Interim Results
Embargoed until 07.00 am on Wednesday 5 November 2003
FIRSTGROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO
30 SEPTEMBER 2003
SUMMARY
* Results in line with market expectations
* Strong performance given additional £7.0m of NI and Pension costs
* Rail profits impacted by £7.7m through subsidy reduction and increased
franchise premium
* Continued strong growth in North American operations
* US School bus operating profit + 14%1
* Substantial growth in London bus business + 23%
* Passenger growth in UK urban bus operations +1.5%, UK Rail +4%
* TransPennine and Thames franchises to commence in 2004
FINANCIAL SUMMARY
* Turnover £1,127.7m (2002: £1,068.9m)
* Operating profit2 £78.1m4 (2002: £84.4m)
* Profit before tax2 £56.8m4 (2002: £55.8m)
* Adjusted basic earnings per share 9.6p (2002: 9.3p)
* EBITDA3 £125.0m4 (2002: £133.5m)
* Interim dividend per share up 5.6% to 3.75p (2002: 3.55p)
Commenting, FirstGroup's Chief Executive, Moir Lockhead said:
'The Group has made significant progress in this period, with continued
expansion in North America, the acquisition of GB Railways and the award of the
TransPennine Express rail franchise. We have achieved excellent results after
absorbing significant cost increases in our UK operations (including National
Insurance and pension contributions).
We were delighted to be selected yesterday as the preferred bidder for the
Thames Trains franchise. This two-year franchise will run from April 2004 and
allow us to benefit passengers through the integration of services into
Paddington ahead of the creation of the Greater Western franchise in 2006.
Going forward, we will continue to bear down on costs while growing our
businesses in North America and the UK. The second half of the year has started
in line with expectations and we expect to achieve our earnings targets for the
remainder of the year.'
1At constant exchange rates
2Before goodwill amortisation, exceptional items and profit on disposal of
fixed assets.
3Operating profit as defined plus depreciation
4After cost increases and subsidy reduction of c.£15m in UK operations
Enquiries:
FirstGroup plc
Moir Lockhead, Group Chief Executive Tel: 020 7291 0512
Iain Lanaghan, Group Finance Director Tel: 020 7291 0512
Michael Mitchell, Corporate Communications Director Tel: 020 7291 0504
Photographs for the media are available at www.newscast.co.uk
Chairman's statement
I am pleased to report another period of solid operational performance. Group
turnover has increased by 5.5% to £1,127.7m and profit before tax, goodwill
amortisation and exceptional items has risen to £56.8m (2002: £55.8m). This is
a strong performance given the additional £7.0m of National Insurance and
pension costs in our UK operations and the combined £7.7m reduction in rail
subsidies and increased franchise payments. Adjusted earnings per share (before
goodwill amortisation, restructuring and exceptional costs, and property
profits) increased by 3% to 9.6p (2002: 9.3p). In line with the indications
given in May, the Board has recommended an increase in the interim dividend
ahead of inflation to 3.75p (2002: 3.55p), an increase of 5.6%. The dividend
will be paid on 11 February 2004 to shareholders on the register on 16 January
2004.
Safety continues to be the primary concern of our business and all our
companies focus on ensuring that we operate in the safest possible way for our
passengers and staff.
In May we acquired the transit division of Coach USA. This acquisition is a
good strategic fit with our existing transit operations in the US. In August
our offer for GB Railways plc was declared wholly unconditional. This
acquisition fits well with our existing rail operations and provides an entry
into the growing rail freight market.
In the US we are very encouraged by the continued progress of our school bus
division which has had a strong bidding season, gaining contracts for some
1,468 new buses for operation from September 2003. We have an active pipeline
of further acquisition opportunities for the remainder of the year which will
bring our school bus additions to the top end of our expectations. We are also
optimistic about the opportunities to develop our Services Division and
anticipate accelerated growth during the remainder of the year.
Our London bus business has grown by 23% following the introduction of
congestion charging. Outside London we are seeing encouraging growth in our
urban bus operations through improved marketing of services and working with
local authorities to introduce more bus priority measures.
In UK rail we were delighted to be awarded the franchise for TransPennine
Express with our partner Keolis and to be selected as the preferred bidder for
the Thames Trains franchise. We are also bidding for the Northern and ScotRail
franchises.
All our businesses continue to be strong generators of cash that can be used to
invest in further growth, buy back equity or pay down debt. Our North American
business is now self-funding for maintenance and growth capital expenditure.
The Group's strategy of developing businesses in major transport markets has
continued to deliver value for shareholders. Our strategic positions in the UK
and US markets ensure that we have a strong base for future expansion. The
opportunities for our businesses on both sides of the Atlantic are excellent. I
am confident that we will be able to continue to grow earnings and dividends
ahead of the rate of inflation.
Martin Gilbert
Chairman
Chief Executive's operating review
OVERVIEW
Results
This has been an exciting six months for the Group with continued expansion in
North America, the acquisition of GB Railways and the award of the TransPennine
Express rail franchise. Turnover has increased to £1,127.7m (2002: £1,068.9m).
Operating profit, before goodwill amortisation, exceptional costs and profits
on disposal of fixed assets was £78.1m (2002: £84.4m). In this period we have
had to absorb substantial increases of £7.0m in National Insurance and pension
contributions in our UK operations. In UK Rail profits were also impacted by £
7.7m through the contractual reduction in rail subsidy and increased franchise
premium. The Group has generated £125.0m (2002: £133.5m) of EBITDA (operating
profit before goodwill amortisation, exceptional items and profit on disposal
of fixed assets plus depreciation) which has been used to invest £93.5m in the
business through capital expenditure and the acquisition of new operations in
the US and UK.
NORTH AMERICA
In North America the Group is the second largest operator of student
transportation with over 16,000 school buses across the US and Canada. We also
operate transit contracting and management, and vehicle maintenance services.
Results
In the six months to 30 September 2003 turnover increased to £286.1m (2002: £
261.6m). The underlying increase at constant exchange rates was 18%. Operating
profit for the same period was £18.0m (2002: £16.5m) an increase at constant
exchange rates of 21%. Margins have been maintained at 6.3%.
First Student
Our US school bus business has continued to grow strongly. At constant exchange
rates turnover increased by 12% and operating profit by 14%. We retained
approximately 90% of our existing business that came up for renewal and we have
had an excellent year for new business wins, increasing our current base by 9%
with the addition of 1,468 new buses. We were particularly pleased to be
awarded the management contract to run all of the 683 school buses on behalf of
the City of Boston. The start-up of this large contract and the other new
business has gone extremely well. New contracts have been acquired at our
target margins and we are on course to maintain the full year margins. We have
an active pipeline of new business acquisitions for the remainder of this year
that will bring growth in the division to the top end of our expectations. We
believe that we will be able to continue to grow this division by 8-10% per
annum over the next few years.
First Transit
At constant exchange rates turnover increased by 23% and operating profit by
33%. In May we were pleased to announce the acquisition of the Transit Division
of Coach USA for a purchase price of $22.5m. The business is an excellent
strategic fit with our existing operations and has an annualised turnover of
$95m with contracts to operate some 1,200 buses on behalf of transit
authorities and other bodies in states such as California, Florida and New
York. During this period we renewed a significant 5-year contract with the city
of Miami and going forward we have an active acquisition pipeline. Our strategy
is to be the lowest cost provider in our core market of transit management and
operation. In addition we will develop in the fast expanding markets of call
centre management (through our Dyntek operation), paratransit and other related
light transit markets.
First Services
At constant exchange rates turnover has grown by 37% and operating profit by
39% reflecting the inclusion for the first time of the L&E Mobile business
acquired in February this year. During the period L&E expanded its operations
with a major contract award with the Massachusetts State Police and First
Vehicle Services won a major contract in Atlantic City. The business is
targeting to expand into the US$21 billion private sector fleet services market
and to develop new add-on services that are complementary to its existing skill
sets. It is intended to continue to expand L&E's turnkey business, which fits
communication equipment to emergency service vehicles. First Services has
active plans to grow strongly both organically and through acquisition and has
already won a number of new public and private client service contracts to
commence operation in the second half of the year.
Summary
We have successfully expanded o ur North American operations by 50% in the four
years since acquisition and we expect to see this pace of growth maintained
over the next few years.
UK BUS
We are the largest bus operator in the UK with a fleet of some 9,500 buses,
running more than 1 in 5 of all local bus services and carrying 2.7 million
passengers every day.
Results
For the six months to 30 September 2003 turnover increased by 5.8% to £443.0m
(2002: £418.7m ). Operating profit before contract hire leasing costs increased
to £46.2m (2002: £45.9m). This result was achieved after absorbing increases in
National Insurance contributions of £2m and additional pension contributions of
£4m. Increases in bus fares were held at or below the level of inflation,
resulting in a slight fall in operating margin to 10.4% (2002: 11.0%).
London
We have continued to see substantial growth in our London bus operations.
Turnover year on year has grown by 23% and now represents approximately 21% of
our total UK bus business. During the period we have gained 8 new contracts and
we now operate approximately 1,300 buses for Transport for London. We are
opening a new depot in Willesden which will increase capacity and be used as
the base for new articulated bus services due to commence early next year.
Outside London
Outside London we have continued to see encouraging passenger growth of 1.5% in
our urban bus operations that comprise approximately 56% of turnover. We will
continue to improve the marketing of our services and work with Local
Authorities to develop new bus priority measures. We have started work on the
Yorkshire showcase project in Leeds and Sheffield in partnership with local
Passenger Transport Executives and the Department for Transport. This project
is based on new vehicles, quicker schedules, a simplified route network and
enhanced bus priority measures and is predicted to increase growth by 5% per
annum on targeted routes.
Costs
We continue to bear down on costs and target further efficiencies. As our
largest single cost item is labour we are focusing on improved driver
recruitment and retention and enhanced scheduling and rostering systems to
maximise driver output. We are also introducing improvements to our engineering
systems that will increase the productivity of our fleet and reduce the amount
of time that vehicles are off the road.
We are achieving useful savings in purchasing and we have centralised all of
our accounting functions through the new Shared Service Centre in Aberdeen with
consequent increased efficiency and reductions in overhead costs.
UK RAIL
Our Rail division operates passenger and freight services in the UK. Our
passenger operations include intercity (First Great Western, Anglia Railways
and Hull Trains), London commuter (First Great Eastern) and regional (First
North Western). We have been awarded the contract to operate TransPennine
Express starting in February 2004. We also operate freight services through GB
Railfreight.
Results
Rail turnover during the period was £395.4m (2002: £385.4m) an increase of
2.6%. Passenger income on First Great Western and First Great Eastern has
increased by 4%. Operating profit was £22.1m (2002: £29.5m) which is a strong
performance given the combined reduction in subsidy and increase in franchise
payments of £7.7m.
Current Operations
Performance at First Great Eastern has continued at a high level and we have
successfully introduced a £80m fleet of 21 new Desiro trains into service. We
have seen some slow down in season ticket revenues but this has been countered
by an increase in full fare travel.
First Great Western has continued to improve its operating performance and we
have reduced delays attributable to us by over 20%. Our engineering
enhancements to the High Speed Train fleet proved extremely successful during
the hot summer period with train availability almost doubling. The level of
delays attributable to Network Rail is continuing to cause concern and we are
working closely with them to improve the situation.
We operate First North Western on behalf of the Strategic Rail Authority (SRA).
We receive a management fee and do not take revenue risk on the operations.
At the National Rail Awards we were delighted that First Great Eastern won Best
Operator for the second time and one of our Train Managers from First Great
Western won the Rail Personality award for customer service.
GB Railways
GB Railways operates Anglia Railways, Hull Trains and GB Railfreight (GBRf).
Anglia holds the franchise to operate the intercity services from London to
Ipswich and Norwich and connecting local services in East Anglia. Hull Trains
is a non-franchised, open access train operating company running trains between
London Kings Cross and Hull. GB Railways is bidding for the Greater Anglia
franchise that will incorporate all passenger rail operations from London
Liverpool Street. GBRf provides freight services in the UK for customers such
as Network Rail, British Gypsum and Medite Shipping Company Limited. We are
optimistic about the opportunities for this business and look forward to
increasing our presence in the rapidly expanding rail freight market.
New Franchises
In September we were pleased to be awarded, with our partner Keolis, the
contract to operate the new TransPennine Express franchise for a period of 8
years from early 2004 with an option to extend for a further 5 years. We have
already ordered a £260m fleet of new trains and contracted for two new
maintenance depots for the franchise that will greatly improve the service
offered to passengers in the region.
We were delighted to be selected yesterday as the preferred bidder for the
Thames Trains franchise. This two-year franchise will run from April 2004 and
allow us to benefit passengers through the integration of services into
Paddington ahead of the creation of the Greater Western franchise in 2006. In
addition we have submitted our bids for the new Northern and ScotRail
franchises and we are interested in bidding for the new Integrated Kent
franchise.
Rail Freight
We are excited at the opportunities to grow our UK Rail operations further and
to expand in the rail freight market. We have asked the management of GBRf to
develop plans to accelerate the growth of this business and for investment in
new rolling stock and equipment.
GROUP OUTLOOK
Going forward, we will continue to bear down on costs while growing our
businesses in North America and the UK. The second half of the year has started
in line with expectations and we expect to achieve our earnings targets for the
remainder of the year.
Moir Lockhead
Chief Executive
Finance Director's review
Overall
Turnover increased by £58.8m (5.5%) to £1,127.7m and operating profit, before
goodwill and exceptional items was £78.1m (2002: £84.4m).
6 months to 6 months to Year to
30 September 2003 30 September 2002 31 March 2003
Divisional Turnover Operating Operating Turnover Operating Operating Turnover Operating Operating
results
£m profit * Margin * £m profit * Margin * £m profit * Margin *
£m % £m % £m %
UK Bus 443.0 46.2 10.4 418.7 45.9 11.0 859.4 111.7 13.0
UK Rail 395.4 22.1 5.6 385.4 29.5 7.7 842.3 61.3 7.3
North America 286.1 18.0 6.3 261.6 16.5 6.3 582.4 61.3 10.5
Financing - (4.1) - - (2.9) - - (6.7) -
element of
leases **
Other *** 3.2 (4.1) - 3.2 (4.6) - 6.9 (11.5) -
Total Group 1,127.7 78.1 6.9 1,068.9 84.4 7.9 2,291.0 216.1 9.4
* Before goodwill amortisation, exceptional items 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 and operating margin are
defined as being before goodwill amortisation and exceptional items
North American turnover was £286.1m (six months to 30 September 2002: £261.6m),
an increase of 9.4% (17.6% before exchange rate movements). We have added 1,468
yellow school buses during the period including a significant new contract win
in Boston. In addition we acquired Coach USA's transit business in July 2003.
North American operating profit was £18.0m (six months to 30 September 2002: £
16.5m), an increase of 9.1% (20.7% before exchange rate movements) and the
overall margin was maintained at 6.3%.
UK Bus turnover was £443.0m (six months to 30 September 2002: £418.7m), an
increase of 5.8%. Urban passenger volumes outside London increased by 1.5% and
new London tenders accounted for £17.0m of the uplift in turnover. UK Bus
operating profit was £46.2m (six months to 30 September 2002: £45.9m), an
increase of 0.7%. This increase in operating profit was after the impact of
significant cost pressures, in particular additional pension and national
insurance costs year on year of £6.0m. In addition there was industrial action
during the period which combined with the cost pressures, saw the operating
margin fall to 10.4% from 11.0% last half year.
UK Rail turnover was £395.4m (six months to 30 September 2002: £385.4m), an
increase of 2.6%. Passenger income increased by 4% in First Great Western and
First Great Eastern. UK Rail operating profit was £22.1m (six months to 30
September 2002: £29.5m) with the reduction principally due to subsidy reduction
of £4.7m in First Great Western and an increase in the franchise payment of £
3.0m in First Great Eastern. We have been awarded the new TransPennine Express
franchise along with our partner, Keolis, which we expect to start operating in
early 2004 and we have been selected as the preferred bidder for the Thames
Trains two year franchise extension. We await the outcome of our bids for the
Northern and ScotRail franchises.
Interest charge before exceptional item
The net interest charge was £21.3m (six months to 30 September 2002: £28.6m)
with the reduction principally due to the cancellation of the interest rate
swaps referred to below. The interest charge before exceptional items was
covered 5.9 times (six months to 30 September 2002: 4.7 times) by EBITDA.
Taxation
The taxation charge, including exceptional items, was £4.6m (six months to 30
September 2002: £12.2m). The reduction in the taxation charge is principally
due to higher exceptional charges in the first half of 2003 compared to last
year. No tax has been provided on property gains as these do not give rise to a
chargeable gain for tax purposes. The taxation charge for the half year has
been based on the estimated effective rate for the full year of 30% (six months
to 30 September 2002: 30%) on profit before goodwill and exceptional items. The
actual cash cost of taxation to the Group is estimated to be 17% of profit
before tax after exceptional items for the full year (year to 31 March 2003:
20%).
Goodwill amortisation, exceptional items and property gains on disposal
Property disposal gains of £6.1m (six months to 30 September 2002: £11.2m) were
realised as part of our ongoing property disposal programme.
Goodwill amortisation was £13.0m (six months to 30 September 2002: £13.1m) with
favourable foreign exchange movements of £1.0m offsetting £0.9m of additional
goodwill on acquisitions.
During the six months to 30 September we incurred an exceptional charge of £
18.7m in relation to the cancellation of certain US Dollar and Sterling
interest rate swaps. New US dollar swaps were implemented with a significantly
lower average interest rate of 2.85%, and for a longer term than the cancelled
US Dollar swaps.
Other exceptional items were £7.5m (six months to 30 September 2002: £1.0m) and
comprised £3.6m of UK Bus restructuring costs, £3.1m of UK Rail bid costs and £
0.8m in North America.
Dividends
The interim dividend of 3.75 pence (six months to 30 September 2002: 3.55
pence) per ordinary share represents an increase of 5.6%.
Earnings per share (EPS)
The adjusted basic EPS was 9.6 pence (six months to 30 September 2002: 9.3
pence), an increase of 3.2%. Basic EPS was 4.6 pence (six months to 30
September 2002: 9.7 pence) with the reduction principally due to higher
exceptional charges and lower property disposal gains.
EBITDA and investment in the business
EBITDA was £125.0m (six months to 30 September 2002: £133.5m). Capital
expenditure was £81.8m (six months to 30 September 2002: £67.9m) which
consisted principally of £20.2m for new passenger carrying vehicles in the UK
and £46.8m for yellow school buses in North America. In addition in the first
half we invested £28.9m (six months to 30 September 2002: £9.7m) in
acquisitions, net of £10.4m (6 months to 30 September 2002: £1.8m) of cash
acquired, as set out below.
Acquisitions
On 21 May 2003 we acquired the Transit business of Coach USA for a total
consideration of $22.5m. Goodwill arising on this acquisition amounted to
$5.4m.
On 14 August 2003 our offer for GB Railways plc was declared unconditional in
all respects. As at 30 September 2003 we had acquired 89.4% of the share
capital of this company for an initial consideration of £22.0m. Provisional
goodwill arising on this acquisition amounted to £17.2m.
No disclosure has been given of the results of acquisitions in the six months
to 30 September 2003 as the results are not considered material enough to
warrant separate disclosure.
Net debt
Net debt at 30 September 2003 was £709.5m (30 September 2002: £691.7m), an
increase year on year of only £17.8m, despite significant investment through
capital expenditure and acquisitions. This once again clearly demonstrates the
Group's strong cash generation from operating activities.
Since 1 April 2003 the sterling value of the Group's dollar borrowings
decreased by £14.8m as a result of the period end exchange rate movement to £1:
$1.66 from an opening rate of £1:$1.57.
In line with policy on interest rate risk, 81% (30 September 2002: 78%) of the
Group's net debt is on fixed terms. Net debt at 30 September 2003 included
$497m (30 September 2002: $409m) to hedge the net assets of the North American
businesses.
Analysis of net debt Fixed Variable Total
£m £m £m
Cash - 0.1 0.1
Rail ring-fenced cash and deposits - 73.3 73.3
Sterling bond (2013 6.875%) (295.3) - (295.3)
Sterling bank loans and overdrafts - (113.8) (113.8)
US dollar bank loans and overdrafts - (299.6) (299.6)
Canadian bank loans and overdrafts - (10.4) (10.4)
HP and finance leases (34.1) (8.3) (42.4)
Loan notes (8.7) (12.7) (21.4)
Interest rate swaps (237.9) 237.9 -
Total (576.0) (133.5) (709.5)
Balance sheet and net assets
Net assets decreased over the period by £19.9m principally reflecting a
retained profit for the period of £3.6m offset by adverse foreign exchange
movements of £24.1m.
Shares in issue
As at 30 September 2003 there were 413.4m (30 September 2002: 417.7m) shares in
issue. The average number of shares in issue (excluding own shares held) was
413.2m (six months to 30 September 2002: 418.1m).
Foreign exchange
The results of the North American businesses have been translated at an average
rate of £1:$1.62 (six months to 30 September 2002: £1:$1.49 and year to 31
March 2003: £1:$1.55). The period end rate was £1:$1.66 (30 September 2002: £1:
$1.56 and 31 March 2003: £1:$1.57).
Accounting policies
The Group has continued to account for pension costs under SSAP 24 and will
continue to do so until the adoption of International Accounting Standards in
2005/06.
Iain M Lanaghan
Finance Director
Consolidated profit and loss account
Notes Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited
before goodwill total before goodwill total Year to
goodwill amortisation 6 months goodwill amortisation 6 months 31
to to March
amortisation and amortisation and
30 30 2003
and exceptional September and exceptional September
2002 £m
exceptional items 2003 exceptional items
£m
items 6 months to £m items 6 months to
6 months to 30 September 6 months to 30 September
2002
30 September 2003 30 September
2002 £m
2003 £m
£m
£m
Turnover
Continuing 1,127.7 - 1,127.7 1,068.9 - 1,068.9 2,291.0
operations
Operating profit
Continuing 78.1 (20.5) 57.6 84.4 (14.1) 70.3 179.7
operations
Group operating 78.1 - 78.1 84.4 - 84.4 216.1
profit before
goodwill
amortisation and
exceptional items
Goodwill - (13.0) (13.0) - (13.1) (13.1) (25.8)
amortisation
Exceptional items, - (7.5) (7.5) - (1.0) (1.0) (10.6)
net
Operating profit 78.1 (20.5) 57.6 84.4 (14.1) 70.3 179.7
Profit on disposal - 6.1 6.1 - 11.2 11.2 10.0
of fixed assets
Profit on ordinary 78.1 (14.4) 63.7 84.4 (2.9) 81.5 189.7
activities before
interest
Net interest payable (21.3) (18.7) (40.0) (28.6) - (28.6) (56.3)
and similar charges
Profit on ordinary 56.8 (33.1) 23.7 55.8 (2.9) 52.9 133.4
activities before
taxation
Tax on profit on 3 (17.0) 12.4 (4.6) (16.7) 4.5 (12.2) (35.8)
ordinary activities
Profit on ordinary 39.8 (20.7) 19.1 39.1 1.6 40.7 97.6
activities after
taxation
Equity minority - - - - - - (0.1)
interests
Profit for the 39.8 (20.7) 19.1 39.1 1.6 40.7 97.5
financial period
Equity dividends 4 (15.5) - (15.5) (14.8) - (14.8) (45.5)
paid and proposed
Retained profit for 13 24.3 (20.7) 3.6 24.3 1.6 25.9 52.0
the financial period
Adjusted basic 5 9.6p 9.3p 26.8p
earnings per share
Adjusted cash 5 21.0p 21.1p 50.6p
earnings per share
Basic earnings per 5 4.6p 9.7p 23.4p
share
Diluted earnings per 5 4.6p 9.7p 23.4p
share
Consolidated balance sheet
Notes Unaudited Unaudited Audited
30 September 30 September 31 March
2003 2002
2003
£m £m
£m
Assets employed:
Fixed assets
Goodwill 6 486.4 501.9 496.7
Tangible fixed assets 7 803.9 790.3 775.8
Investments 0.5 1.1 0.7
1,290.8 1,293.3 1,273.2
Current assets
Stocks 31.8 27.0 28.9
Debtors 8 403.1 347.1 345.8
Investments 9 45.8 50.9 45.7
Cash at bank and in hand 27.6 39.5 35.6
508.3 464.5 456.0
Creditors: amounts falling due 10 (595.8) (611.2) (571.5)
within one year
Net current (liabilities)/assets
Amounts due within one year (133.4) (183.3) (159.3)
Amounts due after more than one 8 45.9 36.6 43.8
year
Net current liabilities (87.5) (146.7) (115.5)
Total assets less current 1,203.3 1,146.6 1,157.7
liabilities
Creditors: amounts falling due 10 (695.7) (635.4) (630.9)
after more than one year
Provisions for liabilities and 11 (124.7) (119.7) (124.0)
charges
382.9 391.5 402.8
Financed by:
Capital and reserves
Called up share capital 12 20.7 20.9 20.7
Share premium account 13 238.8 236.7 238.8
Revaluation reserve 13 3.5 3.6 3.5
Other reserves 13 3.8 3.6 3.8
Profit and loss account 13 114.4 125.7 134.9
Equity shareholders' funds 381.2 390.5 401.7
Equity minority interests 1.7 1.0 1.1
382.9 391.5 402.8
Consolidated cash flow statement
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2003 31 March
September
£m 2002 2003
£m £m
Net cash inflow from operating 14(a) 92.6 79.6 219.7
activities
Returns on investment and servicing 14(b) (52.6) (15.1) (31.0)
of finance
Taxation
Corporation tax paid (15.0) (11.3) (23.6)
Capital expenditure and financial 14(c) (64.6) (71.9) (82.2)
investment
Acquisitions and disposals 14(d) (28.9) (9.7) (23.8)
Equity dividends paid (30.6) (29.4) (44.0)
Cash (outflow)/inflow before use of (99.1) (57.8) 15.1
liquid resources and financing
Management of liquid resources
(Increase)/decrease in liquid bank (0.1) 9.5 14.7
deposits
Financing 14(e) 77.9 44.6 (47.4)
Decrease in cash in period (21.3) (3.7) (17.6)
Reconciliation of net cash flows to movement in net debt
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2003 31 March
September
£m 2002 2003
£m £m
Decrease in cash in period (21.3) (3.7) (17.6)
Cash (inflow)/outflow from (78.3) (50.0) 32.7
(increase)/decrease in debt and HP
contract and finance lease
financing
Movement in current asset 0.1 (9.5) (14.7)
investments
Fees on issue of Bond and loan - 0.2 1.6
facility
Amortisation of debt issuance fees (0.4) (0.2) (0.5)
Foreign exchange differences 14.8 24.0 26.6
Movement in net debt in period (85.1) (39.2) 28.1
Net debt at beginning of period 15 (624.4) (652.5) (652.5)
Net debt at end of period 15 (709.5) (691.7) (624.4)
Consolidated statement of total recognised gains and losses
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2003 31 March
September
£m 2002 2003
£m £m
Profit for the financial period 19.1 40.7 97.5
Foreign exchange differences (24.1) (49.0) (53.2)
Total recognised (losses)/gains for the (5.0) (8.3) 44.3
period
Reconciliation of movement in shareholders' funds
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2003 31 March
September
£m 2002 2003
£m £m
Profit for the financial period 19.1 40.7 97.5
Dividends (15.5) (14.8) (45.5)
3.6 25.9 52.0
Shares issued to QUEST - - 2.1
Own shares purchased and cancelled - (5.4) (17.1)
Write down of own shares held by QUEST - - (1.1)
Foreign exchange differences (24.1) (49.0) (53.2)
Net reduction in shareholders' funds (20.5) (28.5) (17.3)
Shareholders' funds at beginning of 401.7 419.0 419.0
period
Shareholders' funds at end of period 381.2 390.5 401.7
No note of historical cost profits and losses is given as there are no material
differences between the results as set out in the consolidated profit and loss
account and their historical cost equivalents.
Notes to the interim financial information
1 Basis of preparation
This interim report does not constitute statutory accounts within the meaning
of section 240 of the Companies Act 1985.
The figures for the six months to 30 September 2003 include the results of the
rail businesses for the 24 weeks ended 13 September 2003 and the results of the
other businesses for the 26 weeks ended 27 September 2003.
These results are unaudited but have been reviewed by the auditors. The
comparative figures for the six months to 30 September 2002 are unaudited and
are derived from the interim report for the six months ended 30 September 2002,
which was also reviewed by the auditors.
The comparative figures for the year to 31 March 2003 are not the Company's
statutory accounts for that financial year but have been derived from them.
Those accounts have been reported on by the Company's auditors and delivered to
the Registrar of Companies. The report of the auditors did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
This interim report will be sent to all shareholders in November 2003 and will
be available to the public at the Registered Office of the Company, 395 King
Street Aberdeen AB24 5RP. This interim report was approved by the Board on 4
November 2003.
2 Principal accounting policies
The results for the six months ended 30 September 2003 have been prepared using
the same accounting policies as were used in the preparation of the annual
report for the year ended 31 March 2003.
3 Tax on profit on ordinary activities 6 months to 6 months to Year to
30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Corporation tax 1.9 9.6 27.2
Deferred tax 2.7 2.6 8.6
4.6 12.2 35.8
4 Dividends 6 months to 6 months to Year to
30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Ordinary shares of 5p each
- Interim proposed 15.5 14.8 14.8
- Final paid - - 30.8
- Adjustment to prior year final dividend - - (0.1)
in respect of shares cancelled
15.5 14.8 45.5
The interim dividend of 3.75p per ordinary share will be paid on 11 February
2004 to shareholders on the register of members at the close of business on 16
January 2004.
5 Earnings per share (EPS)
Basic EPS is based on earnings of £19.1m (six months to 30 September 2002: £
40.7m and year to 31 March 2003: £97.5m) and on a weighted average number of
ordinary shares of 413.2m (six months to 30 September: 418.1m and year to 31
March 2003: 416.7m) in issue.
Diluted EPS is based on the same earnings for each of the periods and on the
weighted average number of ordinary shares of 415.7m (six months to 30
September 2002: 419.1m and year to 31 March 2003: 417.4m). 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.
The adjusted basic EPS and adjusted cash EPS are intended to demonstrate
recurring elements of the results of the Group before goodwill amortisation. A
reconciliation of the earnings used in the bases is set out below
£m Six months to
30 September 2003
Earnings per
share p
Profit for basic EPS calculation 19.1 4.6
Goodwill amortisation 13.0 3.1
Exceptional items, net 7.5 1.8
Exceptional interest rate charge 18.7 4.6
Profit on disposal of fixed assets (6.1) (1.5)
Taxation effect of adjustments (12.4) (3.0)
Profit for adjusted basic EPS calculation 39.8 9.6
Depreciation 46.9 11.4
Profit for adjusted cash EPS calculation 86.7 21.0
£m Six months to
30 September 2002
Earnings per
share p
Profit for basic EPS calculation 40.7 9.7
Goodwill amortisation 13.1 3.1
Exceptional items, net 1.0 0.3
Profit on disposal of fixed assets (11.2) (2.7)
Taxation effect of adjustments (4.5) (1.1)
Profit for adjusted basic EPS calculation 39.1 9.3
Depreciation 49.1 11.8
Profit for adjusted cash EPS calculation 88.2 21.1
£m Year to
31 March 2003
Earnings per
share p
Profit for basic EPS calculation 97.5 23.4
Goodwill amortisation 25.8 6.2
Exceptional items, net 10.6 2.5
Profit on disposal of fixed assets (10.0) (2.4)
Taxation effect of adjustments (12.1) (2.9)
Profit for adjusted basic EPS calculation 111.8 26.8
Depreciation 99.2 23.8
Profit for adjusted cash EPS calculation 211.0 50.6
6 Goodwill £m
Cost
At 1 April 2003 584.8
Additions 23.3
Exchange rate differences (25.0)
At 30 September 2003 583.1
Amortisation
At 1 April 2003 88.1
Charge for period 13.0
Exchange rate differences (4.4)
At 30 September 2003 96.7
Net book value
At 30 September 2003 486.4
At 31 March 2003 496.7
At 30 September 2002 501.9
7 Tangible fixed assets Land and Passenger Other Total
buildings carrying plant and £m
£m vehicle equipment
fleet
£m
£m
Cost or valuation
At 1 April 2003 128.4 1,134.5 142.3 1,405.2
Subsidiary undertakings and 1.8 9.3 3.3 14.4
businesses acquired
Additions 5.8 71.2 4.8 81.8
Disposals (2.1) (17.4) (0.7) (20.2)
Exchange rate differences (1.1) (22.5) (1.5) (25.1)
At 30 September 2003 132.8 1,175.1 148.2 1,456.1
Depreciation
At 1 April 2003 19.9 520.5 89.0 629.4
Subsidiary undertakings and 0.2 - 1.7 1.9
businesses acquired
Charge for period 1.5 37.9 7.5 46.9
Disposals (0.2) (15.0) (0.6) (15.8)
Exchange rate differences (0.2) (9.2) (0.8) (10.2)
At 30 September 2003 21.2 534.2 96.8 652.2
Net book value
At 30 September 2003 111.6 640.9 51.4 803.9
At 31 March 2003 108.5 614.0 53.3 775.8
At 30 September 2002 105.6 630.1 54.6 790.3
8 Debtors 30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Amounts due within one year
Trade debtors 219.8 187.6 190.5
Other debtors 64.4 40.8 44.5
Deposits paid for rolling stock - 16.7 -
Pension funds' prepayments 10.2 6.6 8.1
Other prepayments and accrued income 62.8 58.8 58.9
357.2 310.5 302.0
Amounts due after more than one year
Pension funds' prepayments 44.6 35.1 42.4
Other prepayments and accrued income 1.3 1.5 1.4
45.9 36.6 43.8
403.1 347.1 345.8
9 Current asset investments 30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Bank deposits 45.8 50.9 45.7
10 Creditors 30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Amounts falling due within one year
Bank loans and overdrafts 60.6 98.2 40.0
Obligations under hire purchase contracts 26.3 47.2 34.2
and finance leases
Loan notes 0.3 1.3 0.6
Trade creditors 94.5 125.7 102.9
Corporation tax 14.3 22.1 27.2
Other tax and social security 24.7 19.1 18.5
Other creditors 53.1 23.3 33.0
Pension funds' creditors 12.3 10.3 11.3
Accruals and deferred income 256.9 214.6 235.0
Season ticket deferred income 36.9 34.6 37.8
Proposed dividends 15.9 14.8 31.0
595.8 611.2 571.5
10 Creditors (continued) 30 September 30 September 31 March
2003
2002 2003
£m
£m £m
Amounts falling due after more than one
year
Bank loans
- Due in more than one year but not more - 267.2 -
than two years
- Due in more than two years but not more 363.2 9.6 286.8
than five years
Obligations under hire purchase contracts
and finance leases
- Due in more than one year but not more 12.8 27.3 21.5
than two years
- Due in more than two years but not more 3.3 14.2 6.1
than five years
- Due in more than five years - 0.2 0.1
Loan notes
- Due in more than one year but not more 21.1 22.1 21.3
than two years
£300.0m Sterling bond - 6.875% 2013 295.3 294.8 295.1
695.7 635.4 630.9
Bank loans and overdrafts
Whilst advances under bank facilities are generally repayable within a few
months of the balance sheet date, they have been classified by reference to the
maturity date of the longest refinancing permitted under these facilities in
accordance with FRS 4. The bank loans and overdrafts are unsecured.
Hire purchase contracts and finance leases
Hire purchase contract and finance lease liabilities are secured on the assets
to which they relate. The contracts vary in length between four and twelve
years. No new contracts were entered into during the period.
Loan notes
The loan notes have been classified by reference to the earliest date on which
the loan note holders can request redemption. Loan notes of £20.4m (30
September 2002: £21.3m and 31 March 2003: £20.6m) are supported by bank
guarantees.
Bond
The bond is repayable in 2013 and is shown net of £4.7m (30 September 2002: £
5.2m and 31 March 2003: £4.9m) of issue related costs which are being amortised
over the term of the bond. Certain subsidiaries have issued guarantees to the
Company's bondholders. These guarantees rank pari passu with guarantees
provided by those subsidiaries to the Group's other major unsecured lenders.
11 Provisions for liabilities and Deferred Insurance Pensions Total
charges
tax claims £m £m
£m £m
At 1 April 2003 88.2 29.8 6.0 124.0
Provided in the period 2.7 8.6 0.1 11.4
Utilised in the period - (10.9) - (10.9)
Subsidiary undertakings acquired (0.4) - - (0.4)
Notional interest - 1.3 0.1 1.4
Exchange rate differences (0.2) (0.6) - (0.8)
At 30 September 2003 90.3 28.2 6.2 124.7
12 Called up share capital 30 September 30 31 March
September
2003 2003
2002
£m £m
£m
Authorised:
Ordinary shares of 5p each 30.0 30.0 30.0
Allotted, called up and fully paid
Ordinary shares of 5p each 20.7 20.9 20.7
The number of ordinary shares of 5p each in issue at the end of the period was
413.4m (30 September 2002: 417.7m and 31 March 2003: 413.4m).
13 Reserves Share Revaluation Profit and
premium reserve loss
account
account £m
£m
£m
At 1 April 2003 238.8 3.5 134.9
Retained profit for the financial period - - 3.6
Foreign exchange differences - - (24.1)
At 30 September 2003 238.8 3.5 114.4
Capital Capital Total other
redemption reserve reserves
reserve £m £m
£m
At 1 April 2003 and 30 September 2003 1.1 2.7 3.8
14 Notes to the consolidated cash flow 6 months to 6 months to Year to
statement
30 September 30 September 31 March
2003
2002 2003
£m
£m £m
(a) Reconciliation of operating profit to
net cash inflow from operations
Group operating profit 57.6 70.3 179.7
Depreciation charges 46.9 49.1 99.2
Goodwill amortisation 13.0 13.1 25.8
Loss on sale of non-property fixed assets 0.2 - 0.2
Profit on sale of investment in joint - (2.5) (2.5)
venture
(Increase)/decrease in stocks (0.1) 0.2 -
Increase in debtors (42.6) (47.6) (77.3)
Increase/(decrease) in creditors and 17.6 (3.0) (5.4)
provisions
Net cash inflow from operating activities 92.6 79.6 219.7
(b) Returns on investments and servicing
of finance
Interest received 0.9 1.0 2.7
Interest paid (32.9) (12.1) (25.1)
Cancellation of interest rate swaps (18.7) - -
Interest element of hire purchase (1.9) (4.0) (7.0)
contracts and finance lease payments
Fees on issue of bond and loan facilities - - (1.6)
Net cash outflow from returns on (52.6) (15.1) (31.0)
investments and servicing of finance
(c) Capital expenditure and financial
investment
Purchase of tangible fixed assets (69.8) (74.7) (107.4)
Sale of fixed asset properties 2.5 2.0 4.4
Sale of other tangible fixed assets 2.7 0.8 4.1
Deposits for rolling stock - - 16.7
Net cash outflow from capital expenditure (64.6) (71.9) (82.2)
and financial investment
(d) Acquisitions and disposals
Purchase of subsidiary undertakings (21.9) - -
Purchase of businesses (17.4) (14.0) (28.1)
Net cash acquired with purchase of 10.4 1.8 1.8
subsidiary undertakings and businesses
Sale of investment in joint venture - 2.5 2.5
Net cash outflow from acquisitions and (28.9) (9.7) (23.8)
disposals
(e) Financing
Issue of share capital - - 2.5
Own shares repurchased - (5.4) (17.1)
Shares purchased by Employee Benefit (0.5) - -
Trust
New bank loans 98.4 125.9 312.1
Repayments of amounts borrowed:
- Bank loans - (44.6) (285.1)
- Loan notes (0.5) (0.9) (2.5)
Capital element of hire purchase and (19.5) (30.4) (57.3)
finance lease payments
Net cash inflow/(outflow) from financing 77.9 44.6 (47.4)
15 Analysis of net debt At Cash flow Other At 30
September
31 March £m non-cash
2003
2003 changes
£m
£m £m
Current asset investments 45.7 0.1 - 45.8
Cash at bank and in hand 35.6 (7.7) (0.3) 27.6
Bank overdrafts (10.0) (13.6) - (23.6)
Cash 25.6 (21.3) (0.3) 4.0
Bank loans due within one (30.0) (7.0) - (37.0)
year
Bank loans due after one year (286.8) (91.3) 14.9 (363.2)
Sterling bond 2013 (295.1) - (0.2) (295.3)
Obligations under hire (61.9) 19.5 - (42.4)
purchase contracts and
finance leases
Loans and loan notes (21.9) 0.5 - (21.4)
Financing (695.7) (78.3) 14.7 (759.3)
Net debt (624.4) (99.5) 14.4 (709.5)
Other non-cash charges include £14.8m (six months to 30 September 2002: £24.0m
and year to 31 March 2003: £26.6m) of foreign exchange movements.