Final Results
Embargoed until 07:00hrs on Wednesday 14 May 2003
FIRSTGROUP PLC
PRELIMINARY RESULTS FOR THE YEAR TO
31 MARCH 2003
HIGHLIGHTS
Growth in North America continues - operating profit up 8%
New bus contracts in London worth £25 million - targeting further growth
UK Bus volumes outside London +1.5 % - margins maintained
UK Rail passenger volumes up 4 %
Dividend up by 7% to 11p
FINANCIAL SUMMARY
Turnover £2,291m (2002: £2,164m) up 6%
Operating profit2 £216.1m (2002: £215.0m) up 1%
Adjusted basic earnings per share 26.8p (2002: 25.8p) up 4%
EBITDA3 £315.3m (2002: £310.1m) up 2%
Commenting, FirstGroup's Chief Executive, Moir Lockhead said:
'This is another encouraging set of results. The Group is well positioned in
markets which are resilient and offer long-term growth prospects. We generate
over £300m of EBITDA each year and our focus is to deliver increased
shareholder value through investment in the business, continued dividend
growth, debt reduction and further repurchases of equity as appropriate.
Trading in the new financial year has started well and is in line with our
expectations.'
At constant exchange rates
Before goodwill amortisation and exceptional items.
Operating profit before goodwill amortisation and exceptional items plus
depreciation
Enquiries:
FirstGroup plc
Moir Lockhead, Chief Executive Tel: 020 7291 0512
Iain Lanaghan, Finance Director Tel: 020 7291 0512
Michael Mitchell, Corporate Communications Director Tel: 020 7291 0504
PHOTOGRAPHS FOR THE MEDIA ARE AVAILABLE AT http://www.newscast.co.uk/
Notes to editors:
FirstGroup plc is a UK based international transport company with a turnover of
more than £2 billion a year, and 57,000 employees throughout the UK and North
America.
The Group is Britain's largest bus operator running more than one in five of
all local bus services. A fleet of some 9,500 buses carries 2.7 million
passengers a day in more than 40 towns and cities.
The Group is also one of the UK's largest rail operators with three franchises
- First Great Western, First Great Eastern and First North Western. It is
introducing new trains in each franchise at a cost of more than £200 million.
The group operates nearly one-fifth of the UK passenger rail network, with a
balanced portfolio of inter-city, London commuter, and regional services.
It holds the operating contract for the Croydon Tramlink network, which carries
over 20 million passengers a year.
In North America the Group has three operating divisions: Yellow School Buses
(First Student), Transit Contracting and Management Services (First Transit)
and Vehicle Maintenance and ancillary services (First Services). Headquartered
in Cincinnati the businesses operate across the US and Canada.
* First Student is the second largest provider of Yellow school buses in the
USA and the third largest in Canada. With a fleet of some 15,500 school buses
it transports nearly one million students everyday.
*First Transit is one of the largest private sector providers of urban bus
services in the US, managing public transport systems on behalf of cities such
as Houston, Dallas and Denver.
* First Services is the largest private sector provider of vehicle maintenance
in the US. Maintaining fleets and equipment for primarily public sector
customers such as cities, counties, fire and police departments
Chairman's statement
Across all our divisions safety is our highest priority. We continue to
reinforce a culture of safety throughout our Company, changing attitudes
through education and training backed up by an ongoing programme of safety
audits. During the year we have made real progress in further strengthening the
business with successful initiatives in safety, staff training and
environmental management.
I am very pleased to report further increases in Group turnover and operating
profit* that once again demonstrate the quality and cash generative nature of
our business. With over £300m of EBITDA (operating profit plus depreciation) we
have continued to invest in our operations to deliver value to shareholders
through growth in the business, increased dividends and the re-purchase of
shares.
Turnover has increased by 6% to £2,291m (2002: £2,164m) and profit before tax,
goodwill amortisation and exceptional items increased by 2% to £159.8m (2002: £
156.7m). Adjusted basic earnings per share has increased by 4% to 26.8p (2002:
25.8p) and the Board has proposed a final dividend, subject to approval by
shareholders, of 7.45p making a full year payment of 11p, an increase of 7%.
The dividend is covered 2.1 times and will be paid on 29 August 2003 to
shareholders on the register on 25 July 2003. The Group's strong and
sustainable cash flows and profits give the Board confidence that they will be
able to continue to increase dividends at above the rate of inflation going
forward.
Since the Group's formation 8 years ago dividends have increased each year
giving a Compound Annual Growth Rate (CAGR) of 13%. Over the same period,
operating profit has grown from £42m to £216m (CAGR 26%) and EBITDA has grown
from £62m to £315m (CAGR 26%).
We continue to build on our successful strategy of focusing on three business
segments; North America, UK Bus and UK Rail.
We are very pleased with the progress we have made in North America. In US
Dollar terms turnover has increased by 16% and profits have increased by 8%.
Our student bus business has continued to grow, with contracts in a number of
new regions. We have also seen growth in our transit and services divisions and
we are confident that there are further opportunities for expansion in these
businesses. Since acquisition in 1999, operating profits from our North
American operations have grown by 50%.
We are encouraged by the opportunities UK Bus offers for further organic
growth. Turnover in our business in London has grown by £25m and we have seen
passenger volume growth of 1.5% in the rest of the country. Traffic congestion
continues to increase in towns and cities throughout the UK and we believe that
the bus provides the most cost effective and immediate solution. The early
success of congestion charging in London may offer further encouragement for
other cities to adopt a similar approach.
In UK Rail we continue to build on our excellent record of delivering benefits
to passengers through improved operating performance, enhanced service quality
and the introduction of new rolling stock. We are bidding for a number of new
rail franchises which fit with our geographic and strategic profile of
operations.
I am pleased to announce the appointment of Martyn Williams to the Board as a
Non-Executive Employee Director. Martyn works for our UK bus division in
Swansea and has over 25 years experience in the industry. At the end of March
2003, Robbie Duncan, Business Change Director, retired from the Group. I would
like to thank Robbie for his contribution to the development of the business
since its formation eight years ago.
Exceptional customer service is fundamental to our business. I would like to
thank all of our staff for their hard work and continued commitment to the
business, which has resulted in another successful year for the Group.
Our strategy is clear. We continue to focus on delivering shareholder value by
developing our business in markets which offer the best opportunity for
profitable growth and in areas where we can utilise our core skills. We have a
well balanced portfolio of businesses which are relatively resilient to
economic downturn and are not heavily impacted by macro economic trends. The
Group's strong cash generation underpins the continuing programme of investment
in the business, share repurchase and dividend growth. I believe that the
prospects for the Group are excellent.
Martin Gilbert
Chairman
*Operating profit referred to in this statement and in the Chief Executive's
Review and Financial Review refers to operating profit before goodwill
amortisation and exceptional items.
Chief Executive's operating review
OVERVIEW
Safety
The safety of our staff and passengers is of fundamental importance to us all
and underpins everything that we do. During the year we have continued to work
with DuPont Safety Resources with the aim of developing our total safety
culture. We are making good progress but continually strive to improve safety
awareness at all levels within our organisation.
Results
I am pleased to report another encouraging set of results for the Group with
good progress in all areas of our operations. Operating profit rose to £216.1m
(2002: £215.0m). We have seen continued growth in EBITDA (operating profit plus
depreciation) to £315.3m (2002: £310.1m), which has enabled us to invest in the
business with capital expenditure and business acquisitions totalling £134.5m,
together with a 7% increase in dividend and the return of £17.1m to
shareholders through the continued repurchase of equity during the year.
NORTH AMERICA
Results
Turnover from our three North American operations was £582.4m (2002: £542.9m).
The underlying increase at constant exchange rates was 16%. Operating profit
was £61.3m (2002: £60.8m). At constant exchange rates the increase was 8%.
First Student
During the year growth continued at First Student with US Dollar turnover
increasing by 15%. The bidding market for school bus contracts was more
competitive in 2002, however we retained approximately 90% of our existing
school bus contracts that came up for renewal during the period. Our policy
remains that we will not bid for new business at unattractive margins. The
division gained net new contracts for approximately 100 buses. We were
delighted to make our first entry into the state of Tennessee with a contract
win in Chattanooga.
The majority of our expansion came from the purchase of smaller operators which
we were able to acquire on attractive terms. Through this programme of
strategic in-fill acquisitions we purchased six small businesses adding 725
buses to our fleet. We strengthened our position in Florida with the
acquisition of a further school bus operator in Jacksonville bringing our total
fleet in the city to 740 buses. New school bus businesses were also acquired in
Massachusetts, New Jersey, Wisconsin and California. We now operate some 15,500
school buses across the US and Canada, approximately 50% more than at the time
of acquisition in 1999, and this growth trend is continuing.
We are encouraged by our progress in the current bidding round for contracts to
start in Autumn 2003. We have been awarded a five year management contract,
requiring no vehicle capital expenditure, to operate 683 school buses in
Boston. This will be our first management contract in the city and builds on
our successful relationships with school boards in New England. In addition we
were awarded a contract in Louisiana, our first entry in to this state.
Looking forward, we have an encouraging pipeline of new contracts and business
acquisitions and we are confident that we will deliver another year of
continued growth in First Student.
First Transit
In First Transit US Dollar turnover increased by 17%. We have won net new
business with an annualised turnover of approximately US$5m. Important new
contracts were gained in Maryland and California, and service expansions were
added in Alabama and Virginia. In March, First Transit completed the
acquisition of the transportation management division of Dyntek Inc. Through
this acquisition First Transit will assume responsibility for non-emergency
medical transport call centre contracts in Connecticut, Illinois and Arlington
County, Virginia. This acquisition will strengthen First Transit's expertise in
this growing market.
The new business market has continued to be competitive. In response, the
division has reduced its cost base by improving internal efficiencies to
position itself as the lowest cost, best value provider in the market,
consistent with maintaining our quality and customer service. We are focusing
on bidding for new business where our specific expertise, in areas such as call
centre management and paratransit services, will bring additional value to
customers.
First Services
First Services has also continued to expand with US Dollar turnover increasing
by 13%. We have completed a detailed review of opportunities within the
servicing and vehicle management market. As a result First Services aims to
broaden its spread of business in both the public and private sector. During
the year we won new business in Washington DC, Puerto Rico and Georgia.
Additionally, in February 2003, we acquired a small specialist business that
fits communications equipment into vehicles such as police cars and emergency
vehicles. This business complements and extends our existing operations.
Margins
Margins across the division were adversely impacted by increased fuel and
insurance costs. In First Student the incidence of a higher than average number
of school days lost through very heavy snowfall during the winter also impacted
revenues and margins. Since the year end we have put in place fuel hedging
arrangements which will give us cover for 50% of our purchase requirements for
up to four years at competitive rates. Growth in insurance costs has also
moderated and we are focusing on controlling claims more effectively.
Outlook - North America
Our North American division is now self-funding for maintenance and growth
capital expenditure. The prospects for our operations remain excellent in
highly fragmented markets, which also offer the prospect of further growth from
outsourcing. We are confident that this division will form a growing proportion
of the Group's profits in the future.
UK BUS
Results
This was a year of considerable achievement in UK Bus. Turnover increased by 6%
to £859.4m (2002: £811.5m) and operating profit before financing costs
increased by 6% to £111.7 m (2002: £105.7m). The division generated over £150m
of cash, of which a substantial amount was reinvested in the division.
London
In London, where we operate bus services on behalf of Transport for London
(TfL), we added 130 new vehicles in support of TfL's strategy to increase the
number of buses and services in preparation for the start of congestion
charging. The scheme was successfully introduced in February 2003 and the
initial results show that car volumes within the charging zone have been
reduced by approximately 15% with consequent improved journey times for buses.
Our new and extended contracts generated £25m of additional turnover in the
year. We now operate 1235 buses in London giving us a 16% market share in the
capital. Some 50% of our London business now operates under quality
incentivised contracts and we are performing well against these targets. For
2003/04 we have already secured all major contract changes and in addition we
are targeting a further increase in the number of buses we operate.
Outside London
Outside London passenger volumes increased by 1.5%, with areas of particularly
good growth where we continue to develop Quality Partnership programmes with
Local Authorities. We have continued to strengthen our partnerships with
transport authorities and other stakeholders to integrate bus service
improvements within wider transport policies which include parking and
development strategies. This has led to some important initiatives that have
delivered improved services for passengers and new alternatives to the private
car. Growth was very encouraging in cities such as Aberdeen, Glasgow,
Manchester and York where we have introduced a range of benefits such as
modernised route structures, newer buses, simplified ticketing, park and ride
schemes and zonal fares.
Partnerships
We are working closely with local authority partners to accelerate the
implementation of bus infrastructure improvements at the conurbation level. In
Sheffield we have developed a pilot demographic mapping system that enables us
to measure customer response to service initiatives and to better target
changes to those areas of highest potential bus usage, as well as helping us to
address the Government's social inclusion agenda. This initiative is now being
introduced across other urban areas where we operate.
In the major cities where our operations are centred, we have seen encouraging
growth over the past two years. In Glasgow we now carry 15.1m more passengers
(12.7% growth), while in Manchester we carry 10.4m more passengers (13.1%
growth).
In Yorkshire, in conjunction with South and West Yorkshire Passenger Transport
Executives we are developing the 'Yorkshire Showcase' which has a target to
increase bus travel in the region by 30% over the next five years.
In York we have worked closely with the City Council which has introduced
traffic restraint measures in the historic city centre in conjunction with a
growing park and ride network on the periphery. In return we have introduced a
brand new fleet of 90 buses together with an Overground network, marketing
activities and investment in the Park and Ride. This has resulted in a 12%
turnaround in passenger numbers since the start of the scheme and a reduction
of road traffic in the city.
In the North West we have entered into an agreement with the Greater Manchester
Passenger Transport Authority, Bolton Metro and Wigan Borough Councils to help
fund a quality bus corridor which will significantly improve the reliability of
services on an important arterial route in Greater Manchester.
In Glasgow, as part of a £1.5m investment package to improve the quality of bus
services, we introduced the UK's first air-conditioned double decker tri-axle
buses capable of carrying 115 passengers, which has helped to deliver the
continued passenger volume growth in the city.
Rural operations
We are also improving our bus services in rural areas. For example, in Devon
and Cornwall we have carried out a comprehensive market research and passenger
and stakeholder consultation exercise, which has allowed us to introduce more
direct routes between main towns, providing quicker journey times and enhanced
services to over 40 towns and villages. We have also reorganised our operating
divisions in the South West to deliver better customer service and reduce
overheads.
Marketing
Investment in marketing and customer service has been a major priority
throughout the year with the emphasis on improving the precision of our bus
marketing programme.
We continued to roll out the Overground, our successful simplified route and
fares structure, to new areas such as Chelmsford, Halifax, Huddersfield,
Wirral, North Staffordshire, Northampton, Norwich and Redditch. We now operate
20 Overground networks throughout the UK.
Technology
Across the division we have continued to implement technology based initiatives
to improve customer service. In Leicester we introduced 'StarText' a new system
that enables passengers to check the arrival times of local bus services, at
given bus stops across the network, using text messaging on their mobile
phones. In addition, we have been developing the use of our 'Tracker' system
which uses satellite technology to track our buses through traffic and identify
congestion hotspots. This enables us to refine timetables and work efficiently
with local authorities to minimise disruption to services as a result of
traffic congestion.
Yellow school bus in the UK
Our US style yellow school bus pilot programme in the UK has been further
expanded during the year to Aberdeen, Windsor, Wokingham and Wrexham. We now
operate a total of six schemes and are actively pursuing opportunities to
develop this successful pilot further.
Outlook - UK Bus
We remain optimistic about the opportunities for further growth in our bus
operations as traffic congestion continues to increase in major towns and
cities throughout the UK. We are very encouraged by the positive impact that
congestion charging has had on traffic in London and the success of bus
priority schemes across the country. The experience in London could provide the
impetus to introduce similar measures to combat traffic congestion in other
urban areas in the UK.
UK RAIL
Results
Turnover in the Group's three train operating companies was £842.3m (2002: £
802.9m), an increase of 5%. Operating profit was £61.3m (2002: £66.8m) which is
a creditable result given the reduction in rail support grant for First Great
Western and increase in franchise payments for First Great Eastern totalling £
13.5m. All of our train franchises remain profitable and are benefiting from
substantial investment in new rolling stock and passenger improvements. This is
reflected in continuing high levels of performance as shown in the Strategic
Rail Authority's (SRA) public performance measures. In particular First Great
Eastern continues to be the best performing train operating company in London
and the South East. First Great Western has also shown further improvements in
punctuality and reliability, particularly during the last six months, as a
result of improved infrastructure reliability and enhanced front-line staffing
levels at stations.
Passenger volumes have increased during the period by 5% on First Great Western
and 4% on First Great Eastern. At First North Western, which we operate on
behalf of the SRA, the impact of industrial action last year resulted in
passenger volumes falling by 5%.
Investment
We are committed to improving the performance and reliability of our rail
services. We have continued our programme of introducing new rolling stock and
investing in passenger facilities. The full fleet of new Adelante class 180
high speed trains are scheduled to be in service at First Great Western from
the start of the summer timetable in May providing additional capacity and
passenger comfort on services to Bristol and South Wales. The new fleet of
class 175s, which are now fully operational at First North Western are
contributing to a better travel experience for passengers. In addition, this
summer First Great Eastern will be phasing in its new fleet of Desiro class 360
trains to replace old slam door rolling stock. These trains are fully
accessible for people with disabilities, include on-board CCTV and will provide
a quieter, smoother ride for commuters at London's Liverpool Street station.
Looking further ahead we have an agreement with Siemens to develop a new
generation of high speed trains (HST) that could enter passenger service within
5 years. The aim is to develop a train that could replace the Intercity 125
HSTs on the Great Western mainline from London Paddington. This next generation
of HSTs will set an even higher standard for intercity rail travel in the UK.
We have made further investment to improve passenger facilities and increase
security at railway stations. At Swindon we have contributed to the cost of
building an additional platform to ease the 'bottleneck' which causes frequent
delays to train services through the station. At First Great Eastern we have
recently improved station security at Chelmsford, Romford and Ilford which has
been well received by passengers and accredited under the British Transport
Police Secure Station Scheme.
Franchises
We continue to develop our proposals for new and renewed passenger rail
franchises. We currently have a balanced portfolio of intercity, London
commuter and regional railways and are seeking to develop a similarly balanced
portfolio of operations under the SRA's revised franchise plan.
We are one of the final two bidders, with our partner Keolis, for the
TransPennine Express franchise which is due to commence operation in early
2004. If selected for the franchise, we will be able to offer significantly
improved services between the major centres in the North of England. We are
currently working with train manufacturers to develop rolling stock which will
bring new levels of passenger comfort to these services. In addition we have
pre-qualified for the Northern and Scotrail franchises and we are now working
on our detailed proposals to be submitted to the SRA later in the year.
In April this year we were invited by the SRA to put forward proposals for the
interim consolidation of the Thames Trains franchise, which expires in 2004,
with First Great Western which does not expire until 2006. We will be able to
offer passengers a significantly enhanced level of service from London
Paddington on the suburban lines to Reading and to the Cotswolds from 2004,
through more efficient rolling stock scheduling and timetabling of services. We
expect to hear whether our proposals have been successful later this year.
We were extremely disappointed, as were a large number of our customers and
stakeholders, at the SRA's decision not to allow us to bid for the new Greater
Anglia franchise. We are working with the SRA to understand how they reached
this decision.
Network Rail
After an extremely difficult period in the autumn, we are now encouraged by the
progress that Network Rail is making to address the backlog of infrastructure
maintenance particularly on the Great Western mainline between London
Paddington and Bristol. Significant works are scheduled to take place this
year and we are working closely with Network Rail to minimise short-term
disruption. These works will further improve the infrastructure and have a
positive impact on reliability.
Bus/Rail Integration
The Group's scale of operations enables us to provide unrivalled bus/rail
integration opportunities. We now offer joint bus/rail tickets for major parts
of the South West, North West and East Anglia regions. We are also examining
ways to improve links between railway stations and bus networks. Dedicated bus
rail links are in operation in Bristol and Taunton and in Truro we operate a
train taxi service. In East Anglia innovative plans are being developed to
create a network of buses to feed into train services at railheads throughout
the region.
First Info
Our call centre operation based in Plymouth now employs some 500 staff who
handle around 11 million inbound calls per year. They provide travel
information, customer care and ticket sales on behalf of our bus and rail
operations and are one of the national contractors to the National Rail Enquiry
Service. In addition, First Info now operate several Traveline national bus
enquiry contracts.
Trams
Passenger volumes continue to show encouraging growth on Croydon Tramlink which
is now carrying over 20 million passengers per annum. We are currently one of
two finalists for the new Leeds Tram System. We expect to submit our proposals
with our partners Bombardier, Bouygues and Jarvis later in 2003.
STAFF
Once again I have been impressed by the commitment and enthusiasm of our staff.
Their continued dedication has delivered another year of growth. Although the
current rate of bus driver turnover remains too high, we continue to target
further improvements. Our aim is to make First the employer of choice and we
are working hard to improve our understanding of the needs and aspirations of
our people so that they can continue to develop and achieve their full
potential. We continue to target improved recruitment, training and retention
of staff. Our overall objective is to develop a workforce that is highly
motivated and customer focused. To achieve this we believe we have to offer
employees opportunities to develop through training, on-the-job appraisal and
the provision of programmes such as lifelong learning.
In the bus division we extended the successful pilot workplace learning scheme
started in Essex to locations in Yorkshire and Scotland. We have also
developed National Vocational Qualifications (NVQ) and Business & Technology
Education Council (BTEC) qualifications for our drivers and introduced new
training programmes for managers.
In our rail division we established a staff training academy in Bristol which
includes driver simulators. This will ensure that our staff receive up to the
minute training and that key skills are developed and practiced. First Great
Western has already offered 900 staff the opportunity to achieve NVQ level
qualifications in job related subjects. First Great Eastern has developed and
introduced a comprehensive series of training programmes for both frontline
staff and managers covering, amongst other things, safety, customer service and
conflict management. In addition First Great Eastern has received partial
Investors in People (IIP) accreditation with special commendation for its
training and appraisal process and aims to receive full accreditation by the
end of 2003. First North Western has launched a series of comprehensive
customer service training programmes for all frontline staff and managers with
the aim of improving the travel experience for customers.
ENVIRONMENT AND COMMUNITY
As the UK's largest surface transport operator we can make a major contribution
to improving the environment by encouraging the development of public transport
and thereby reducing road congestion, vehicle emissions and improving safety.
We are pleased to be taking part in the European Union's Clean Urban Transport
Trial. We will be operating 3 fuel cell powered buses in our East London
operation, the only such trial in the UK. These emission free buses are
virtually silent and have the potential to make a significant difference to
overall air quality.
We have improved environmental awareness and training throughout the Group
which has resulted in some encouraging trends. For example in the bus division
we have achieved an 8% reduction in energy usage as a result of local depot
initiatives. In addition we have invested £2m in partial water recycling bus
washes bringing our water consumption down by 14%. We were delighted to receive
a Green Apple Award, one of the UK's leading environmental awards, for our work
in reducing the environmental impact of transport. Additionally, we received a
Scotland plc Corporate Social Responsibility Award in recognition of our
successes in environmental and safety improvements, community involvement and
charitable projects.
During the year the Group and its staff in the UK and North America have
continued to support a number of local and national charities. Further details
of all these activities can be found in our Corporate Responsibility Report
which is published separately.
GROUP OUTLOOK
The Group is well positioned in markets which are resilient and offer long-term
growth prospects. We generate over £300m of EBITDA each year and our focus is
to deliver increased shareholder value through investment in the business,
continued dividend growth, debt reduction and further repurchases of equity as
appropriate. Trading in the new financial year has started well and is in line
with our expectations.
Moir Lockhead
Chief Executive
Financial Review
Overall
Group turnover in the year increased by £126.9m, or 6%, to £2,291.0 m. Group
operating profit, before goodwill amortisation and exceptional items, was £
216.1m, an increase of £1.1m, or 1% on 2002.
Divisional Results
Year to 31 March 2003 Year to 31 March 2002
Turnover Operating Operating Turnover Operating Operating
profit# margin# profit# margin#
£m £m
£m % £m %
UK Bus Division 859.4 111.7 13.0 811.5 105.7 13.0
North America 582.4 61.3 10.5 542.9 60.8 11.2
Division
Rail Division 842.3 61.3 7.3 802.9 66.8 8.3
Financing - (6.7) - - (3.4) -
elements of
leases*
Other** 6.9 (11.5) - 6.8 (14.9) -
Total Group 2,291.0 216.1 9.4 2,164.1 215.0 9.9
# Before goodwill amortisation and exceptional items
* Financing elements of UK Passenger Carrying Vehicle operating lease costs
** Tram operations, central management and other items
Throughout the Financial Review, operating profit and operating margin are
defined as being before goodwill amortisation and exceptional items
Revenue in the UK Bus Division increased by £47.9m, or 5.9% to £859.4m. In
London where we operate contracts on behalf of Transport for London (TfL),
revenues have increased by £25.3m as a result of additional services provided
in the run up to Congestion Charging. Outside London passenger volumes have
increased by 1.5%. Operating profit, before the financing element of operating
leases, grew by £6.0m, or 5.7% and the margin was maintained at 13.0% despite
significant cost pressures most notably insurance, pensions and pay.
The financing element of leases increased by £3.3m to £6.7m, due to the full
year effect of leases entered into during 2001/02 and additional leases entered
into during the year for new London tenders.
The North America Division's turnover rose by £39.5m, or 7.3% to £582.4m. At
constant exchange rates the increase in business was 15.8%. The majority of the
new business was in First Student where we added 825 new buses, of which 725
were acquired through the purchases of six small school bus operators.
Operating profit increased to £61.3m (2002: £60.8m). At constant exchange rates
the increase was 8%. The operating margin fell by 0.7% to 10.5% principally due
to increased insurance and fuel costs and a higher than usual number of school
days lost due to severe snow conditions.
Rail Division revenue increased by £39.4m, or 4.9% to £842.3m. Passenger
volumes were up 5% in First Great Western and 4% in First Great Eastern.
Operating profit decreased by £5.5m to £61.3m due to a combination of lower
subsidies, reduced performance regime receipts and cost pressures on insurance,
pensions and pay. The reduction in performance regime receipts was partly
mitigated by the release of the majority of the gauge corner cracking
compensation received in 2001/02.
Exceptional items
Exceptional items totalled £10.6m (2002: £20.5m) and include a charge of £6.0m
for UK Bus restructuring, £3.7m for claims settlements in North America
principally relating to a one-off serious accident, £3.4m for bid costs
incurred principally on Rail franchises, less an exceptional gain of £2.5m from
the disposal of our interest in Tramtrack Croydon Limited.
Net gains on property disposals of £10.0m (2002: £1.0m) were realised during
the year. These disposals are part of a five year property disposal programme
which will release cash from prime city centre sites, much of which will be
reinvested in modern bus depots, which will further enhance our UK Bus
operations.
Goodwill amortisation
The goodwill charge was £25.8m (2002: £29.3m). The reduction is accounted for
by goodwill on joint ventures and associates (now written off) of £2.0m which
was included in 2001/02 and in addition foreign exchange movements of £1.9m.
The balance is attributable to goodwill on acquisitions made in the last two
years.
Interest
Net interest payable was £56.3m (2002: £56.3m). This was covered 5.6 times by
earnings before interest, taxation, depreciation and amortisation (EBITDA). A
reduction in the interest charge due to lower overall average borrowing levels,
greater use of US Dollar denominated debt and the foreign exchange impact on
the interest on US Dollar borrowings, were partly offset by the full year
effect of the higher interest rate on the bond. In the current year the Group
will benefit from a reduced ongoing interest charge as set out below.
Acquisitions and disposals
During the year the Group acquired six school bus companies, one transit and
one service business in North America for a total cash consideration of £28.1m
(2002: £6.1m). Goodwill arising on these acquisitions amounted to £18.2m (2002:
£4.2m).
Taxation
The taxation charge on profit before goodwill amortisation and exceptional
items was £47.9m
(2002: £48.1m) representing an effective rate of 30% (2002: 31%). Tax relief
on goodwill and exceptional items reduces the tax charge to £35.8m (2002: £
33.9m). No tax has been provided on property gains, as these do not give rise
to a chargeable gain for tax purposes.
The actual cash cost of taxation to the Group is £27.2m (2002: £25.6m) which is
20% of profit before tax (2002: 24%). A full reconciliation of this rate to the
UK standard rate of corporation tax is set out in note 8 to the financial
statements.
EBITDA and investment in the business
EBITDA (operating profit before goodwill amortisation and exceptional items,
plus depreciation) was £315.3m (2002: £310.1m), an increase of 1.7%. Capital
expenditure was £106.4m (2002: £153.4m). The majority of capital expenditure
was in our bus operations with £60.6m spent in North America and £37.6m in the
United Kingdom.
During the year there was an adverse working capital movement of £82.7m
principally due to an increase in debtors of £77.3m. The majority of the
working capital movement was due to temporary timing issues such as the lag in
receipt of £18m of property disposals. The only longer term timing difference
is considered to be pension prepayments of £13.7m.
Balance sheet
Net assets of the Group decreased from £420.0m to £402.8m. The main elements
of the movement were £52.0m of retained profit which was offset by a £53.2m
adverse foreign exchange movement and £17.1m of share repurchases. The adverse
foreign exchange movement is due primarily to the retranslation of goodwill
relating to the North American business which is denominated in US Dollars. The
Group's net debt reduced by £28.1m to £624.4m.
Pensions
Pension and post retirement costs have been accounted for on a SSAP 24 basis.
The total charge to the profit and loss account was £26.1m (2002: £19.5m). We
have continued to apply the transitional rules and disclosures under FRS 17. At
31 March 2003, after taking account of deferred taxation, the FRS 17 net
deficit in the group pension funds, excluding Rail, was approximately £194m
(2002: £33m). In addition it should be noted that a post-tax deficit of £20m
(2002: post tax surplus of £7m) relates to Rail franchises where we believe
that no liability will be borne beyond the end of the franchise. Markets have
recovered substantially since the year-end and had 30 April 2003 market levels
applied at 31 March 2003, the net FRS 17 deficit excluding Rail would have been
£166m, with the Rail net deficit being £15m.
The performance of equity markets in the last few years has impacted the
pension funding requirements of the Group's defined benefit pension schemes.
Recognising that this is unlikely to be made up in the short term simply
through a recovery in asset values, in addition to the normal pension
contributions in 2002/03, the Group has made discretionary tax deductible
payments into the schemes of £14m, and expects discretionary payments to
continue over the coming years.
During the year the group consulted with employees and Trade Unions within UK
Bus, and agreed the introduction of a new pensions package in the occupational
schemes. Benefits for the majority of existing employees have been restructured
and employer and employee rates have been increased. For new employees
starting from April 2003, benefits will be confined to a money purchase and
career average basis. In addition, scheme management costs will be minimised
through a continuation of scheme mergers.
Funding and risk management
At the year end, total bank borrowing facilities amounted to £595m, of which £
520m had more than two years to maturity. Of these, £326m were utilised at 31
March 2003. The maturity profile of committed banking facilities is regularly
reviewed and well in advance of their expiry such facilities are extended or
replaced. In December 2002 the Group entered into a new £400m, five year
committed revolving credit and guarantee facility which replaced existing bank
facilities due to expire by May 2004. This facility increased the medium term
committed borrowing capability of the Group with improved terms and competitive
pricing. This was also arranged on a non-underwritten basis.
The bond issue in March 2002 has greatly improved the debt maturity profile
which at the year end was 6.8 years, 3.1 years higher than at 31 March 2001,
the Bond having been issued in March 2002, on a weighted average basis for
fixed rate debt.
As the Group is a net borrower, it minimises cash and bank deposits, although
it can only withdraw cash and bank deposits from the Rail companies to the
extent of retained profits. The Group limits deposits to short terms, and with
any one bank to the maximum of £30m, depending upon the individual bank's
credit rating, which must not be less than 'A' rated.
The Group does not enter into speculative financial transactions and uses
financial instruments for certain risk management purposes only. With regard to
net interest rate risk, the Group reduces exposure by using interest rate
derivatives to achieve an overall hedged position of between 75% to 100%.
Subsequent to 31 March 2003 the Group's interest hedging programme was
rebalanced to reduce future ongoing costs whilst retaining the hedging target
range of 75% to 100%. For the year to 31 March 2004, the impact of the
rebalancing is estimated to be a saving of £10.0m in the interest charge with
declining benefits in future years. It involved the cancellation of certain
interest rate swaps for a total exceptional pre-tax item within the interest
charge of £19.0m. At the same time new US Dollar swaps were entered into at an
average interest rate of 2.85%.
Fuel price risk is 100% hedged in both UK Bus and Rail by way of a cap which
expires in March 2005. In North America the Group bears no fuel risk on
approximately half of its contracts. On the contracts where the Group bears
fuel price risk, we were unhedged for most of the year. However since the year
end we have taken advantage of falling oil prices and hedged 50% of this
exposure for a period of up to four years.
The Group hedges part of its exposure to the impact of exchange rate movements
on translation of foreign currency net assets by holding net borrowings in
foreign currencies.
Analysis of net debt
Fixed Variable Total
£m £m £m
Cash - 13.4 13.4
Rail ring fenced cash - 67.9 67.9
Sterling bank loans and overdrafts - (40.0) (40.0)
US dollar bank loans - (276.2) (276.2)
Canadian dollar bank loans - (10.6) (10.6)
Bond (2013 6.875%) (295.1) - (295.1)
HP and finance leases (50.2) (11.7) (61.9)
Loan notes (8.9) (13.0) (21.9)
Interest rate swaps (208.8) 208.8 -
Total (563.0) (61.4) (624.4)
Shares in issue
During the year 1.0m shares were issued to satisfy save as you earn scheme
maturities and 7.4m shares were repurchased and cancelled at a total cost of £
17.1m. Accordingly the total number of shares in issue decreased from 419.8m to
413.4m. For the purpose of the earnings per share (EPS) calculation (excluding
0.4m own shares held in trust for employees), the average number of shares in
issue for the year was 416.7m (2002: 419.8m).
Foreign exchange
The profits from the US have been translated at an average rate of £1:$1.55
(2002: £1:$1.44). The year end rate was £1:$1.57, compared with £1:$1.43 last
year.
Accounting standards and policies
The Group has adopted UITF 34 'Pre-contract costs'. As a result all general bid
costs are expensed as incurred. Prior year figures have been restated to
reflect this change in accounting policy.
The Group has continued to account for pension costs under SSAP 24. The
application of SSAP 24 is likely to continue in light of the extended
implementation period for FRS 17 and the review of IAS 19 Employee Benefits. It
is anticipated that the change in accounting policy will take place in
financial year 2005/06.
Iain M Lanaghan
Finance Director
Consolidated profit and loss account
For the year ended 31 March 2003
Notes Before Goodwill Total Before Goodwill Total
goodwill amortisation goodwill amortisation
amortisation and 2003 amortisation and 2002
and exceptional and exceptional
exceptional items exceptional items Restated
items items
2003 2002
2003 2002
Restated
Restated
£m £m £m £m £m £m
Turnover
Continuing 2,277.6 - 2,277.6 2,164.1 - 2,164.1
operations
13.4 - 13.4 - - -
Acquisitions
Group 2 2,291.0 - 2,291.0 2,164.1 - 2,164.1
turnover
Share of - - - 0.1 - 0.1
turnover of
joint
ventures
Total 2,291.0 2,291.0 2,291.0 2,164.2 - 2,164.2
turnover
Operating
profit
Continuing 213.2 (36.0) 177.2 215.0 (47.8) 167.2
operations
2.9 (0.4) 2.5 - - -
Acquisitions
Group 2 216.1 (36.4) 179.7 215.0 (47.8) 167.2
operating
profit
Group 216.1 - 216.1 215.0 - 215.0
operating
profit
before
goodwill
amortisation
and
exceptional
items
Exceptional 4 - (10.6) (10.6) - (20.5) (20.5)
items, net
Goodwill 2 - (25.8) (25.8) - (27.3) (27.3)
amortisation
Group 2 216.1 (36.4) 179.7 215.0 (47.8) 167.2
operating
profit
Share of - - - (1.6) - (1.6)
operating
losses of
joint
ventures
Share of - - - (0.4) - (0.4)
operating
losses of
associate
Amortisation - - - - (1.4) (1.4)
of goodwill
on associate
Amortisation - - - - (0.6) (0.6)
of goodwill
on joint
ventures
Total 216.1 (36.4) 179.7 213.0 (49.8) 163.2
operating
profit
Profit on - 10.0 10.0 - 1.0 1.0
disposal of
fixed assets
Profit on 2 216.1 (26.4) 189.7 213.0 (48.8) 164.2
ordinary
activities
before
interest
Net interest 6 (56.3) - (56.3) (56.3) - (56.3)
payable and
similar
charges
Profit on 159.8 (26.4) 133.4 156.7 (48.8) 107.9
ordinary
activities
before
taxation
Tax on 7 (47.9) 12.1 (35.8) (48.1) 14.2 (33.9)
profit on
ordinary
activities
Profit on 111.9 (14.3) 97.6 108.6 (34.6) 74.0
ordinary
activities
after
taxation
Equity (0.1) - (0.1) (0.1) - (0.1)
minority
interests
Profit for 111.8 (14.3) 97.5 108.5 (34.6) 73.9
the
financial
year
Equity 8 (45.5) - (45.5) (43.1) - (43.1)
dividends
paid and
proposed
Retained 20 66.3 (14.3) 52.0 65.4 (34.6) 30.8
profit for
the
financial
year
Adjusted Actual Adjusted Actual
Basic 9 26.8p 23.4p 25.8p 17.6p
earnings per
share
Cash 9 50.6p - 48.5p -
earnings per
share
Diluted - 23.4p - 17.5p
earnings per
share
Consolidated balance sheet
At 31 March 2003
Notes 2003 2002
Restated
£m £m
Assets employed:
Fixed assets
Intangible assets 10 496.7 547.0
Tangible assets 11 775.8 797.5
Investments 12 0.7 1.5
1,273.2 1,346.0
Current assets
Stocks 13 28.9 25.0
Debtors 14 345.8 284.0
Investments 15 45.7 60.4
Cash at bank and in hand 16 35.6 41.0
456.0 410.4
Creditors: amounts falling
due within one year 17 (571.5) (537.8)
Net current (liabilities)/assets
Due within one year (159.3) (157.4)
Amounts due after more than one 14 43.8 30.0
year
Net current (liabilities)/assets (115.5) (127.4)
Total assets less current 1,157.7 1,218.6
liabilities
Creditors: amounts falling
due after more than one year 17 (630.9) (687.9)
Provisions for liabilities and 18 (124.0) (110.7)
charges
402.8 420.0
Financed by:
Capital and reserves
Called up share capital 20.7 21.0
Share premium account 20 238.8 236.7
Revaluation reserve 20 3.5 3.6
Other reserves 20 3.8 3.5
Profit and loss account 20 134.9 154.2
Equity shareholders' funds 401.7 419.0
Equity minority interests 1.1 1.0
402.8 420.0
Consolidated cash flow statement
For the year ended 31 March 2003
Notes 2003 2002
Restated
£m £m
Net cash inflow from operating activities 21(a) 219.7 310.3
Returns on investments and servicing of finance 21(b) (31.0) (65.8)
Taxation
Corporation tax paid (23.6) (37.6)
Capital expenditure and financial investment 21(c) (82.2) (140.3)
Acquisitions and disposals 21(d) (23.8) (14.0)
Equity dividends paid (44.0) (40.7)
Cash inflow before use of liquid
resources and financing 15.1 11.9
Management of liquid resources
Decrease/(increase) in bank deposits 14.7 (48.6)
Financing 21(e) (47.4) 13.8
Decrease in cash in year (17.6) (22.9)
Reconciliation of net cash flows to movements in net debt
For the year ended 31 March 2003
Notes 2003 2002
£m £m
Decrease in cash in year (17.6) (22.9)
Cash outflow/(inflow) from decrease/(increase) in
debt and
hire purchase contract and finance lease 32.7 (21.5)
financing
Movement in current asset investments (14.7) 48.6
Fees on issue of Bond and loan facility 1.6 5.2
Amortisation of debt issuance fees (0.5) (1.1)
Foreign exchange difference 26.6 (0.1)
Movement in net debt in year 28.1 8.2
Net debt at beginning of year 22 (652.5) (660.7)
Net debt at end of year 22 (624.4) (652.5)
Consolidated statement of total recognised gains and losses
For the year ended 31 March 2003
2003 2002
Restated
£m £m
Profit for the year attributable to shareholders 97.5 73.9
Foreign exchange differences (53.2) (3.2)
Total recognised gains and losses relating to the year 44.3 70.7
Prior period adjustment on adoption of UITF 34 (see note 1) (2.3)
Total recognised gains and losses since the last annual 42.0
report
Reconciliation of movements in shareholders' funds
For the year ended 31 March 2003
2003 2002
Restated
£m £m
Profit for the financial year 97.5 73.9
Dividends (45.5) (43.1)
52.0 30.8
Shares issued:
- to QUEST 2.1 -
Own shares purchased and cancelled (17.1) (7.7)
Write down of own shares held by QUEST (1.1) -
Foreign exchange differences (53.2) (3.2)
Net (deduction from)/addition to shareholders' funds (17.3) 19.9
Shareholders' funds at beginning of year 419.0 399.1
Shareholders' funds at end of year 401.7 419.0
1 Principal accounting policies
The financial information set out herein does not constitute the Group's
statutory accounts but has been extracted from the accounts for the years ended
31 March 2002 and 2003. The accounts for the year ended 31 March 2002 have been
delivered to the Registrar on Companies and the accounts for the year ended 31
March 2003 will be delivered to the Registrar of Companies in due course. The
auditors have reported on both sets of accounts: their reports were unqualified
and did not contain a statement under section 237 (2) or (3) of the Companies
Act 1985.
The accounts for the year ended 31 March 2003 have been prepared using the same
accounting policies as were used in the preparation of the accounts for the
year ended 31 March 2002 with the exception of bid costs where UITF 34 has been
adopted.
Under UITF 34 'Pre-contract costs' are now expensed as incurred rather than the
previous policy of capitalisation. The impact of this change in accounting
policy for the year to 31 March 2003 is an increase in exceptional costs of £
0.8m and for the year to 31 March 2002 an increase in exceptional costs of £
1.6m. The restatement of bid costs at 31 March 2002 has resulted in a reduction
of £1.9m in other debtors and prepayments, an increase of £0.4m in accruals and
deferred income, and a reduction in equity shareholders' funds of £2.3m to £
419.0m.
Copies of the Statutory Accounts for the year ended 31 March 2003 will be sent
to all shareholders by early June and will be available thereafter at the
Registered Office of the Company at 395 King Street, Aberdeen AB24 5RP.
2 Profit and loss account analysis and segmental information
Continuing Acquisitions Total Total
operations 2003 2002
£m £m £m £m
Group turnover 2,277.6 13.4 2,291.0 2,164.1
Group operating costs
- General (2,064.4) (10.5) (2,074.9) (1,949.1)
- Goodwill amortisation (25.4) (0.4) (25.8) (27.3)
- Exceptional costs (note 4) (10.6) - (10.6) (20.5)
Total Group operating costs (2,100.4) (10.9) (2,111.3) (1,996.9)
(note 3)
Group operating profit 177.2 2.5 179.7 167.2
2 Profit and loss account analysis and segmental information (continued)
Segmental information is as follows:
Turnover Profit before Net assets
interest
/(liabilities)
2003 2002 2003 2002 2003 2002
Restated Restated
£m £m £m £m £m £m
UK Bus 859.4 811.5 109.7 102.9 267.2 238.4
UK Rail 842.3 802.9 58.5 64.9 (37.9) 2.0
North America 582.4 542.9 32.4 27.3 483.5 521.9
Group items 6.9 6.8 (10.9) (30.9) (310.0) (342.3)
2,291.0 2,164.1 189.7 164.2 402.8 420.0
All of the Group turnover and Group operating profit for the year
was generated in the United Kingdom, except that shown above as being generated
in North America.
3 Operating costs
Continuing Acquisitions Total Total
operations 2003 2002
£m £m £m £m
Materials and consumables 233.9 1.5 235.4 233.0
Staff costs (note 5) 1,003.1 6.8 1,009.9 945.0
External charges 739.7 1.3 741.0 688.5
Depreciation, amortisation 123.7 1.3 125.0 130.4
and other amounts written
off fixed assets
2,100.4 10.9 2,111.3 1,996.9
4 Exceptional items, net
UK Rail North Other Total Total
Bus America
2003 2003 2003 2003 2003 2002
£m £m £m £m £m £m
Restructuring costs 6.0 - - - 6.0 7.4
St Louis strike - - - - - 1.5
Provision against cost of - - - - - 8.0
investment in joint
ventures
Abortive bid costs - 2.8 - 0.6 3.4 3.6
Claims settlements - - 3.7 - 3.7 -
Gain on disposal of - - - (2.5) (2.5) -
Tramtrack Croydon Limited
6.0 2.8 3.7 (1.9) 10.6 20.5
The tax effect in 2003 was a credit of £3.1m (2002: credit of £5.2m) of the
above exceptional items.
5 Employees' and directors' remuneration
The average number of persons employed by the Group (including Directors)
during the year was as follows:
2003 2002
No. No.
Operational 52,257 50,928
Administration 4,862 4,857
57,119 55,785
The aggregate payroll costs of these persons were as follows:
2003 2002
£m £m
Wages and salaries 923.6 866.5
Social security costs 60.2 59.0
Other pension costs 26.1 19.5
1,009.9 945.0
6 Net interest payable and similar charges
2003 2002
£m £m
Bond and bank facilities 47.6 43.8
Loan notes 1.9 2.1
Finance charges payable in respect of
hire purchase contracts and finance leases 6.5 11.0
56.0 56.9
Income from short term deposits and other investments (2.6) (2.8)
Notional interest on provisions 2.9 2.2
Total 56.3 56.3
7 Tax on profit on ordinary activities
2003 2002
£m £m £m £m
Current taxation
UK corporation tax charge for the year 26.4 25.9
Adjustment in respect of prior years (0.4) (0.5)
Recoverable ACT previously written off - (1.1)
26.0 24.3
Overseas taxation charge
Current year 1.2 1.0
Prior years - 0.3
1.2 1.3
Total current taxation 27.2 25.6
Deferred taxation
Origination and reversal of timing 7.9 9.1
differences
Adjustment in respect of prior years 0.7 (0.8)
8.6 8.3
Tax on profit on ordinary activities 35.8 33.9
8 Equity dividends
2003 2002
£m £m
Ordinary shares of 5p each
- Interim paid (3.55p (2002: 3.3p) per share) 14.8 13.9
- Final proposed (7.45p (2002: 7.0p) per share) 30.8 29.3
- Adjustment to prior year dividend in respect of shares (0.1) (0.1)
cancelled
45.5 43.1
9 Earnings per share
Basic earnings per share is based on earnings of £97.5m (2002: £73.9m) and on
the weighted average number of ordinary shares of 416.7m (2002: 419.8m) in
issue. Diluted earnings per share is based on the same earnings and on the
weighted average number of ordinary shares of 417.4m (2002: 421.4m).
A reconciliation of the number of shares used in the basic and diluted measures
is set out below:
2003 2002
Number Number
(m) (m)
Weighted average number of shares used in basic calculation 416.7 419.8
SAYE share options 0.6 1.0
Executive share options - 0.3
Long term incentive plan awards 0.1 0.3
417.4 421.4
The adjusted basic earnings per share and adjusted cash earnings per share
measures are intended to demonstrate recurring elements of the results of the
Group before goodwill amortisation and exceptional items. Both the adjusted
basic and cash measures of earnings per share use the same weighted average
number of ordinary shares as the basic earnings per share measure. A
reconciliation of the earnings used in these measures is set out below:
2003 2002
Earnings per Earnings per
£m share £m share
(p) (p)
Restated
Profit for basic earnings per share 97.5 23.4 73.9 17.6
calculation
Goodwill amortisation 25.8 6.2 29.3 7.0
Taxation effect of this adjustment (9.0) (2.2) (9.0) (2.2)
Restructuring and other exceptional 10.6 2.5 20.5 4.9
costs
Taxation effect of this adjustment (3.1) (0.7) (5.2) (1.2)
Profit on disposal of fixed assets (10.0) (2.4) (1.0) (0.3)
Profit for adjusted basic earnings
per share calculation 111.8 26.8 108.5 25.8
Depreciation 99.2 23.8 95.1 22.7
Profit for adjusted cash earnings
per share calculation 211.0 50.6 203.6 48.5
10 Intangible fixed assets
Goodwill
£m
Cost
At beginning of year 616.0
Additions (note 23) 18.2
Exchange rate differences (49.4)
At end of year 584.8
Amortisation
At beginning of year 69.0
Charge for the year 25.8
Exchange rate differences (6.7)
At end of year 88.1
Net book value
At 31 March 2003 496.7
At 31 March 2002 547.0
11 Tangible fixed assets
Land and Passenger Other Total
buildings carrying plant and
vehicle equipment
fleet
£m £m £m £m
Cost or valuation
At beginning of year 124.8 1,126.0 136.6 1,387.4
Subsidiary undertakings 0.2 11.5 0.3 12.0
acquired
Additions 10.4 79.7 16.3 106.4
Disposals (5.4) (41.6) (7.8) (54.8)
Exchange rate differences (1.6) (41.1) (3.1) (45.8)
At end of year 128.4 1,134.5 142.3 1,405.2
Depreciation
At beginning of year 18.6 491.1 80.2 589.9
Charge for the year 2.9 82.1 14.2 99.2
Disposals (1.2) (36.8) (4.0) (42.0)
Exchange rate differences (0.4) (15.9) (1.4) (17.7)
At end of year 19.9 520.5 89.0 629.4
Net book value
At 31 March 2003 108.5 614.0 53.3 775.8
At 31 March 2002 106.2 634.9 56.4 797.5
12 Fixed asset investments
Own
Other
Associates investments shares Total
£m £m £m
£m
Cost
At beginning of year 7.5 0.5 2.3 10.3
Additions - - 2.2 2.2
Disposals - (0.5) (3.3) (3.8)
Reclassification as other (7.5) 7.5 - -
investment
At end of year - 7.5 1.2 8.7
Provision
At beginning of year (7.5) (0.5) (0.8) (8.8)
Provided during year - - (1.1) (1.1)
Disposals - 0.5 1.4 1.9
Reclassification as other 7.5 (7.5) - -
investment
At end of year - (7.5) (0.5) (8.0)
Total
At 31 March 2003 - - 0.7 0.7
At 31 March 2002 - - 1.5 1.5
13 Stocks
2003 2002
£m £m
Spare parts and consumables 23.1 23.1
Property development work in progress 5.8 1.9
28.9 25.0
14 Debtors
2003 2002
Restated
£m £m
Amounts due within one year
Trade debtors 190.5 177.9
Other debtors 44.5 19.1
Deposit paid for rolling stock - 16.7
Pension fund prepayments 8.1 5.7
Other prepayments and accrued income 58.9 34.6
Deferred taxation - -
302.0 254.0
Amounts due after more than one year
Pension fund prepayments 42.4 28.3
Other prepayments and accrued income 1.4 1.7
43.8 30.0
345.8 284.0
15 Current asset investments
2003 2002
£m £m
Bank deposits 45.7 60.4
16 Cash at bank and in hand
2003 2002
£m £m
Ring fenced cash 22.2 36.2
Other cash 13.4 4.8
35.6 41.0
17 Creditors
2003 2002
Restated
£m £m
Amounts falling due within one year
Bank loans and overdrafts 40.0 7.5
Obligations under hire purchase 34.2 57.3
contracts and finance leases
Loan notes 0.6 1.2
Trade creditors 102.9 122.8
Corporation tax 27.2 23.8
Other tax and social security 18.5 16.4
Other creditors 33.0 21.9
Pension fund creditors 11.3 8.5
Accruals and deferred income 235.0 210.6
Season ticket deferred income 37.8 38.4
Proposed dividends 31.0 29.4
571.5 537.8
2003 2002
£m £m
Amounts falling due after more than one year
Bank loans
Due in more than one year but not more - 24.2
than two years
Due in more than two years but not more 286.8 283.4
than five years
Obligations under hire purchase contracts
and finance leases
Due in more than one year but not more 21.5 34.3
than two years
Due in more than two years but not more 6.1 27.6
than five years
Due in more than five years 0.1 0.4
Loan notes
Due in more than one year but not 21.3 23.2
more than two years
£300.0m Bond - 6.875% 2013 295.1 294.8
630.9 687.9
18 Provisions for liabilities and charges
Deferred tax Insurance claims Pensions Total
£m £m £m £m
At beginning of year 79.6 24.9 6.2 110.7
Provided in the year 8.6 14.3 - 22.9
Utilised in the year - (10.1) (0.4) (10.5)
Notional interest - 2.7 0.2 2.9
Exchange rate differences - (2.0) - (2.0)
At end of year 88.2 29.8 6.0 124.0
19 Deferred tax
2003 2002
£m £m
Capital allowances in excess of depreciation 116.2 101.1
Other timing differences 16.0 11.1
Trading losses (44.0) (32.6)
Deferred tax provision 88.2 79.6
20 Reserves
Share Revaluation Profit and
premium reserve loss account
account
£m £m £m
At beginning of year as previously reported 236.7 3.6 156.5
Prior year adjustment - - (2.3)
At beginning of year as restated 236.7 3.6 154.2
Cancellation of shares (i) - - (17.1)
Retained profit for the year - - 52.0
Foreign exchange differences - - (53.2)
Shares issued to QUEST 2.1 - (1.1)
Transfer of realised revaluation reserve - (0.1) 0.1
At end of year 238.8 3.5 134.9
20 Reserves (continued)
Capital Capital Total other
redemption reserves reserves
reserve
£m £m £m
At beginning of year 0.8 2.7 3.5
Cancellation of shares (i) 0.3 - 0.3
At end of year 1.1 2.7 3.8
Notes:
(i) 7,434,626 ordinary shares were repurchased at a total cost of £17.1m and
cancelled.
21 Notes to the consolidated cash flow statement
2003 2002
Restated
£m £m
(a) Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 179.7 167.2
Depreciation and other amounts written off tangible fixed 99.2 95.1
assets
Amortisation charges 25.8 27.3
Write down of investment in joint venture and associate - 8.0
Profit on sale of investment in joint venture (2.5) -
Loss/(profit) on sale of non property fixed assets 0.2 (0.7)
Increase in stocks - (2.1)
Increase in debtors (77.3) (11.6)
(Decrease)/increase in creditors and provisions (5.4) 64.1
FNW Franchise amendment payment - (37.0)
Net cash inflow from operating activities 219.7 310.3
(b) Returns on investments and servicing of finance
Interest received 2.7 2.8
Interest paid (25.1) (52.0)
Interest element of hire purchase contract
and finance lease payments (7.0) (11.5)
Fees on issue of Bond and loan facility (1.6) (5.1)
Net cash outflow from returns on investments
and servicing of finance (31.0) (65.8)
21 Notes to the consolidated cash flow statement (continued)
(c) Capital expenditure and financial investment 2003 2002
Restated
£m £m
Purchase of tangible fixed assets (107.4) (154.7)
Sale of fixed asset properties 4.4 2.1
Sale of other tangible fixed assets 4.1 5.7
Deposits for rolling stock 16.7 6.6
Net cash outflow from capital expenditure
and financial investment (82.2) (140.3)
(d) Acquisitions and disposals
Purchase of subsidiary undertakings - (1.0)
Purchase of businesses (28.1) (6.1)
Net cash acquired with purchase of businesses 1.8 -
Purchase of investment in joint ventures - (4.9)
Purchase of investment in associate - (2.0)
Sale of investment in joint venture 2.5 -
Net cash outflow from acquisitions and disposals (23.8) (14.0)
(e) Financing
Issue of share capital 2.5 -
Own shares repurchased (17.1) (7.7)
Bond 2013 - 300.0
New bank loans 312.1 77.5
Repayment of amounts borrowed - bank loans (285.1) (277.7)
- (2.5) (11.5)
other loans
Capital element of hire purchase contract
and finance lease payments (57.3) (66.8)
Net cash (outflow)/inflow from financing (47.4) 13.8
22 Analysis of net debt
At beginning Cash flow Other At end
of year non-cash of year
changes
£m £m £m £m
Current asset investments 60.4 (14.7) - 45.7
Cash at bank and in hand 41.0 (7.6) 2.2 35.6
Bank overdrafts - (10.0) - (10.0)
Cash 41.0 (17.6) 2.2 25.6
Bank loans due within one year (7.5) (27.0) 4.5 (30.0)
Bank loans due after one year (307.6) 1.3 19.5 (286.8)
Bond 2013 (294.8) 0.2 (0.5) (295.1)
Obligations under hire purchase
contracts and finance leases (119.6) 57.3 0.4 (61.9)
Loans and loan notes (24.4) 2.5 - (21.9)
Financing (753.9) 34.3 23.9 (695.7)
Net debt (652.5) 2.0 26.1 (624.4)
23 Summary of purchase of businesses
Total Total
2003 2002
£m £m
Fair value of net assets acquired:
Tangible fixed assets 12.0 3.6
Other current assets 1.6 -
Cash at bank and in hand 1.8 -
Other creditors (5.5) (1.7)
9.9 1.9
Goodwill 18.2 4.2
28.1 6.1
Satisfied by:
Cash paid and payable 28.1 6.1
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