Final Results
Embargoed until 07:00hrs on Wednesday 17 May 2006
FIRSTGROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR TO 31 MARCH 2006
OPERATIONAL SUMMARY
* Strong Group performance in challenging trading conditions
*
+ Increased revenue and profit despite £31m fuel cost increase
+ Dividend increased by 10%
* Excellent performance in UK Rail
*
+ Award of 2 new franchises - now the UK's largest rail operator
+ First ScotRail performance best in 5 years
+ First TransPennine Express strong passenger growth and introduction of
new trains
+ First Great Western + 7.5% and FGW Link + 9.0% passenger income growth
+ Shortlisted for South Western Franchise
* Continued growth in North America
*
+ Record sales and earnings
+ First Student - revenue growth and contract renewals at improved
margins
+ First Transit - retention of important contracts and expansion in light
transit market
+ First Services - strong revenue and earnings growth and well placed to
grow in federal market
* Robust performance in UK Bus
*
+ Strong on-bus revenue growth and increased passenger journeys
+ Focus on operational efficiencies and higher productivity
+ Launch of first `ftr' service in York this month
+ Investment in service reliability delivering benefits - mileage
operated at highest level in 4 years
FINANCIAL SUMMARY
* Turnover £3,030.9m (2005: £2,693.4m)
* Adjusted operating profit1 £229.7m (2005: £214.8m)
* Operating profit £210.7m (2005: £204.0m)
* EBITDA2 £351.7m (2005: £322.4m)
* Adjusted profit before tax1 £176.4m (2005: £166.5m)
* Profit before tax £157.4m (2005: £155.7m)
* Adjusted basic earnings per share1 30.9p (2005: 28.9p)
* Basic earnings per share 27.4p (2005: 27.1p)
* Interest cover3 6.6x (2005: 6.7x)
* Dividend per share 14.1p (2005: 12.815p)
* Net debt at 31 March 2006 £704.4m (2005: £663.1m)
1 Before intangible asset amortisation, bid costs and profit on disposal of
fixed assets, as shown in the consolidated income statement page 24.
2 Adjusted operating profit as defined plus depreciation.
3 Calculated as EBITDA divided by the net of finance costs and investment
income.
Commenting, FirstGroup's Chief Executive, Moir Lockhead said:
"I am pleased to report another strong set of results reflecting a very
successful year for the Group. Our record EBITDA has enabled us to invest for
growth in the business, while increasing the dividend by 10% and returning £
23.0m to shareholders through the further repurchase of equity during the
year."
"All of our divisions have delivered an extremely robust performance. Our UK
Rail Division continues to deliver strong passenger volume and income growth.
Through the award of two new major franchises - Greater Western and Thameslink/
Great Northern (now renamed First Capital Connect) - we have secured additional
revenue of over £1.0bn per annum for up to 10 years. We continue to grow in
North America and the Board remains extremely pleased with the consistent
returns we have delivered from our businesses there. We have more than doubled
EBITDA since we entered the North American market in 1999. In UK Bus we are
encouraged to see increased passenger journeys and have delivered strong
revenue growth despite ongoing fuel price pressure. The first `ftr' service was
launched in York this month and we continue to see encouraging growth in those
areas where we can successfully develop partnerships with Local Authorities who
are committed to public transport and the reduction of traffic congestion."
"The Group is well placed for further growth. It has strong and predictable
cash flows with some 50% of our revenues coming from contracted business in the
UK and North America. The Board is committed to increasing shareholder value by
growing our core businesses, developing opportunities in new markets and
dividend growth of 10% per annum for the foreseeable future, at least until
2008. This will be supported, where appropriate, by share repurchases while
maintaining a strong balance sheet. Trading in the new financial year has
started well and is in line with our expectations."
Enquiries FirstGroup plc :
Moir Lockhead, Chief Executive Tel: 020 7291 0512
Dean Finch, Finance Director Tel: 020 7291 0512
Rachael Borthwick, Corporate Communications Director Tel: 020 7291 0508
PHOTOGRAPHS FOR THE MEDIA ARE AVAILABLE AT WWW.NEWSCAST.CO.UK
NOTES TO EDITORS:
FirstGroup plc is a UK based international transport company with a turnover of
over £3 billion a year and some 74,000* 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 9,000 buses carries over 2.8
million passengers a day in more than 40 major towns and cities.
* The Group is the UK's largest rail operator with four passenger franchises
- First Great Western, First Capital Connect, First TransPennine Express
and First ScotRail - and one open access operator Hull Trains.
* The Group operates one quarter of the UK passenger rail network, with a
balanced portfolio of intercity, commuter and regional services, carrying
over 250m passengers per annum.
* The Group is shortlisted for the South Western franchise.
* The Group operates freight services through GB Railfreight.
* The Group operates 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 Fleet Maintenance and Support Services (First
Services). Headquartered in Cincinnati the businesses operate across the US
and Canada.
* First Student is the second largest provider of student transportation in
North America with a fleet of over 21,000 yellow school buses, carrying
nearly 2 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
transit authorities in cities such as Los Angeles, Houston and Denver. We
are one of the largest providers of airport shuttle bus services in the US,
serving airports in cities such as Baltimore, Philadelphia and Miami. We
also manage 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. We provide fleet
maintenance for public sector customers such as the Federal Government,
cities and fire and police departments. We also provide a range of support
services including vehicle maintenance, logistics support and facilities
management to public and private sector clients including the US Navy and
US Air Force.
* including new employees who joined the Group from Greater Western and
Thameslink/Great Northern franchises
Chairman's statement
This year is marked by the bombings in London in July. On behalf of the Board
of FirstGroup plc and all of its employees I would like to express my
condolences to the injured and to the bereaved. Although our operations were
not directly affected, we are proud of the efforts our staff made to assist
passengers in extremely challenging circumstances. I would like to take this
opportunity to thank all of our staff involved for their courage and commitment
during that very difficult time. The safety of our passengers and employees is
our highest priority and we constantly strive to achieve the highest possible
standards.
I am pleased to report another year of good progress across the Group. Turnover
has increased to £3,030.9m (2005: £2,693.4m) and adjusted profit before tax
(before intangible asset amortisation, bid costs and profit on disposal of
fixed assets) increased to £176.4m (2005: £166.5m). Profit before tax increased
to £157.4m (2005: £155.7m). This is a particularly strong performance given the
additional cost increases faced by the Group during the year, specifically
increases in fuel prices which impacted Group operating profit by £31m. Cash
generation was again strong. EBITDA (Group operating profit* plus depreciation)
increased to a record £351.7m (2005: £322.4m). Adjusted basic earnings per
share has increased by 6.9% to 30.9p (2005: 28.9p) and basic earnings per share
increased by 1.1% to 27.4p (2005: 27.1p). The Board has proposed a final
dividend, subject to approval by shareholders, of 9.55p making a full year
payment of 14.1p, an increase of 10%. The dividend is covered 2.4 times, before
intangible asset amortisation, bid costs and profit on disposal of fixed
assets. It will be paid on 25 August 2006 to shareholders on the register on 21
July 2006. The dividend increase reflects the Board's confidence in the Group's
strong cash generation and growth prospects. The Board is confident that this
level of dividend growth is sustainable for the foreseeable future, at least
until 2008.
This year saw the Group build on its successful rail portfolio with the award
of two important rail franchises Greater Western and Thameslink/Great Northern
(now renamed First Capital Connect). We were delighted to win both of these
franchises as a result of substantial and comprehensive research and the
expertise of our bidding team. We are now the UK's largest passenger rail
operator, providing services from the north east of Scotland right down to the
south west of England, and look forward to building on our record of success.
We are shortlisted for the South Western franchise and look forward to
submitting a robust and innovative bid.
Our North America division continues to perform well with high contract
retention and new business won across all of our operations. These businesses
have delivered consistent growth since we entered the North American market in
1999.
We believe that the bus is the natural solution to the increasing problem of
congestion affecting our towns and cities. We continue to promote and develop a
partnership approach to tackle the problem of traffic congestion. We have
experienced encouraging growth in those areas where we are able to develop
quality partnerships with Local Authorities to improve the services we offer
passengers through bus priority and other traffic management schemes.
During the year we further strengthened the Board with two new appointments. In
July Professor David Begg joined the Board as a Non-Executive Director. David
has vast experience and an impressive record in public transport and transport
policy. Sid Barrie joined the Board as Commercial Director in August and his
appointment further strengthens our commercial team. Both bring extensive
experience to the Group.
I would like to take this opportunity to thank our staff for their continued
hard work and commitment in delivering another year of strong growth. I would
also like to welcome new employees including those at First Capital Connect and
the enlarged Greater Western franchise and staff who have joined our businesses
in the UK and US during the period.
We have a clear strategy to deliver value for shareholders by growing in our
core businesses in the UK and North America and exploring opportunities to
develop in new markets. We will continue to invest for growth in our businesses
while remaining committed to increasing the dividend by 10% per annum, at least
until 2008 and, where appropriate, share repurchases while maintaining our
strong balance sheet.
Martin Gilbert
Chairman
* Operating profit referred to throughout this document refers to operating
profit before intangible asset amortisation, bid costs and profit on disposal
of fixed assets.
Chief Executive's operating review
OVERVIEW
Safety
The safety and security of our passengers and staff is at the forefront of
everything we do and we actively endorse a culture of `Safety First' throughout
our business. We continually assess our working practices and procedures to
ensure that we are doing everything we can to meet the highest possible
standards of safety for our passengers and our staff. We have launched the
`Injury Prevention Programme' across the Group and established the `First
Safety Principles' to clearly set out the principles of safe working practices
throughout the business. The simple message to all employees is `if you cannot
do it safely, don't do it'.
Results
I am pleased to report another successful year of growth in our businesses in
the US and UK with record results. Group turnover increased by 12.5% to £
3,030.9m (2005: £2,693.4m). Adjusted operating profit was £229.7m (2005: £
214.8m). I am particularly pleased with this creditable performance given the
strong headwinds we faced during the year, most notably the significant rise in
fuel costs. Operating profit was impacted by £31m by additional fuel costs as a
result of the rise in global oil prices. The Group generated record EBITDA
(adjusted operating profit plus depreciation) of £351.7m (2005: £322.4m)
enabling us to continue to invest in the business as well as increasing the
dividend by 10% and returning £23.0m to shareholders through further repurchase
of equity during the year.
UK RAIL
The UK Rail division operates passenger and freight services in the UK.
Passenger rail franchises consist of the new Greater Western franchise
(incorporating First Great Western, First Great Western Link and Wessex
Trains), First Capital Connect (incorporating Thameslink and Great Northern),
First TransPennine Express and First ScotRail. We also operate Hull Trains, a
non-franchised open access intercity passenger train operator, and we provide
rail freight services through GB Railfreight. We are now the UK's largest rail
operator carrying more than 250 million passengers per annum.
Results
I am very pleased with the excellent performance of our rail division during
the year. Our current operations, excluding the new franchises which commenced
operation after the year end, performed strongly delivering record turnover and
profits. Turnover in the Group's rail division increased to £1,164.9m (2005: £
1,059.7m) and operating profit increased by 23% to £79.6m (2005: £64.5m). The
operating margin increased to 6.8% (2005: 6.1%). This is a particularly strong
performance, given the effect of the July terrorist attacks on London which had
an estimated adverse impact of £9.0m on our rail franchises during the first
half of the year. We took a number of actions to encourage and promote rail
travel and subsequently saw passenger journeys return to normal levels as
public confidence recovered. These results demonstrate the strength of all our
rail franchises which have continued to deliver strong passenger volume growth.
We have now secured additional longer-term revenue for up to 10 years across
our UK rail portfolio with the award of two new enlarged rail franchises.
New Franchises
We were delighted to be awarded both the Greater Western and Thameslink/Great
Northern (now renamed First Capital Connect) franchises worth over £1bn of
revenue per annum. We commenced operation of both franchises on 1 April with a
smooth handover reflecting the considerable effort made by the rail teams
during the rigorous mobilisation process. Both of these franchises present a
significant opportunity for the Group and complement our existing rail
portfolio. We are encouraged by the good start up of both franchises and are
experiencing strong revenue growth ahead of the projections made at the time of
the bids. We are now the only operator to run every type of overground rail
service in the UK, from high speed intercity trains and overnight sleepers to
local branch lines, regional and commuter services and open access, light rail
and freight operations. We will continue to build on our strong reputation of
innovation, investment and customer service.
The Greater Western franchise, which combines First Great Western, First Great
Western Link and Wessex Trains, operates services across the South and West of
England and South Wales. We have committed to a £200m investment programme, the
vast majority of which will be spent in the first 2 years. This investment will
deliver significant improvements across the franchise and customer benefits
including improved capacity, safety and service. We are upgrading the train
fleet to provide a step change in passenger comfort and facilities and to
provide over 30% more seats during the morning and evening peak. We are also
making a number of station improvements across the network including new ticket
machines, improved facilities for customers, new CCTV and help points and an
additional 1,700 car parking spaces, representing an increase of 25% on the
current mainline availability, and more cycle park facilities. In addition we
will work together with Network Rail, the infrastructure provider, to tackle
the deep-rooted performance issues on the Greater Western network. We have just
completed our most comprehensive and widespread consultation in advance of the
introduction of the December 2006 timetable and have already responded to
feedback received with the provision of service revisions, and where
appropriate, additional services. We are delighted that Sir Chay Blyth has
joined us to head the new board of Directors at First Great Western. Sir Chay
is a regular user of our services in the region and we look forward to drawing
on his vision and inspiration as we continue to grow and develop this important
franchise.
First Capital Connect operates across London and the South East. We have
delivered a successful start up of this new franchise and worked hard to ensure
that customers saw improvements to the service right from the outset. We are
investing £52m, the majority in the first three years of the franchise term, to
improve the service offered to passengers. We will be introducing a number of
improvements from cleaner, smarter trains to enhanced station facilities
including upgraded waiting areas and passenger information systems.
Improvements to the timetable will substantially increase capacity at peak
times, providing more seats for passengers in the morning and evening peak.
Safety and security at our stations is key and we have already conducted a
major review of all stations and as a result a number of significant
enhancements will be introduced. We are recruiting additional frontline staff,
investing in new CCTV equipment, help points and a new control centre to
monitor security camera footage from a single central location. Revenue
protection is one of our key priorities for this new franchise and we will be
providing customers with improved ticketing facilities and will reduce revenue
leakage through further ticket checks, additional revenue protection staff and
the installation of automatic ticket gates at a number of key stations across
the network. These initiatives aim to improve security, reduce ticketless
travel and lessen vandalism.
Current operations
First ScotRail continues to deliver a strong performance, reflecting the
dedication to providing service enhancements for passengers and ensuring the
highest possible standards of operation across the network. We have continued
to focus on minimising delays caused by train performance failures and as
result have seen delays for which we are responsible fall by 26%. This
excellent result far exceeds the franchise commitment of 2% reduction per
annum. We are also pleased to see a marked improvement in the performance of
the infrastructure. We are very pleased that reliability and punctuality is now
more than 90%, the best performance in five years. Passenger volumes have
increased by 11% since the start of the franchise in October 2004 and we were
delighted to achieve the highest levels of customer satisfaction recorded for
some time. Since we took over the franchise we have focused on improving
customer service across all areas. We opened a new customer service centre in
Fort William, creating 50 new jobs in rural Scotland, to provide general travel
information, ticket sales, customer relations and assistance for disabled
travellers. We also introduced an innovative free text alert service for
passengers to provide advance warning if their train is expected to be delayed.
We have improved training and development for employees and increased the
number of frontline staff across the network. The personal safety of our
passengers and staff is our main priority. As part of our commitment to safety
more than 100 stations across the ScotRail network are being fitted with CCTV,
help points and improved car park lighting. The winter timetable we launched in
December provided improved commuter services in to Glasgow and Inverness and
enhancements to services in Aberdeenshire, the Highlands and Strathclyde.
First TransPennine Express continues to outperform with passenger volumes
across the network increasing by 6.5% during the period, bringing the total
passenger volume growth to 11% since the start of the franchise in February
2004. We continue to benefit from increased road congestion on the commuter
corridor between Leeds and Manchester with an estimated 5 million journeys a
year now made on this part of the rail network. Substantial volume growth of
30% has been achieved on services to and from Manchester Airport, we now carry
1.2m passengers per annum on this key route. We were delighted to expand our
First TransPennine network with the transfer of Manchester International
Airport - Blackpool North services from Northern Rail with effect from June
2006. Passengers will benefit from the transfer of these services with the
opportunity to travel on new rolling stock. This year a fleet of 51 new 100mph
Siemens trains will be introduced on the network and the first of these new
trains entered passenger service in March. Passengers in the region will
benefit from the step change in quality and the many new features including air
conditioning, improved seating, advanced passenger information systems, a first
class section, on-board CCTV security cameras and improved access for all. In
May the Secretary of State for Transport, Douglas Alexander, opened a £28m
train-care depot in Manchester to service the new trains. This state of the art
facility is designed to deliver optimum train performance and standards of
cleanliness.
At First Great Western growth has continued to be strong. Passenger income grew
by 7.5% despite the impact of the London bombings in July. Passenger income
growth has exceeded 8% over the last four years and this encouraging trend
provides us with a strong platform for further growth in the new franchise.
During the period we have worked hard with Network Rail and our industry
partners through the Joint Performance Improvement Plan to prioritise and
tackle the issues which impede performance. We have reduced the operator delays
for which we are responsible by 30% in the last 5 years. As part of our
commitment to integrated transport, and to ensure that public transport is even
more convenient and better value, further PlusBus schemes were introduced
during the year enabling passengers to switch between different modes of
transport using only one ticket. As a result we are encouraged that sales of
PlusBus tickets have more than trebled during 2005. During the year we were
pleased to receive Secure Station status for a number of stations including
Slough, Newbury, Newton Abbott, Cholsey, Exeter St Davids, Plymouth, Totnes,
Thatcham and Pangbourne bringing the total number of accredited stations in the
region to 27.
At First Great Western Link passenger income increased by 9% demonstrating the
strong underlying performance of this railway despite the impact of the
terrorist attacks in London last July. We invested in a refurbishment programme
to improve the travel experience for passengers. A number of stations across
the First Great Western Link network benefited from newly refurbished passenger
facilities such as waiting rooms and booking halls and improved customer
information boards. We also launched a package of security and safety
improvements, in partnership with Transport for London (TfL), helping to make
rail travel safer across the capital. The £400,000 investment programme
delivered improvements including new CCTV, help points and new anti-vandal
shelters at stations. In March we were pleased to achieve Secure Station status
at Oxford station following the accreditation of a number of our other First
Great Western Link stations in the Thames Valley.
Hull Trains, our non-franchised, open access intercity train company operating
between London Kings Cross and Hull, performed well during the year and
delivered strong revenue and passenger growth. We now operate six weekday
services and have recently introduced new 125mph trains on to the network. In
response to demand we are currently expanding the First Class seating capacity
offered on our services. We were delighted to win the `Rolling Stock Excellence
of the Year Award' and come runner up in the `Rail Business of the Year'
category at the recent Rail Business Awards. We also won the National Fleet
Reliability Improvement Programme award for `Reliability of Rolling Stock'.
GB Railfreight
GB Railfreight (GBRf), our freight company, had another successful year
building on its reputation for a high level of service combined with a flexible
business model. A number of new contracts were won during the year for clients
including Royal Mail, Petrochem Carless, Knights Rail and Network Rail. In
August GBRf will commence a significant 10-year contract with Metronet to
transport infrastructure materials as part of the programme to renew the London
Underground network. In January we launched a new daily multi-modal service
from the Port of Felixstowe to Exel at Doncaster, providing a `turn up and go'
service giving customers the flexibility to use it when they need to. A number
of new rolling stock orders such as locomotives and wagons were placed to
support the new contracts. The growth of GBRf and its successful tender for
these contracts has taken thousands of heavy vehicles off already congested
roads as it transports goods and equipment by rail. We are pleased with the
development of GBRf and confident that there is scope to further expand our
rail freight operations through this innovative and demand-responsive business.
Franchise bidding
We are delighted to be shortlisted for the South Western franchise. We have an
excellent track record of innovation and investment and a highly experienced
bidding team. We look forward to consulting widely and working with all of the
stakeholders to develop exciting proposals for this franchise. We will be
seeking to pre-qualify for the North London Lines concession which will be
tendered by Transport for London later in the summer.
Outlook UK Rail
The strong performance of our rail operations reflects our expertise,
innovation and the investment we have made in the businesses. We aim to deliver
a high level of service and performance to our existing customers and attract
new passengers on to the railways. This year has been particularly successful
with the award of two major rail franchises to the Group and we look forward to
building on that success in forthcoming franchise rounds. We remain confident
about the Group's future opportunities in UK railways.
NORTH AMERICA
In North America the Group is the second largest operator of student
transportation with over 21,000 yellow school buses carrying nearly 2 million
students every day across the US and Canada. We operate the largest transit
contracting and management business in North America and we have a growing
services division providing fleet maintenance and ancillary services to public
and private sector clients.
Results
Our North American division has performed well during the year. Turnover from
our three businesses increased to £826.3m or $1,476.0m (2005: £665.8m or
$1,230.2m), an increase in dollar terms of 20.0%. Operating profit was £67.1m
or $120.2m (2005: £62.4m or $115.4m). Operating profit was impacted by $10.0m
as a result of increased fuel costs due to the rise in global oil prices and by
$8.4m as a result of increasing our insurance reserves. This was partially
offset by the recovery of the `lost' operational days from 2004/05 in First
Student.
Since we acquired our North American business we have delivered consistent
returns with EBITDA growth of approximately 13% per annum since 2000. The three
businesses generate excellent returns with EBITDA of £122.0m or $218.4m (2005:
£109.3m or $202.1m) and remain self-financing in terms of maintenance capital
expenditure, organic growth through new contract wins and acquisitions. All
investment for growth, whether it be contract bids or acquisitions, must meet
the Group's rigorous internal rate of return targets.
First Student
This year we are pleased to have continued the growth of our yellow school bus
business despite ongoing fuel cost pressures. Strong contract retention remains
a feature of this business and we were pleased to retain over 90% of our
contracts that came up for renewal during the period. US Dollar turnover
increased by 19.6% but operating profit was down by 3.2% as a result of higher
fuel costs and the cost of increasing our insurance reserves. During the period
we successfully integrated Cardinal, the business we acquired last year, and
this continues to provide us with a good base for growth and synergies within
our Canadian operations. We continued to grow our market share through a
combination of new business wins, organic growth and acquisitions. In addition
to the new business won in the first half of the year, we were pleased to win a
new contract in Saskatchewan, Canada and to make our first entry in to Arizona.
We will be seeking to expand our presence in this new market. In addition we
were pleased to retain a number of important contracts including Washington and
Massachusetts and we made four in-fill acquisitions in Wisconsin, New Jersey,
Ohio and Vermont.
Looking ahead we had a successful bidding season and have renewed contracts and
won new business on terms which better reflect the cost pressures we face. We
are focused on delivering margin enhancement in the business and will continue
to drive efficiencies where appropriate and re-profile contracts as they come
up for re-tender. We are confident that we will be able to continue to grow our
yellow school bus business through our strategy to win new business combined
with the organic growth of existing contracts and in-fill acquisitions at our
target margins.
First Transit
US Dollar turnover increased by 13.5% and operating profit by 9.4%. We continue
to focus on margin enhancement and during the period have implemented a
programme of efficiencies which will also deliver further benefit in the new
trading year. During the year we continued to grow with the commencement of new
contracts including the provision of shuttle bus services at the University of
Texas, additional transit management and contracting services in Washington DC
and additional paratransit business in Philadelphia. We were pleased to retain
a number of important contracts that came up for renewal including transit
management and contracting business in Los Angeles and Denver. We continued to
implement our strategy to increase our share of the `light transit' market and
we are now one of the largest operators of airport shuttle services in the US,
providing bus services at a number of major airports across the US. We recently
won a contract to operate a further call centre in Indianapolis bringing our
call centre operations to a total of eight in cities such as New York,
Portland, Chicago, Denver and Hartford.
We are confident that our Transit operation continues to provide opportunities
for further growth in the fast growing areas of call centre management,
paratransit, logistics consultancy and private shuttle buses. We will continue
to develop our management expertise in these areas to exploit future
opportunities to grow our presence in these markets.
First Services
Our Services division, which provides a range of outsourced vehicle
maintenance, operations and support services in the private and public sectors,
performed well during the year. US Dollar turnover increased by 35.3% and
operating profit by 39.6%, reflecting a full year of strong trading performance
from our services acquisition and also an improved operating margin.
Our fleet maintenance business continued to grow with new business to provide
vehicle maintenance services to the State of Oklahoma and Commonwealth of
Pennsylvania and a number of private sector customers. We also won new
contracts to provide specialist mobile communications equipment for both
Florida and Tennessee State Highway Patrol. Our Services business, which
operates in the large federal market, continued to grow through new business
and the securing of further contracted work from existing customers. In October
First Services successfully commenced operation of a substantial contract to
provide land-based support services to the US Navy.
We are encouraged by the growth of our Services business and believe we are
well placed to develop further opportunities in the growing US Federal market.
Outlook North America
Our North American division continues to deliver excellent returns for
shareholders. We are confident that we can continue to grow and exploit
opportunities in this large and fragmented market through our proven strategy
of combining contract wins with well matched acquisitions at our target
margins.
UK BUS
The Group is the largest bus operator in the UK with a fleet of some 9,000
buses, and a market share of approximately 23%. We carry over 2.8 million
passengers every day.
Results
During the year on-bus revenue growth was strong, particularly in the second
half of the year where it increased by 7.7% year on year in the last quarter.
We have seen an encouraging trend of increased passenger journeys for the bus
division overall. Total revenue increased to £1,031.2m (2005: £960.7m) as a
result of revenue and passenger growth initiatives, improved tender results and
pricing. Operating profit before lease financing costs was £108.6m (2005: £
115.2m). Significant cost increases, in particular fuel, continue to pressure
margins in UK Bus. Our aim is to drive down unit costs through operational
efficiencies and higher productivity. We are carrying out a detailed review of
route profitability to ensure that we closely match service provision with
demand and manage our resources as efficiently as possible. While margins in UK
Bus remain under pressure, principally through increased fuel costs, our
priority is to achieve sustainable growth in profits through high-quality
customer service and increased patronage.
The new management team has been successful in driving a number of key
initiatives through the business. `Performance with Pride' has been a core
objective within our UK Bus division this year. We aim to meet customers'
travel needs by providing a quality service that is sustainable, profitable and
of which we are proud. Our continued focus on service quality together with
actions taken by management have delivered improved vehicle reliability,
increased mileage operated to its highest level in four years and eliminated
driver shortages. We are making significant investment in our maintenance and
engineering functions and have rolled out improved processes and best practice
across the division through Standard Operating Procedures. I am pleased to
report that we are beginning to see the benefit of this increased investment
and expect this to continue.
London
In London our overall punctuality and reliability performance has improved over
the year. We are committed to improving our service quality and investing in
additional focused supervision of specific routes. We were delighted to be
awarded the contract to operate one of the two Heritage Bus Routes on behalf of
Transport for London. The routes commenced operation in November and we are
proud to be entrusted with operating this high profile contract.
The Mayor of London has now approved plans to extend the Congestion Charging
zone westward in 2007. We are well placed with depot location and additional
capacity to provide further services should they be required in order to meet
the needs of passengers.
As a major British company, we are delighted that London has been selected to
host the 2012 Olympic Games. We have extensive experience of working with Local
Authorities to deliver a successful public transport system for the
Commonwealth Games in Manchester in 2002, and we look forward to working with
the Olympic Transport Authority and others on the development of innovative and
comprehensive plans to deliver a first class transport system for the Games.
Outside London
We continue to promote and develop a partnership approach to tackle the growing
problem of traffic congestion affecting our towns and cities. We have seen good
growth where we are able to work with Local Authorities to meet passengers'
requirements for punctual and reliable services. Our bus operations in York
continue to lead the industry's efforts to deliver improved services for
passengers through effective partnerships with Local Authorities. In June 2005
our York operation won `Public Transport Operator of the Year' at the National
Transport Awards. We are particularly proud that City of York Council nominated
us for the award.
In May this year we launched ftr - our premium urban travel concept - in York.
The ftr scheme introduces state-of-the-art articulated vehicles that look like
trams but have the flexibility of a conventional bus and use normal roads. As
part of the partnership, City of York Council is introducing a programme of
improvements to traffic lights, bus stops and shelters that will enable the ftr
vehicles to move people around the city in comfort and without delay. The
second ftr service will begin in Leeds later this year and we are evaluating
plans for further schemes in cities such as Sheffield, Swansea, Reading, Bath
and Glasgow.
We are pleased to see continued passenger growth on the first `Showcase route'
launched in partnership with the City Council in Bristol. The second Showcase
route, supported by South Gloucestershire Council, is due to be launched
shortly. We are now working with the four Local Authorities in the area to
deliver the Greater Bristol Bus Network, a comprehensive system to provide fast
and reliable bus journey times along ten major corridors to compete effectively
with the private car.
In Glasgow our partnership with the City Council, Strathclyde Passenger
Transport and the Scottish Executive delivered the first Statutory Quality
Partnership in the UK. The Statutory Quality Partnership, known as
`Streamline', will deliver improved bus information and signalling systems,
traffic management measures on key corridors. Journey times on the first
Streamline route have been reduced by almost 10%, and the system is enabling
improvements in reliability. Early indications are that there is an encouraging
increase in passenger volumes in the initial months of this partnership scheme.
We continue to develop Punctuality Improvement Partnerships (PIPs) with Local
Authorities. Our first PIP, in partnership with Greater Manchester Passenger
Transport Executive (GMPTE), continues to deliver improved bus services for
passengers with further benefits to come. In the Greater Manchester area the
PIP process has been used on a number of routes as part of a rolling programme
to cover all services. The services have been intensively monitored and,
working in partnership with GMPTE, we have drawn up prioritised action plans to
tackle key issues. We have revised timetables and implemented other operational
changes to address issues within our direct control. We are encouraged that
this has contributed to higher levels of customer satisfaction. On many issues,
however we require help from our partners, for example, to enable prioritised
highway solutions to be pursued. We are working with Local Authorities to
introduce PIPs around the country.
Aircoach, which operates express coaches between Dublin city centre and the
airport and contracted services for airport car parks, performed well during
the year. On bus revenue growth was strong particularly in Dublin where we have
seen increased patronage on the airport route. A new yield management system
for fares and a focus on sales and marketing helped to raise awareness and
contributed to increased patronage numbers on our services from Dublin to Cork
and Belfast. We were pleased to be awarded the contract to operate park and
ride services at Belfast International Airport and continue to explore further
opportunities in this marketplace.
We are delighted that Brent Humphries, one of our drivers at First Cymru, won
the `Bus Driver of the Year' award last year, coming first out of 120 entrants
selected from the very best bus and coach drivers across the country. In
addition, we are pleased that three out of the top five runners up are drivers
employed within our UK Bus division. Our Aberdeen team won the award for
innovation at this year's UK Bus Awards for a project aimed at changing young
people's attitudes towards bus travel helping to make it a safer and more
pleasant experience for all passengers.
Investment
Our ongoing programme of investment and fleet renewal continued with capital
expenditure of £95.4m in the period on new vehicles. In Glasgow we have made
significant investment in new vehicles to support the UK's first Statutory
Quality Partnership. In Manchester, during the period, we have invested in 158
new buses where we can maximise passenger growth. Further investment has been
targeted in towns and cities with potential for passenger growth including
Aberdeen, Bath, Bristol, Edinburgh and the Borders, Halifax, Huddersfield,
Norwich and Stoke-on-Trent.
Concessionary fares
The Government's new concessionary fares schemes offering free travel on local
bus services for people over 60 and disabled people in England was launched on
1 April 2006. Early indications show that the schemes are working well and that
concessionary fares passengers are making additional journeys. Our experience
in Wales and Scotland indicates that free travel schemes offer substantial
benefits to concessionary fare passengers. In some cases the schemes have
helped to turn around a long-term decline in the number of bus passenger
journeys, resulting in an extension to existing services and the introduction
of new ones. We welcome the Government's announcement that free local bus
travel will be extended to a nationwide scheme in 2008 which means those
entitled will be able to use local bus services anywhere in England.
The new Scotland-wide free bus scheme for senior citizens and disabled people
came into effect on 1 April 2006 and, we believe, this will benefit
concessionaires. In March 2006 the Welsh Assembly Government launched pilot
schemes for a half-fare bus travel scheme for 16 to 18 year olds in Bridgend,
Wrexham, Denbighshire and Flintshire. As a major bus operator in Bridgend and
across South Wales we are delighted to be participating in this innovative
scheme and are working with the Welsh Assembly Government and other partners to
ensure the success of the two-year pilot.
Outlook UK Bus
Our UK Bus business continues to be robust generator of cash, despite cost
pressures. Revenue growth has been strong and we continue to demonstrate the
effectiveness of partnerships with Local Authorities to deliver improved
services and passenger growth. Our focus on reliability and punctuality and our
investment in service quality has already delivered benefits and we expect this
to continue. We are optimistic about the opportunities to continue to grow this
business with the introduction of innovative new products, improved service
quality and reliability while retaining a tight control on costs.
CORPORATE RESPONSIBILITY
Corporate Social Responsibility is at the core of our business. It is reflected
in our vision and values and our aim to transform the way people travel and how
they feel about public transport. How we manage key issues such as safety,
environment, our relationships with customers and our employees is key to
achieving our vision.
As a public transport operator we recognise the vital role we play in
supporting the needs of society to achieve more sustainable travel. The
development of public transport is essential if we are to reduce the growing
negative social impacts associated with society's continuing reliance on the
private car. We are working hard to reduce these impacts by providing the
safest, most reliable service that we can to encourage more people to use
public transport. We recognise the significant contribution we make to the
communities we serve in providing important social and transport links. We also
have an impact on the economy by providing an important and necessary public
service, being a major employer both in the UK and North America and
influencing the movement of people and goods through the services we provide.
We believe that we have a responsibility to influence the views of policy
makers by promoting partnerships, policies and initiatives that benefit public
transport.
Full details of our activities and progress during the year can be found in our
Corporate Responsibility Report which can be downloaded at www.firstgroup.com
Safety
Safety is our highest priority. We are continuously developing and improving
our processes to ensure that a `Safety First' culture is embedded throughout
the Group. We strive to make our services as safe as possible for our
passengers and our staff.
This year we have been working on a major safety initiative, the `Injury
Prevention Programme', that will drive a significant cultural change in safety
across the Group. To support this initiative we have launched the First Safety
Principles. These set out in clear, concise terms the principles of safe
working practices and have been communicated and endorsed throughout the
business.
The bombings in London on 7 July demonstrated that public transport remains a
target for terrorist attack and reinforced the need for vigilance and
awareness. Within our business we have, where appropriate, undertaken
independent reviews by security experts to identify where we could implement
further measures to improve overall security. We have enhanced our security
function through the appointment of a Group Head of Security who will lead the
development of our security strategy. In particular, we are looking at the use
of new technology to provider greater security on vehicles and at sites. In
our rail operations we are working to improve security for our passengers and
staff.
Employees
Our staff are the public face of our business and ambassadors for the Group. I
would like to thank all our employees for their continued commitment to the
Group. We aim to be the employer of choice in our industry and offer our staff
opportunities to develop and grow to reach their full potential. We believe it
is vital to engage with staff and promote an ongoing dialogue to better
understand their views and concerns. We strive to continuously engage with our
staff through a range activities including informal meetings at depot level to
a more formal staff satisfaction survey. We make significant investment in
training and development of our employees across the Group.
We have on-going programmes for employees working towards recognised training
in the form of vocational qualifications in the UK including our pioneering
Workplace Learning initiative, in partnership with the Transport and General
Workers Union. We now have 40 learning centres reaching around 60% of our UK
bus employees with plans to further increase the coverage so that more of our
UK employees can gain access to flexible, effective and valuable learning
opportunities. In North America employees can participate in the Automotive
Service Excellence (ASE) Programme designed to train and test technicians.
First Student has continued to promote the `Smith System of Defensive
Driving'. This specialist training provides the skills for school bus drivers
to perform their duties safely in all traffic conditions.
The recruitment and retention of high quality staff is a key issue within our
industry. We continue to implement a range of initiatives within our businesses
to address this important issue. We were the first in the industry to recruit
drivers and engineers from Europe. We have recruited some 1000 employees,
mainly drivers and some engineers, from Poland, the Czech Republic, Portugal,
Malta and Slovakia which eliminated our driver shortage. We were pleased that
our initiative has been selected as an example of `best practice' in
demonstrating in practical terms how job mobility can support the broader aims
of the European Employment Strategy.
Environment and Community
We are pleased that our hard work has established an environmental management
framework within the Group. This year we have achieved significant reductions
in energy usage in the UK rail division and in water usage in the UK bus
division. In North America we have made significant progress in developing our
environmental reporting framework and are able to report on emissions and waste
arising for the first time this year.
We participate in a number of trials to promote and develop the use of
alternative fuels in public transport. In London we operate fuel cell buses as
part of a European-wide trial and are pleased that the reliability of the
technology has exceeded initial expectations. We also operate a number of gas
buses and have been trialling hybrid vehicles. We will be working with BP, our
fuel supplier, to introduce, where appropriate, biofuels to the business to
further reduce carbon dioxide emissions.
We continue to work with `The CarbonNeutral Company' and this year we have been
working with a number of schools to support them in understanding their carbon
footprint and developing ways to reduce it. In North America we recently joined
American Forest an organisation that works to protect, restore and enhance the
natural capital of trees and forests.
We are proud support the Outward Bound Trust, an educational charity that
encourages young people to fulfil their potential through challenging outdoor
experiences. Over the past ten years we have funded over 1,000 young people,
between the ages of 11-18 years, to take part in an Outward Bound experience.
As well as donations to support various fundraiser events for the charity we
have also provided workplace accommodation at our facility in Glasgow for the
Outward Bound Metro team. The cost of equivalent facilities in the city would
otherwise be prohibitive and this support has contributed to the development of
over 2000 young people, in 2004/5 alone.
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 and initiatives
to benefit their local communities. All of our operating companies support
local events either through donations, sponsorship or use of resources and
facilities made available to them by the Group.
GROUP OUTLOOK
We remain confident about our future prospects. Our UK Rail division continues
to deliver strong passenger volume and income growth. Through the award of two
new major franchises - Greater Western and Thameslink/Great Northern - we have
secured additional revenue of over £1.0bn per annum for up to 10 years. We look
forward to building on our success in UK Railways and are delighted to be
shortlisted for the South Western Franchise in this current round. In UK Bus we
are encouraged by strong revenue growth and increased passenger journeys. We
have seen the benefits of our increased focus on operational performance,
service quality and driver recruitment. The first `ftr' service was launched in
York in May 2006 and we continue to promote and develop a partnership approach
with Local Authorities who are committed to reducing traffic congestion to
support successful, modern public transport systems to meet the needs of
passengers. We continue to grow our North American businesses and believe that
the market continues to offer substantial opportunities for the Group. We are
pleased to have delivered consistent returns for shareholders and more than
doubled EBITDA since we made our first entry in to the North American market in
1999. During the year we have continued to explore and develop opportunities in
Europe. We have created a team to identify and bid for businesses, which
represent the right opportunity for entry for us.
The Group is well placed for further growth. It has strong and predictable cash
flows with some 50% of our revenues coming from contracted business in the UK
and North America. The Board is committed to increasing shareholder value by
growing our core businesses, developing opportunities in new markets and
dividend growth of 10% per annum for the foreseeable future, at least until
2008. This will be supported, where appropriate, by share repurchases while
maintaining a strong balance sheet. Trading in the new financial year has
started well and is in line with our expectations."
Moir Lockhead
Chief Executive
Finance Director's review
Overview
The Group has a portfolio of businesses in the United Kingdom and North America
that generate strong and predictable profits and cash flows. Our aim is to
increase shareholder value by investing these cash flows for growth, increasing
dividends and repurchasing shares. Over the course of the year the market
capitalisation of the group has increased by 22% from £1.37 billion to £1.67
billion.
2005/06 was a landmark year with Group turnover exceeding £3 billion and
adjusted operating profit exceeding £220 million for the first time. Our UK
Rail and North American businesses have reported record earnings and EBITDA is
the highest we have ever achieved, up 9.1% year on year to £351.7m.
The year also saw the Group established as the UK's largest passenger rail
operator with the award of two important rail franchises, Greater Western and
Capital Connect which have combined turnovers of over £1.0 billion per annum.
We have now successfully commenced operation of both these franchises and these
wins mean that UK Rail profits are secure over the medium term.
The pension deficit has decreased over the year by £89m to £132m partly due to
further recovery of the stock market but also because of a major focus on
reducing the cost of pension provision going forward and additional cash
payments into the schemes during the year.
We have invested heavily in new buses during the year with a major fleet
renewal in the UK which has lowered the average bus age by 0.4 years.
This is the first full year of reporting under International Financial
Reporting Standards (IFRS) and a full reconciliation of the opening and closing
2005 balance sheets and the profit and loss for 2005 will be set out in note 38
of the Annual Report and Accounts 2006.
Results
Turnover was £3,030.9m (2005: £2,693.4m), an increase of 12.5% and profit
before taxation was £157.4m (2005: £155.7m). Adjusted operating profit was £
229.7m (2005: £214.8m), an increase of 6.9%. Rail profits have increased
considerably as a result of strong revenue growth. North American profits were
up reflecting a high level of contract retention and new contract wins across
all the businesses. There were lower profits in UK Bus because of higher fuel
costs. For the Group as a whole, fuel costs were up £31m year on year.
Year to Year to
31 March 2006 31 March 2005
Divisional Turnover Adjusted Operating Turnover Adjusted Operating
results £m operating margin * £m operating margin *
profit * % profit * %
£m £m
UK Bus 1,031.2 108.6 10.5 960.7 115.2 12.0
UK Rail 1,164.9 79.6 6.8 1,059.7 64.5 6.1
North America 826.3 67.1 8.1 665.8 62.4 9.4
Financing - (10.2) - - (9.0) -
element of
leases **
Other *** 8.5 (15.4) - 7.2 (18.3) -
Total Group 3,030.9 229.7 7.6 2,693.4 214.8 8.0
* Before intangible asset amortisation, bid costs and profit on disposal of
fixed assets
** Financing element of UK PCV operating lease costs
*** Tram operations, central management, Group information technology and other
items
Throughout the financial review, operating profit, operating margin and EBITDA
are defined as being before intangible asset amortisation, bid costs and profit
on disposal of fixed assets
UK Bus turnover was £1,031.2m (2005: £960.7m), an increase of 7.3%. Operating
profit was £108.6m (2005: £115.2m), a reduction of 5.7%. These results reflect
a creditable performance against a backdrop of cost increases in particular
fuel. Fuel costs were £15.5m higher than last year reflecting the sharp
increase in commodity prices. Other cost increases were offset by revenue
growth and other actions to mitigate costs. On-bus revenue growth grew
particularly strongly in the second half with quarter 4 growth of 7.7% compared
to 2004/05.
UK Rail turnover was £1,164.9m (2005: £1,059.7m), an increase of 9.9%.
Operating profit was £79.6m (2005: £64.5m), an increase of 23.4%. 2005/06 saw a
full year of the ScotRail franchise which commenced in October 2004 and there
were strong performances by all existing Rail operations with the division
delivering record turnover and profit despite the disruption following the
terrorist attacks last summer. We estimate that the London bombings had a
consequential adverse impact on operating profit of £9m. The two new rail
franchises have begun well and with Greater Western in particular continuing to
enjoy strong demand.
North American turnover was £826.3m (2005: £665.8m). At constant exchange
rates, this represents an increase of 20.0%. Operating profit was £67.1m (2005:
£62.4m). In US Dollar terms this represents an increase of 4.2%. We have
continued to grow our Yellow school bus operations and now operate in excess of
21,000 buses. First Student revenue increased by 19.6% in US Dollar terms,
however profits were down by 3.2% because of higher fuel and insurance costs.
First Transit US Dollar revenue and profits were up 13.5% and 9.4% respectively
reflecting a number of important contract retentions and further expansion into
the light transit market. First Services revenue increased by 35.3% in US
Dollars and profits were 39.6% higher than 2005/06 with growth in both vehicle
maintenance and services businesses. The services results were helped by a full
year of SKE Support Services which was acquired in August 2004.
Central costs were lower than last year due to a number of non-recurring
initiatives in 2004/05 including an upgrade of information technology systems,
the International Financial Reporting Standards convergence project and
development of new human resources policies and procedures.
Property
Property gains on disposal of £14.0m (2005: £3.3m) were realised during the
year as part of the Group's ongoing programme of disposing of older UK Bus
depots. The more significant disposals included bus depots in Leicester and
Motherwell.
Intangible asset amortisation
The intangible asset amortisation charge was £4.5m (2005: £2.2m) with the
increase due to a full year charge for the ScotRail pension intangible and a
higher charge for contract intangibles for acquisitions made either during the
year or the preceding financial year.
Bid costs and other exceptional items
Bid costs of £28.5m (2005: £11.9m) were incurred during the year and comprised
principally rail refranchising costs for the Greater Western, Capital Connect,
Docklands Light Railway and Integrated Kent franchises. This expenditure
represents the full costs of bidding and completing two major rail franchises
that are expected to be highly profitable. We do not anticipate incurring these
levels of expenditure in the foreseeable future.
Interest payable and similar charges
The net interest charge was £53.3m (2005: £48.3m) with the increase of £5.0m
resulting from a higher average level of net debt and the higher interest costs
on US Dollar denominated debt. The net interest charge is covered 6.6 times
(2005: 6.7 times) by earnings before interest, taxation, depreciation and
amortisation (EBITDA).
Taxation
The taxation charge on profit before intangible amortisation, bid costs and
other exceptional items was £45.3m (2005: £44.6m) representing an effective
rate of 26% (2005: 27%). Tax relief on US intangible amortisation, bid costs
and other exceptional items, partly offset by deferred tax on property gains,
reduced the tax charge to £40.0m (2005: £41.1m).
The actual cash effect of taxation to the group was a credit of £3.3m (2005: a
charge of £19.0m). The UK cash cost of taxation was reduced by increased
pension payments and by favourable UK tax settlements achieved during the year.
It is anticipated that the tax to be paid for 2006/07 will remain minimal. The
group pays a minimal amount of tax on its profits in the US due to tax losses
carried forward and we believe that the level of the cash tax in the US will
remain at a similar level for the medium term.
Dividends
The final dividend of 9.55 pence per ordinary share together with the interim
dividend of 4.55 pence per ordinary share, gives a full year dividend of 14.1
pence, an increase of 10.0%. In accordance with IFRS the final dividend has not
been provided for in the 2006 balance sheet. The final dividend will be paid on
25 August 2006 to shareholders on the register of members at the close of
business on 21 July 2006.
EPS
Adjusted basic EPS, before intangible asset amortisation, bid costs and profit
on disposal of fixed assets, was 30.9 pence (2005: 28.9 pence), an increase of
6.9%. Basic EPS was 27.4 pence (2005: 27.1 pence).
EBITDA
The Group's businesses continue to generate strong operating profits which are
converted into cash. EBITDA for the year was £351.7m (2005: £322.4m) up 9.1%.
EBITDA from North American operations was up 8.1% in US Dollar terms. EBITDA by
division is set out below:
Year to Year to
31 March 2006 31 March 2005
Turnover EBITDA EBITDA Turnover EBITDA EBITDA
£m £m % £m £m %
UK Bus 1,031.2 167.5 16.2 960.7 168.6 17.5
UK Rail 1,164.9 84.9 7.3 1,059.7 69.4 6.5
North America 826.3 122.0 14.8 665.8 109.3 16.4
Financing element - (10.2) - - (9.0) -
of leases
Other 8.5 (12.5) - 7.2 (15.9) -
Total Group 3,030.9 351.7 11.6 2,693.4 322.4 12.0
Cash flow
Cash generated by operations increased to £300.7m from £247.2m last year due to
a lower working capital outflow and a higher depreciation charge compared to
2004/05. The working capital outflow of £27.1m (2005: outflow of £68.1m) was
due to additional pension payments, over and above the profit and loss charge,
of £34m and growth in North America of £13m partly mitigated by the early
receipt of cash from the First Capital Connect franchise of £21m.
Capital expenditure and acquisitions
Capital expenditure, as set out in note 6, was £209.1m (2005: £135.3m). Capital
expenditure was predominantly in North American operations of £65.6m (2005: £
36.5m), UK Bus operations of £102.4m (2005: £70.4m), UK Rail £16.9m (2005: £
14.1m) and UK properties of £15.4m (2005: £11.7m).
The acquisitions made in 2005/06 were four bolt-on yellow school bus operations
in North America and one small UK Bus operator. The total consideration for all
acquisitions made during the year was £12.4m and provisional goodwill arising
on all acquisitions amounted to £10.3m.
Funding and risk management
At the year end, total bank borrowing facilities amounted to £597m of which £
527m is committed. Of these committed facilities, £316m were utilised at 31
March 2006 leaving committed headroom of £211m.
The maturity profile of committed banking facilities is regularly reviewed and
well in advance of their expiry such facilities are extended or replaced.
At 31 March 2006 the Group's debt maturity was 7.8 years (2005: 9.0 years).
As the Group is a net borrower, it minimises cash and bank deposits, which
arise principally in the Rail companies. The Group can only withdraw cash and
bank deposits from the Rail companies on a permanent basis to the lower of
retained profits or the amount determined by prescribed liquidity ratios. 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.
Interest rate risk
With regard to net interest rate risk, the Group reduces exposure by using a
combination of fixed rate debt and interest rate derivatives to achieve an
overall hedged position over the medium term of between 75% to 100%.
Commodity price risk
In the year, the UK was insulated from the rise in crude oil prices due to a
fully hedged position. Looking ahead, we now have 38% coverage of our UK
requirements for 2006/07 (total annual usage 2.6 million barrels) at an average
rate of $59 per barrel (2005/06: average of $38 per barrel). In North America
(total annual usage 0.7m barrels) for 2006/07 we have 36% coverage on crude oil
price risk at an average price of $35 per barrel (2005/06: 64% hedged at $27
per barrel).
Foreign currency risk
Group policies on currency risk affecting cash flow and profits are maintained
to minimise exposures to the Group by using a combination of hedge positions
and derivative instruments where appropriate.
With regard to balance sheet translation risk, the Group hedges part of its
exposure to the impact of exchange rate movements on translation of foreign
currency net assets by holding currency swaps and net borrowings in foreign
currencies. At 31 March 2006 foreign currency net assets were hedged 34% (2005:
35%).
Net debt
The Group's net debt at 31 March 2006 was £704.4m and was comprised as follows:
Analysis of net debt Fixed Variable Total
£m £m £m
Cash - 54.9 54.9
Rail ring-fenced cash and deposits - 119.5 119.5
Sterling bond (2013 6.875%) * (295.9) - (295.9)
Bond (2019 6.125%) * (250.3) - (250.3)
Sterling bank loans and overdrafts - (246.2) (246.2)
US dollar bank and other loans and overdrafts (0.5) (4.5) (5.0)
Canadian dollar bank and other loans and (2.4) (36.2) (38.6)
overdrafts
Euro bank loans and overdrafts - (9.9) (9.9)
HP and finance leases (4.7) (7.7) (12.4)
Loan notes (8.7) (11.8) (20.5)
Interest rate swaps,net (57.0) 57.0 -
Total (619.5) (84.9) (704.4)
* Excludes accrued interest
Balance sheet and net assets
Net assets increased by £107.4m over the year reflecting retained earnings
(after the payment of £52.0m of dividends) for the year of £55.5m, actuarial
gains on defined benefit pension arrangements (net of tax) of £25.7m and a net
increase in the translation reserve of £41.9m. These positive movements were
partly offset by a net increase in own shares held of £7.7m and a charge to
reserves of £8.3m in respect of share options exercised during the year.
Shares in issue
During the year 5.7m shares were repurchased for a total consideration of £
23.0m and were initially held as treasury shares. In 2005/06 4.3m treasury
shares were used to satisfy the exercise of Save As You Earn (SAYE) options on
the maturity of the 2002 SAYE scheme. As at 31 March 2006 there were 392.0m
(2005: 393.6m) shares in issue, excluding 6.6m (2005: 5.2m) shares held in
treasury. The weighted average number of shares in issue for the purpose of EPS
calculations (excluding own shares held in trust for employees and treasury
shares) was 392.6m (2005: 399.2m).
Foreign exchange
The results of the North American businesses have been translated at an average
rate of £1:$1.79 (2005: £1:$1.85). The period end rate was £1:$1.74 (2005: £1:
$1.87).
Pensions
The pensions deficit reduced over the course of the year by £89m to £132m. This
reduction had three main elements being the additional cash contributions being
paid into the UK Bus schemes, the continuing recovery of the stock market and
UK Bus pay deals in many operating companies that cap pensionable pay going
forward and therefore reduces the Group's exposure to volatility in pension
costs.
Dean Finch
Finance Director
Consolidated income statement
Year ended 31 March 2006
Notes Before Amortisation, Total Before Amortisation, Total
amortisation, impairment 2006 amortisation, impairment 2005
impairment charges £m impairment charges £m
charges and bid charges and bid
and bid costs and bid costs
costs 2006 costs 2005
2006 2005
£m £m £m £m
Revenue
Continuing operations 3,030.9 - 3,030.9 2,693.4 - 2,693.4
Operating costs before
profit on disposal of
fixed assets
Continuing operations (2,801.2) (33.0) (2,834.2) (2,478.6) (14.1) (2,492.7)
Operating profit before
profit on disposal of
fixed assets
Continuing operations 229.7 (33.0) 196.7 214.8 (14.1) 200.7
Operating profit before 229.7 - 229.7 214.8 - 214.8
amortisation, impairment
charges and bid costs
Amortisation and - (4.5) (4.5) - (2.2) (2.2)
impairment charges
Bid costs - (28.5) (28.5) - (11.9) (11.9)
Operating profit 229.7 (33.0) 196.7 214.8 (14.1) 200.7
Profit on disposal of - 14.0 14.0 - 3.3 3.3
fixed assets
Operating profit 229.7 (19.0) 210.7 214.8 (10.8) 204.0
Investment income 8.5 - 8.5 4.3 - 4.3
Finance costs (61.8) - (61.8) (52.6) - (52.6)
Profit before tax 176.4 (19.0) 157.4 166.5 (10.8) 155.7
Tax (45.3) 5.3 (40.0) (44.6) 3.5 (41.1)
Profit for the period from 131.1 (13.7) 117.4 121.9 (7.3) 114.6
continuing operations
Attributable to:
Equity holders of the 121.2 (13.7) 107.5 115.4 (7.3) 108.1
parent
Minority interest 9.9 - 9.9 6.5 - 6.5
131.1 (13.7) 117.4 121.9 (7.3) 114.6
Basic earnings per share 3 27.4p 27.1p
Diluted earnings per share 3 27.1p 26.9p
Dividends of £52.0m were paid during the year (2005: £48.0m). Dividends of £
37.4m were proposed for approval during the year (2005: £34.1m).
Consolidated balance sheet
Notes 2006 2005
£m £m
Non-current assets
Goodwill 4 503.1 465.8
Other intangible assets 5 30.0 29.4
Property, plant and equipment 6 926.5 835.0
Financial assets - derivative financial 13 8.5 -
instruments
1,468.1 1,330.2
Current assets
Inventories 7 54.2 40.1
Trade and other receivables 8 373.1 368.7
Financial assets - cash and cash equivalents 174.4 154.1
- derivative financial instruments 13 14.1 -
615.8 562.9
Non-current assets classified as held for sale 6.6 5.2
Total assets 2,090.5 1,898.3
Current liabilities
Trade and other payables 9 545.1 507.3
Tax liabilities 47.8 52.8
Financial liabilities - obligations under 11 2.3 9.0
finance leases
- bank overdrafts and loans 10 30.9 51.4
- loan notes 12 2.8 0.5
- derivative financial instruments 13 1.8 -
- current bond liability 10 23.1 -
653.8 621.0
Net current liabilities 38.0 58.1
Non-current liabilities
Financial liabilities - bonds 10 553.2 527.9
- bank loans 10 268.8 192.8
- obligations under finance leases 11 10.1 15.1
- loan notes 12 17.7 20.5
- derivative financial instruments 13 0.8 -
Retirement benefit obligation 132.0 221.1
Deferred tax liabilities 14 84.6 30.8
Long-term provisions 15 37.6 44.6
1,104.8 1,052.8
Total liabilities 1,758.6 1,673.8
Net assets 331.9 224.5
Equity
Share capital 16 19.9 19.9
Share premium account 17 238.8 238.8
Hedging reserves 17 1.9 -
Other reserves 17 4.6 4.6
Own shares 17 (26.6) (18.9)
Translation reserves 18 27.7 (14.2)
Retained earnings 17 52.9 (16.3)
Equity attributable to equity holders of the 319.2 213.9
parent
Minority interests 12.7 10.6
Total equity 331.9 224.5
Consolidated cash flow statement
Year ended 31 March 2006
Notes 2006 2005
£m £m
Net cash from operating activities 19 235.0 193.7
Investing activities
Interest received 5.9 6.8
Proceeds of disposal of property, plant and 27.3 27.1
equipment
Purchases of property, plant and equipment (196.2) (124.3)
Acquisition of businesses (12.4) (14.9)
Acquisition of subsidiaries - (22.3)
Net cash used in investing activities (175.4) (127.6)
Financing activities
Repurchase of ordinary share capital (23.0) (29.7)
Share purchased by Employee Benefit Trust (1.4) (0.3)
Monies received on exercise of options 8.4 -
Dividends paid (52.0) (48.0)
Dividends paid to minority shareholders (7.2) (3.1)
Repayment of obligations under finance leases (11.8) (20.2)
Repayment of loan notes (0.5) (0.3)
Payment of new bank facility issue costs (1.0) -
New bank loans raised 55.7 90.4
Net cash from financing activities (32.8) (11.2)
Net increase in cash and cash equivalents 26.8 54.9
Cash and cash equivalents at beginning of 145.9 92.2
year
Effect of foreign exchange rate changes (2.8) (1.2)
Cash and cash equivalents at end of year 169.9 145.9
Cash and cash equivalents for cash flow 2006 2005
statement purposes comprise:
£m £m
Cash and cash equivalents per balance sheet 174.4 154.1
Overdrafts (4.5) (8.2)
169.9 145.9
Note to the consolidated cash flow statement - reconciliation of net cash flows
to movement in net debt
Year ended 31 March 2006
2006 2005
£m £m
Increase in cash and cash equivalents in year 26.8 54.9
Increase in debt and finance lease financing (43.4) (70.0)
Debt acquired on acquisition of businesses - (20.6)
Lease and hire purchase contracts acquired with (0.7) (2.2)
business/franchise
Fees on issue of new loan facility 1.0 -
Other non-cash movements in relation to financial (1.9) (1.5)
instruments
Foreign exchange differences (23.1) 7.0
Movement in net debt in year (41.3) (32.4)
Net debt at beginning of year (663.1) (630.7)
Net debt at end of year (704.4) (663.1)
General information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2006 or 2005, but is derived
from those accounts. Statutory accounts for 2005 have been delivered to the
Registrar of Companies and those for 2006 will be delivered following the
company's annual general meeting. The auditors have reported on both sets of
accounts; their reports were unqualified and did not contain statements under
s. 237(2) or (3) Companies Act 1985.
Copies of the Statutory Accounts for the year ended 31 March 2006 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. Business segments
The segment results for the year to 31 March 2006 are as follows:
UK Bus UK Rail North Group Consolidated
America items
2006 2006 2006
2006 2006
£m £m £m
£m £m
Revenue 1,031.2 1,164.9 826.3 8.5 3,030.9
Segment results 108.6 79.6 67.1 (15.4) 239.9
Amortisation of intangible - (2.9) (1.6) - (4.5)
assets
Financing element of (10.2) - - - (10.2)
operating leases
Bid costs - (26.1) - (2.4) (28.5)
Profit on disposal of fixed 14.0 - - - 14.0
assets
Operating profit 112.4 50.6 65.5 (17.8) 210.7
Investment income 8.5
Finance costs (61.8)
Profit before tax 157.4
Tax (40.0)
Profit for the period 117.4
2. Business segments (continued)
The segment results for the year to 31 March 2005 are as follows:
UK Bus UK Rail North Group Consolidated
America items
2005 2005 2005
2005 2005
£m £m £m
£m £m
Revenue 960.7 1,059.7 665.8 7.2 2,693.4
Segment results 115.2 64.5 62.4 (18.3) 223.8
Amortisation of intangible - (1.6) (0.6) - (2.2)
assets
Financing element of (9.0) - - - (9.0)
operating leases
Bid costs - (10.9) - (1.0) (11.9)
Profit on disposal of fixed 3.3 - - - 3.3
assets
Operating profit 109.5 52.0 61.8 (19.3) 204.0
Investment income 4.3
Finance costs (52.6)
Profit before tax 155.7
Tax (41.1)
Profit for the period 114.6
3. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit attributable to equity
shareholders of £107.5m (2005: £108.1m) by the weighted average number of
ordinary shares of 392.6m
(2005: 399.2m)
Diluted EPS is calculated by dividing the profit attributable to equity
shareholders of £107.5m (2005: 108.1m) by the weighted average number of
ordinary shares of 396.5m (2005: 402.0m). 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. A
reconciliation of the number of shares used in the basic and diluted measures
is set out below:
2006 2005
no. no.
(m) (m)
Weighted average number of shares used in basic 392.6 399.2
calculation
SAYE share options 3.0 2.6
Executive share options 0.9 0.2
396.5 402.0
3. Earnings per share (EPS) (continued)
The adjusted basic EPS and adjusted cash EPS are intended to demonstrate
recurring elements of the results of the Group before amortisation of
intangible assets, rail bid costs and profit on disposal of fixed assets. A
reconciliation of the earnings used in the bases is set out below:
2006 2005
£m Earnings £m Earnings
per share per share
(p) (p)
Profit for basic EPS calculation 107.5 27.4 108.1 27.1
Amortisation of intangible assets * 4.3 1.1 2.2 0.5
Bid costs 28.5 7.2 11.9 3.0
Profit on disposal of fixed assets (13.5) (3.4) (3.3) (0.8)
**
Taxation effect of adjustments (5.3) (1.4) (3.5) (0.9)
Profit for adjusted basic EPS 121.5 30.9 115.4 28.9
calculation
Depreciation *** 121.6 31.0 107.4 26.9
Profit for adjusted cash EPS 243.1 61.9 222.8 55.8
calculation
* Amortisation charge of £4.5m less £0.2m (2005: £2.2m less nil) attributable
to equity minority interests.
** Profit on disposal of fixed assets of £14.0m less £0.5m (2005: £3.3m less
nil) attributable to equity minority interests.
*** Depreciation charge of £122.0m (2005: £107.6m) per note 6 less £0.4m (2005:
£0.2m) of
depreciation attributable to equity minority interests.
4. Goodwill 2006 2005
£m £m
Cost
At 1 April 465.8 461.2
Additions 10.3 15.2
Exchange rate differences 27.0 (10.6)
At 31 March 503.1 465.8
Accumulated impairment losses
At 31 March 2005 and 31 March 2006 - -
Carrying amount
At 31 March 503.1 465.8
5. Other intangible assets Contracts Franchise Total
acquired agreements £m
£m £m
Cost
At 1 April 2005 10.6 21.0 31.6
Additions 4.3 - 4.3
Exchange rate differences 0.8 - 0.8
At 31 March 2006 15.7 21.0 36.7
Amortisation
At 1 April 2005 0.6 1.6 2.2
Charge for period 1.6 2.9 4.5
Exchange rate differences - - -
At 31 March 2006 2.2 4.5 6.7
Carrying amount
At 31 March 2006 13.5 16.5 30.0
Contracts Franchise Total
acquired agreements £m
£m £m
Cost
At 1 April 2004 - 4.1 4.1
Additions 10.6 16.9 27.5
Exchange rate differences - - -
At 31 March 2005 10.6 21.0 31.6
Amortisation
At 1 April 2004 - - -
Charge for period 0.6 1.6 2.2
Exchange rate differences - - -
At 31 March 2005 0.6 1.6 2.2
Carrying amount
At 31 March 2005 10.0 19.4 29.4
6. Property, plant and equipment
Land and Passenger Other Total
buildings carrying plant and £m
£m vehicle equipment
fleet
£m
£m
Cost
At 1 April 2005 149.1 1,228.7 161.4 1,539.2
Subsidiary undertakings and - 4.0 - 4.0
businesses acquired
Additions 16.2 155.5 37.4 209.1
Disposals (5.1) (64.2) (2.9) (72.2)
Reclassifications (5.1) - 5.1 -
Reclassified as held for - (27.3) - (27.3)
sale
Exchange rate differences 1.9 35.2 2.7 39.8
At 31 March 2006 157.0 1,331.9 203.7 1,692.6
Accumulated depreciation and
impairment
At 1 April 2005 23.7 581.2 99.3 704.2
Subsidiary undertakings and - - - -
businesses acquired
Charge for period 3.6 99.0 19.4 122.0
Disposals (0.6) (52.1) (2.3) (55.0)
Reclassifications (5.1) - 5.1 -
Reclassified as held for - (21.5) - (21.5)
sale
Exchange rate differences 0.5 14.5 1.4 16.4
At 31 March 2006 22.1 621.1 122.9 766.1
Carrying amount
At 31 March 2006 134.9 710.8 80.8 926.5
Land and Passenger Other Total
buildings carrying plant and £m
£m vehicle equipment
fleet
£m
£m
Cost
At 1 April 2004 141.5 1,156.3 154.6 1,452.4
Subsidiary undertakings and 2.9 29.5 2.4 34.8
businesses acquired
Additions 12.2 96.5 26.6 135.3
Disposals (6.9) (25.6) (21.1) (53.6)
Reclassified as held for - (15.5) - (15.5)
sale
Exchange rate differences (0.6) (12.5) (1.1) (14.2)
At 31 March 2005 149.1 1,228.7 161.4 1,539.2
Accumulated depreciation and
impairment
At 1 April 2004 21.5 536.8 102.5 660.8
Subsidiary undertakings and - - - -
businesses acquired
Charge for period 3.0 88.0 16.6 107.6
Disposals (0.7) (23.4) (19.2) (43.3)
Reclassified as held for - (14.8) - (14.8)
sale
Exchange rate differences (0.1) (5.4) (0.6) (6.1)
At 31 March 2005 23.7 581.2 99.3 704.2
Carrying amount
At 31 March 2005 125.4 647.5 62.1 835.0
7. Inventories 2006 2005
£m £m
Spare parts and consumables 41.7 30.7
Property development work in progress 12.5 9.4
54.2 40.1
8. Trade and other receivables 2006 2005
£m £m
Amounts due within one year
Trade debtors 279.3 258.2
Other debtors 38.8 61.1
Other prepayments and accrued income 55.0 49.4
373.1 368.7
9. Trade and other payables 2006 2005
£m £m
Amounts falling due within one year
Trade creditors 129.7 122.4
Other creditors 106.5 47.0
Accruals and deferred income 294.9 324.6
Season ticket deferred income 14.0 13.3
545.1 507.3
10. Financial liabilities - borrowings
2006 1 April 31 March
£m 2005 2005
£m £m
Current financial liabilities
Short-term bank loans 26.4 43.2 43.2
Bank overdrafts 4.5 8.2 8.2
30.9 51.4 51.4
Finance leases (note 11) 2.3 9.0 9.0
Loan notes (note 12) 2.8 0.5 0.5
Bond 6.875% (repayable 2013) - accrued 20.1 19.5 -
interest
Bond 6.125% (repayable 2019) - accrued 3.0 3.0 -
interest
23.1 22.5 -
Total current financial liabilities 59.1 83.4 60.9
Non-current financial liabilities
Syndicated unsecured bank loans 264.9 180.0 180.0
Other loans 3.9 12.8 12.8
268.8 192.8 192.8
Finance leases (note 11) 10.1 15.1 15.1
Loan notes (note 12) 17.7 20.5 20.5
Bond 6.875% (2013) 295.9 296.1 296.0
Bond 6.125% (2019) 257.3 247.1 231.9
553.2 543.2 527.9
Total non-current financial liabilities 849.8 771.6 756.3
Total financial liabilities 908.9 855.0 817.2
Gross borrowings repayment profile
Within one year or on demand 59.1 83.4
Between one and two years 21.1 25.6
Between two and five years 271.8 193.1
Over five years 556.9 552.9
908.9 855.0
11. Finance leases
The Group had the following obligations under finance leases as at the balance
sheet dates:
2006 2005
£m £m
Maturing under 1 year 2.3 9.0
Maturing 1 - 2 years 2.2 2.6
Maturing 2 - 5 years 4.6 7.4
Maturing after 5 years 3.3 5.1
Total 12.4 24.1
12. Loan notes
The Group had the following loan notes issued as at the balance sheet dates:
2006 2005
£m £m
Maturing in less than one year 2.8 0.5
Maturing 1 - 2 years 17.7 20.5
Total 20.5 21.0
13. Derivative financial instruments
2006 1 April
£m 2005
£m
Non-current assets
Cross currency swaps (net investment hedge) - 16.7
Coupon swaps (fair value hedge) 8.1 -
Interest rate collars (cash flow hedges) 0.4 -
Fuel derivatives (cash flow hedge) - 3.6
8.5 20.3
Current assets
Cross currency swaps (net investment hedge) - 3.5
Coupon swaps (fair value hedge) 3.3 -
Fuel derivatives (cash flow hedges) 10.8 27.8
14.1 31.3
Total assets 22.6 51.6
Current liabilities
Interest rate swaps (cash flow hedge) 0.9 0.7
Cross currency swaps (net investment hedge) 0.9 -
Coupon swaps (fair value hedge) - 4.5
1.8 5.2
Non-current liabilities
Interest rate swaps (cash flow hedge) 0.4 0.9
Cross currency swaps (net investment hedge) 0.4 -
Coupon swaps (fair value hedge) - 1.5
0.8 2.4
Total liabilities 2.6 7.6
14. Deferred tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period.
Accelerated Other Tax Total
temporary
tax differences losses £m
depreciation £m £m
£m
At 1 April 2004 124.8 (77.6) (41.1) 6.1
Charge/(credit) to income 11.5 11.5 (0.9) 22.1
Charge to equity - 5.4 - 5.4
Acquisition of subsidiary - (2.2) - (2.2)
Exchange differences (2.0) (0.1) 1.5 (0.6)
At 31 March 2005 134.3 (63.0) (40.5) 30.8
Adoption of IAS 39 - 9.9 - 9.9
At 1 April 2005 134.3 (53.1) (40.5) 40.7
Charge/(credit) to income 32.9 32.0 (21.6) 43.3
Charge to equity - 2.6 - 2.6
Acquisition of subsidiary - (3.6) - (3.6)
Exchange differences 4.9 (0.3) (3.0) 1.6
As 31 March 2006 172.1 (22.4) (65.1) 84.6
15. Provisions Insurance Pensions Total
claims * £m £m
£m
At 1 April 2005 34.5 10.1 44.6
Provided in the period 25.4 0.2 25.6
Utilised in the period (37.4) (3.4) (40.8)
Notional interest 6.1 - 6.1
Exchange rate differences 2.1 - 2.1
At 31 March 2006 30.7 6.9 37.6
* Insurance claims accruals due within one year at 31 March 2006 amounted to £
50.0m (2005: £39.8m) and are included in "accruals and deferred income" within
note 20. The amount included within provisions represents the estimate of
amounts due after more than one year.
16. Called up share capital 2006 2005
£m £m
Authorised:
Ordinary shares of 5p each 30.0 30.0
Allotted, called up and fully paid
Ordinary shares of 5p each 19.9 19.9
No. £m
m
At beginning and end of year 398.8 19.9
6,630,500 shares (2005: 5,200,000) shares were being held as treasury shares at
31 March 2006.
The Company has one class of ordinary shares which carry no right to fixed
income.
17. Statement of changes in equity Hedging Share Own Retained
shares earnings
reserve premium
£m £m
£m account
£m
At 1 April 2004 - 238.8 (0.6) (82.5)
Share repurchases - - - (12.0)
Retained profit for the financial year - - - 108.1
Dividends paid - - - (48.2)
Movement in EBT, QUEST and treasury - - (18.3) -
shares during the year
Actuarial gain on defined benefit pension - - - 20.8
schemes
Share based payments provision - - - 2.9
Deferred tax on actuarial gains - - - (6.3)
Deferred tax on share based payments - - - 0.9
At 31 March 2005 - 238.8 (18.9) (16.3)
Financial instrument recognition 37.0 - - (9.0)
At 1 April 2005 (as restated) 37.0 238.8 (18.9) (25.3)
Retained profit for the financial year - - - 107.5
Dividends paid - - - (52.0)
Movement in EBT, QUEST and treasury - - (7.7) (8.3)
shares during the year
Current tax on share based payments - - - 1.8
Actuarial gain on defined benefit pension - - - 36.7
schemes
Deferred tax on actuarial gains - - - (11.0)
Derivative hedging instrument movements (35.1) - - -
Share based payments provision - - - 3.2
Deferred tax on share based payments - - - 0.3
At 31 March 2006 1.9 238.8 (26.6) 52.9
Capital Capital Total other
redemption reserve reserves
reserve £m £m
£m
At 31 March 2006 and 31 March 2005 1.9 2.7 4.6
18. Translation reserves
Total
£m
At 1 April 2004 -
Movement for the financial year (14.2)
At 31 March 2005 (14.2)
Reclassify to hedging reserve on financial instrument recognition (7.7)
Movement for the financial year 49.6
At 31 March 2006 27.7
19. Notes to the consolidated cash flow statement 2006 2005
£m £m
Operating profit 196.7 200.7
Adjustments for:
Depreciation charges 122.0 107.6
Amortisation of intangible assets 4.5 2.2
Share based payments 3.2 2.9
Loss on disposal of property, plant and equipment 1.4 1.9
Operating cash flows before working capital 327.8 315.3
Increase in inventories (9.6) (2.6)
Decrease/(increase) in receivables 3.9 (41.0)
Decrease in payables (21.4) (24.5)
Cash generated by operations 300.7 247.2
Corporation tax paid (3.5) (16.1)
Interest paid (61.3) (35.1)
Interest element of hire purchase contracts and finance (0.9) (2.3)
lease payments
Net cash from operating activities 235.0 193.7