other payables 173.1 118.7 129.2
Accruals and deferred income 591.8 577.2 623.0
Season ticket deferred income 53.9 54.3 58.0
1,084.1 1,011.5 1,124.7
13 Derivative financial instruments 30 September 30 September 31 March
2009 2008
2009
GBPm GBPm
GBPm
Non-current assets
Interest rate and foreign exchange 46.4 21.9 21.7
derivatives
Fuel derivatives 4.6 24.2 3.1
51.0 46.1 24.8
Current assets
Interest rate and foreign exchange 13.8 14.4 3.1
derivatives
Fuel derivatives 2.8 54.7 -
16.6 69.1 3.1
Total assets 67.6 115.2 27.9
Current liabilities
Interest rate and foreign exchange 48.7 16.3 52.4
derivatives
Fuel derivatives 135.2 23.1 252.1
183.9 39.4 304.5
Non-current liabilities
Interest rate and foreign exchange 84.3 19.7 161.7
derivatives
Fuel derivatives 40.5 17.8 81.9
124.8 37.5 243.6
Total liabilities 308.7 76.9 548.1
14 Provisions Insurance Legal Pensions Total
Claims1 and other GBPm GBPm
GBPm GBPm
As 1 April 2009 262.0 59.5 5.5 327.0
Provided in the period 63.8 3.1 - 66.9
Utilised in the period (80.0) (5.6) (0.2) (85.8)
Transfers from current - 8.2 - 8.2
liabilities2
Notional interest 8.8 - - 8.8
Foreign exchange movements (23.6) (5.1) - (28.7)
At 30 September 2009 231.0 60.1 5.3 296.4
At 30 September 2008 241.1 55.9 5.8 302.8
1Insurance claims accruals due within one year at 30 September 2009 amounted to
GBP124.4m (2008: GBP110.5m; full year 2009: GBP141.1m) and are included in "accruals
and deferred income" in note 12.
2During the period the timing of the settlement of certain legal and other
claims was reassessed and amounts previously included within "accruals and
deferred income" (note 12) have been transferred to provisions.
15 Business combinations 30 September 30 31 March
2009 September
2008 2009
GBPm
GBPm GBPm
Provisional fair values of net assets
acquired:
Property, plant and equipment - 2.4 2.3
Other current assets - 0.8 0.7
Finance leases - (1.3) (1.3)
Other creditors - (1.4) (1.7)
- 0.5 -
Goodwill (note 7) - 1.9 6.5
Satisfied by cash paid and payable - 2.4 6.5
16 Share capital 30 September 30 31 March
2009 September
2008 2009
GBPm
GBPm GBPm
Authorised:
Ordinary shares of 5p each 32.5 32.5 32.5
Allotted, called up and fully paid
Ordinary shares of 5p each 24.1 24.1 24.1
The number of ordinary shares of 5p each in issue, excluding treasury shares
and shares held in trust for employees, at the end of the period was 479.9m
(2008: 480.8m; full year 2009: 480.8m). At the end of the period 1.2m shares
(2008: 0.3m shares; full year 2009: 0.3m shares) were being held as treasury
shares and 1.0m shares (2008: 1.0m shares; full year 2009: 1.0m shares) were
being held in trust to satisfy the exercise of employee share options.
17 Notes to the condensed consolidated cash 6 months to 6 months to Year to
flow statement
30 September 30 31 March
2009 September 2009
GBPm 2008 GBPm
GBPm
Operating profit before (loss)/profit on 124.3 131.3 345.4
disposal of properties
Adjustments for:
Depreciation charges 152.9 124.8 274.7
Amortisation charges 17.1 13.5 33.1
Share-based payments 2.7 3.1 6.3
Loss on disposal of property, plant and 0.4 5.3 3.2
equipment
Operating cash flows before working capital 297.4 278.0 662.7
Decrease/(increase) in inventories 5.0 (5.7) (17.2)
(Increase)/decrease in receivables (29.9) (38.3) 114.7
Decrease in payables (90.8) (31.2) (69.8)
Defined benefit pension payments in excess (17.3) (27.1) (50.7)
of income statement charge
Cash generated by operations 164.4 175.7 639.7
Tax paid (1.3) (6.6) (8.9)
Interest paid (83.1) (72.2) (129.0)
Interest element of HP contracts and finance (5.1) (3.7) (7.4)
leases
Net cash from operating activities 74.9 93.2 494.4
18 Reconciliation of net cash flows 6 months to 6 months Year to
to movement in net debt to
30 September 31 March
2009 30
September 2009
GBPm
2008 GBPm
GBP8
Increase/(decrease) in cash and 9.4 (6.4) 60.9
cash equivalents in period
(Increase)/decrease in debt and (75.3) 95.9 369.8
finance lease financing
Inception of new HP contracts and (32.0) (12.7) (155.9)
finance leases
Debt acquired on acquisition of - (1.3) (1.3)
businesses
Fees on issue of bank facilities 4.5 5.7 8.4
amendments and bond issue costs
Foreign exchange movements 225.1 (110.4) (614.9)
Other non-cash movements in (2.0) (4.9) (9.5)
relation to financial instruments
Movement in net debt in period 129.7 (34.1) (342.5)
Net debt at beginning of period (2,503.5) (2,161.0) (2,161.0)
Net debt at end of period (2,373.8) (2,195.1) (2,503.5)
19 Retirement benefit schemes
The Group operates or participates in a number of defined benefit pension
schemes which cover the majority of UK employees and certain North American
employees. The scheme details are described in page 94 of the Annual Report and
Accounts for the year ended 31 March 2009.
The market value of the assets at 30 September 2009 for all defined benefit
schemes totalled GBP2,864m (2008: GBP2,744m and full year 2009: GBP2,465m).
Contributions are paid to all defined benefit schemes in accordance with rates
recommended by the schemes' actuaries. The valuations are made using the
Projected Unit Credit Method.
The key assumptions were as follows:
UK North UK North UK North UK North UK UK UK
America America America America
30 30 31 31 31 31 31
30 30 31 31
Sept Sept March March March March March
Sept Sept March March
2009 2008 2009 2008 2007 2006 2005
2009 2008 2009 2008
% % % % % % % % % % %
Discount 5.45 5.1 7.2 6.4 6.75 6.15 6.85 6.0 5.45 5.0 5.5
rate
Expected 7.6 7.0 7.85 7.5 7.75 7.5 7.85 7.5 7.5 7.3 7.6
return on
scheme
assets
Expected 4.4 3.5 4.8 3.75 4.1 3.0 4.8 3.5 4.3 4.1 4.1
rate of
salary
increases
Inflation 2.9 2.3 3.3 2.5 2.6 2.0 3.3 2.5 2.8 2.6 2.6
Future 2.9 - 3.3 - 2.5 - 3.3 - 2.8 2.6 2.6
pension
increases
Amounts recognised in the condensed consolidated income statement in respect of
these defined benefit schemes are as follows:
30 30 31 31 31 31 31
Sept Sept March March March March March
2009 2008 2009 2008 2007 2006 2005
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Current service cost 29.3 34.2 70.1 74.9 75.2 53.4 46.1
Interest cost 77.9 77.8 158.6 125.4 102.0 89.0 80.0
Expected return on scheme (81.8) (96.5) (196.2) (174.4) (140.5) (107.6) (87.9)
assets
Interest on franchise (2.6) 0.4 0.8 (0.1) (1.0) (2.3) (1.5)
adjustment
Past service cost - - (3.0) (1.7) (13.2) (16.6) -
22.8 15.9 30.3 24.1 22.5 15.9 36.7
Actuarial gains and losses have been reported in the condensed consolidated
statement of comprehensive income.
The amount included in the condensed consolidated balance sheet arising from
the Group's obligations in respect of its defined benefit pension schemes is as
follows:
30 30 31 31 31 31 31
Sept Sept March March March March March
2007
2009 2008 2009 2008 2006 2005
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Fair value of schemes' 2,863.9 2,743.6 2,464.9 2,911.4 2,506.7 1,992.6 1,578.4
assets
Present value of defined (3,600.4) (2,760.4) (2,789.6) (2,788.3) (2,488.5) (2,193.8) (1,881.8)
benefit obligations
Rail franchise 219.2 14.1 75.9 (13.8) 2.2 38.3 41.7
adjustment (60%)
Irrecoverable surplus - (51.1) - (30.7) (6.8) - -
Adjustment for employee 172.3 28.4 80.1 10.4 10.2 30.9 40.6
share of Rail Pension
Schemes' deficits (40%)
(Deficits)/surplus in (345.0) (25.4) (168.7) 89.0 23.8 (132.0) (221.1)
schemes
This amount is presented
in the condensed
consolidated balance
sheet as follows:
Non-current assets 3.8 114.3 111.5 186.2 57.1 - -
Non-current liabilities (348.8) (139.7) (280.2) (97.2) (33.3) (132.0) (221.1)
(Liabilities)/assets (345.0) (25.4) (168.7) 89.0 23.8 (132.0) (221.1)
recognised in the
condensed consolidated
balance sheet
END
(END) Dow Jones Newswires
November 04, 2009 02:00 ET (07:00 GMT)