Interim Results
Embargoed until 07.00 am on Wednesday 3 November 2004
FIRSTGROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2004
SUMMARY
* Strong performance with adjusted basic EPS and dividend up 10%
* Excellent performance in UK Rail
*
+ New franchises performing ahead of expectations
+ Passenger income up 11%, reliability on First Great Western best since
Hatfield
+ ScotRail franchise successful commencement 17 October
* Continued growth in North America
*
+ First Student on target for over 1,000 new school buses and retained
over 90% of contracts up for renewal
+ First Transit new call centre contract wins
+ First Services doubled in size through major acquisition in large
Federal market
* UK Bus business restructured
*
+ Underlying bus profits increased
+ Continued strong performance in London Bus
+ Focus on service reliability
FINANCIAL SUMMARY
* Turnover £1,207.3m (2003: £1,127.7m)
* Operating profit1 £84.0m (2003: £78.1m)
* Profit before tax1 £62.1m (2003: £56.8m)
* Profit on ordinary activities before taxation £50.2m (2003: £23.7m)
* Adjusted basic earning per share up 10% to 10.6p (2003: 9.6p)
* Basic earnings per share 8.8p (2003: 4.6p)
* EBITDA2 £131.4m (2003: £125.0m)
* EBITDA:interest cover3 6.0x (2003: 5.9x)
* Interim dividend per share up 10% to 4.125p (2003: 3.75p)
Commenting, FirstGroup's Chief Executive, Moir Lockhead said:
'These are strong results. Our rail division has continued to outperform and we
are on target to grow our North American school bus business by over 1,000
buses this year. In UK Bus we continue to see growth in our London operations
and we have re-organised our operational structures to focus on service
delivery throughout the division.
We were delighted to be awarded the ScotRail franchise and are pleased to
report the successful start up of operations on 17 October. We have been
shortlisted for two further significant rail franchises Intercity East Coast
and Integrated Kent.
The Group has very strong and predictable cash flows with approximately 50% of
our revenues coming from contracted business. In recognition of this the Board
has increased the interim dividend by 10% and is confident that this improved
level of dividend growth is sustainable for the medium term. The second half of
the year has started well and we expect to achieve our earnings targets for the
full year.'
1 Before goodwill, rail bid costs, exceptional items and profit on disposal of
fixed assets
2 Group operating profit1 as defined, plus depreciation
3Calculated as EBITDA divided by net interest payable and similar charges
before exceptional items
Enquiries:
FirstGroup plc
Moir Lockhead, Chief Executive Tel: 020 7291 0512
Dean Finch, Finance Director Tel: 020 7291 0512
Michael Mitchell, Corporate Communications Director Tel: 020 7291 0504
Rachael Borthwick, Corporate Communications Manager 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
more than £2.5 billion a year and 62,000 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 9,300 buses carries 2.8 million
passengers a day in more than 40 towns and cities.
* The Group is also one of the UK's largest rail operators with five
passenger franchises - First Great Western, First Great Western Link, First
TransPennine Express, First ScotRail and First North Western and one open
access operator - Hull Trains.
* The Group operates nearly one-sixth of the UK passenger rail network, with
a balanced portfolio of Intercity, London commuter and regional services.
* The Group is short listed for the Intercity East Coast and the new
Integrated Kent franchises.
* The Group also operates freight services through GB Railfreight.
* The Group holds the operating contract for the Croydon Tramlink network,
which carries over 20 million passengers a year.
* In North America the Group has three operating divisions: Yellow School
Buses (First Student), Transit Contracting and Management Services (First
Transit) and Vehicle Maintenance and ancillary services (First Services).
Headquartered in Cincinnati the businesses operate across the US and
Canada.
*
+ First Student is the second largest provider of yellow school buses in
the USA and the third largest in Canada. With a fleet of some 18,000
school buses it transports over one million students everyday.
+ First Transit is one of the largest private sector providers of urban
bus services in the USA, managing public transport systems on behalf of
cities such as Houston, Los Angeles and Denver. We also manage call
centres, paratransit operations and other related light transit
activities.
+ First Services is the largest private sector provider of vehicle
maintenance and ancillary services in the USA. As well as maintaining
vehicle fleets and equipment for public sector customers such as the
Federal Government, cities, counties, fire and police departments, we
also operate a specialist business fitting communications equipment to
emergency services vehicles.
Chairman's statement
Safety is our highest priority. Buses and trains remain the safest methods of
surface transport and we will strive to improve our performance wherever
possible.
I am pleased to report an excellent set of results for the first half. Group
turnover has increased by 7% to £1,207.3m and profit before tax, goodwill
amortisation, rail bid costs and exceptional items has risen to £62.1m (2003: £
56.8m) an increase of 9%. Cash generation has remained strong. EBITDA (Group
operating profit* plus depreciation) was £131.4m for the period (2003: £
125.0m). Adjusted earnings per share (before goodwill amortisation, rail bid
costs, exceptional items and property profits) increased by 10% to 10.6p (2003:
9.6p). In recognition of the Group's continuing strong cash generation the
Board has recommended an increase in the interim dividend of 10% to 4.125p
(2003: 3.75p). The dividend will be paid on 9 February 2005 to shareholders on
the register on 14 January 2005. The Board is confident that this level of
dividend growth is sustainable for the medium term.
On the 1 April we commenced operation of First Great Western Link which
operates suburban rail services from London Paddington. The integration of this
franchise has been successful and is performing ahead of our expectations,
positioning us well to bid for the Greater Western franchise next year. We were
delighted to be awarded the ScotRail franchise during the period and I am
pleased to report the successful commencement of services on 17 October 2004.
We have also been short-listed for the Intercity East Coast and Integrated Kent
franchises.
Our North American businesses continue to perform well. We have an active
acquisition pipeline and our school bus business is on track to gain over 1,000
new buses by the year end. In First Services we made a strategic acquisition
through which we gained entry to the large Federal services market, doubling
the size of our services business.
We continue to see growth in our London bus business and outside London we are
encouraged by growth in urban areas where we have been able to develop
partnerships with Local Authorities to introduce bus priority measures.
I would like to take this opportunity to thank all employees for their
continued hard work and commitment which has made these results possible, and
to welcome new staff who have joined First in the UK and US during the period.
I hope that the expansion of the Group's businesses will continue to create
opportunities for both existing and new employees.
All of our businesses are strong cash generators with excellent opportunities
for growth. While we continue to invest for growth we are also committed to
increasing shareholder value through a programme of progressive dividend growth
and where appropriate share repurchases.
Martin Gilbert
Chairman
*Operating profit referred to throughout this document refers to operating
profit before goodwill amortisation, rail bid costs and exceptional items
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 continue to promote a culture of safety throughout our
business. I am pleased to report that during the period we have again seen some
positive trends in key safety indicators and we will strive to ensure that we
build on these improvements.
Results
Turnover has increased to £1,207.3m (2003: £1,127.7m). Operating profit, before
goodwill amortisation, rail bid costs, exceptional items and profits on
disposal of fixed assets was £84.0m (2003: £78.1m).
The Group has generated £131.4m (2003: £125.0m) of EBITDA (operating profit as
defined plus depreciation). We have invested £31.1m in the business through
capital expenditure and the acquisition of new operations in the US.
NORTH AMERICA
In North America the Group is the second largest operator of student
transportation with some 18,000 school buses across the US and Canada. We
operate the largest transit contracting and management business in North
America and we have an expanding management and maintenance services division.
Results
In the six months to 30 September 2004 turnover from our three North American
operations was £284.3m or $514.6m (2003: £286.1m or $460.9m). Operating profit
for the same period was £14.7m or $26.0m (2003: £18.0m or $28.8m). Operating
profit in our First Student operation was adversely affected by up to five less
trading days in the period as a result of a late Labor Day in the calendar,
which meant that the North Eastern and mid Atlantic regions of the US had a
later school start. In addition the effect of hurricanes in states such as
Florida, South Carolina and Louisiana resulted in a number of lost school days
during September.
First Student
Our US school bus business has continued to grow strongly. As in previous
years, the seasonal nature of this business, with the summer holidays being a
period when we earn minimal revenue but still incur fixed costs, means that
first half results are not representative of the full year. We retained over
90% of our existing business that came up for renewal, a particularly pleasing
result as this year we had a high level of school bus contracts up for renewal.
We have made a good start to the new academic year which began in September,
with contracts to operate 700 new buses gained through new business wins,
acquisitions and organic growth. New business was won in the states of
Massachusetts, California, Maine, New Jersey, Pennsylvania, Ilinois, South
Carolina, New York, Connecticut and Oregon. Contributions from in-fill
acquisitions made in New Hampshire, New York and Vermont are also included in
these results for the first time. In addition, we have an active pipeline of
new business acquisitions for the remainder of this year and are on target to
add over 1,000 buses to the business in the full year.
First Transit
US Dollar Turnover increased by 12.8% and operating profit by 6%. We won new
business to operate transit management contracts in the Philadelphia region and
further contracts in Los Angeles. We were very pleased to retain the New York
paratransit call centre contract during the period and to win two contracts for
call centres in Portland, Oregon. Our strategy is to focus on fast growing call
centre, paratransit, and public/private shuttle services markets where we can
utilise our expertise and grow this side of the business.
First Services
This division, which provides a range of management and maintenance services,
has had a very successful first half with US Dollar turnover increasing by 34%
and operating profit by 43%.
We were very pleased to retain all of our contracts that were up for renewal
during the period. In addition we continued to grow through new business wins
to provide fleet vehicle maintenance including one for the State of Virginia's
Department of Transport.
In August we acquired SKE Support Services Inc, for a net cost of $26m
representing an EBITDA multiple of less than four times. This business manages
and maintains over 13,000 vehicles everyday and has annualised revenues of
around $71m. SKE provides a range of services including logistics support,
fleet services and telecommunications systems to the US Federal government and
private companies. This strategic acquisition gives the division entry to the
growing US Federal market for outsourced services.
We are particularly pleased with the growth in First Services and expect to see
an increasing contribution from this business going forward.
UK RAIL
The Rail division operates passenger and freight services in the UK. Passenger
operations consist of First Great Western, First North Western, First
TransPennine Express, First Great Western Link, Hull Trains and First ScotRail
(from 17 October 2004). Freight services are operated by GB Railfreight.
Results
Rail turnover during the period was £446.6m (2003: £395.4m). Operating profit
was £34.3m (2003: £22.1m). This very strong performance is a result of improved
service delivery and increased passenger volumes across all of our train
operating companies.
Current Operations
Passenger income on First Great Western has grown strongly in the period with
an increase of 12.1%. Operating performance has continued to improve with
reliability reaching a moving annual average of 99.5% for the year to date, the
highest level since before Hatfield, and punctuality 83.2%, the highest level
for over 3 years.
In terms of delays caused by the operator to its own services, First Great
Western is the most improved Intercity train operator.
On 1 April we commenced operation of the First Great Western Link franchise
which runs suburban rail services from Paddington. Passenger income is running
ahead of plan at 8.5% on the comparable period last year and operating
performance is improving. In December we will launch an integrated timetable
with First Great Western which will offer a 20% increase in peak time capacity
on suburban services and improvements to long distance Intercity services to
the West Country.
Performance at First TransPennine Express, which commenced trading on 1
February 2004, has been encouraging, with passenger volumes running ahead of
our bid model, due to increasing road congestion on the core Leeds to
Manchester corridor. Passenger income increased by 11.5% on the comparable
period last year. In December we will introduce the first phase of our
timetable improvements followed by the introduction of new rolling stock in
2006.
On 17 October we took over the ScotRail franchise. The handover has gone very
smoothly and we have already started on a programme of passenger improvements
which will result in cleaner, more punctual rail services for Scotland. Our
initial view is that passenger revenues are strong and we are optimistic that
we can meet the challenging quality requirements of this franchise and exceed
our bid model for profitability.
We have further strengthened our rail team with the appointment of John Curley
to the newly created role of Infrastructure Director. John joins us from
Network Rail where he was instrumental in turning around the performance of the
rail network across the South West of England and South Wales. Using his
experience of more than 25-years in the rail industry, in both train operations
and infrastructure provision, he will develop infrastructure initiatives to
enhance performance and customer benefits and work on the forthcoming franchise
bids.
Franchise bidding
We have been shortlisted for two very important franchises - Intercity East
Coast (ICEC) and the Integrated Kent Franchise (IKF). Our final bid for ICEC
will be submitted in early December this year and we expect to complete our bid
for IKF in the new year. The Government has confirmed that the timetable for
the award of these two franchises next year is on target. We believe that our
excellent track record in running inter city and suburban railways puts us in a
strong position to win these franchises.
We have already established a highly experienced team, with a proven record of
delivery across the region, to work on the new Greater Western franchise which
is due to start in 2006. Since the commencement of the Great Western franchise
the number of trains operated each day has increased by 35% and the number of
passenger journeys has increased by 54%. We have introduced a fleet of 70 new
125mph Adelante diesel units which have increased the capacity on our Bristol
and South Wales services throughout the day to a half hourly frequency. Further
improvements in both suburban and intercity services will be introduced in
December 2004 with the addition of 5 extra High Speed Trains to the fleet,
together with a new integrated timetable. A subsidy of over £50m per annum in
1996 will have been converted into a premium payable to the Government of over
£10m per annum by the end of the franchise in 2006. Our aim is to bring
consistently high quality services at affordable prices to customers across the
region. We believe that our unrivalled knowledge and experience of working
across the whole Greater Western region will place us at the forefront of
bidding for this franchise.
UK BUS
We are the largest bus operator in the UK with a fleet of some 9,300 buses,
running more than 1 in 5 of all local bus services and carrying 2.8 million
passengers every day.
Results
For the six months to 30 September 2004 turnover increased by 7% to £473.1m
(2003: £443.0m). Operating profit before the finance element of leasing costs
was £45.4m (2003: £46.2m). These results were impacted by approximately £3m as
a result of a strike in South Yorkshire which has now been settled. We are also
focusing on service reliability and we have invested £3 million in improvements
to our engineering processes. We expect to see the benefit of this through
improved vehicle reliability over the next few years. Operating margin would
have been maintained before the impact of the industrial action and the
additional investment in engineering. After these charges margins were 9.6%
(2003: 10.4%).
During the period we restructured the UK bus business by removing a layer of
divisional management to create a greater focus on service delivery at the
operating level and also, where appropriate, to create efficiencies through
standardised operating procedures and centralised support activities.
London
We have continued to see growth in our London bus operations. We have secured
the site for a new depot facility at Dagenham which, together with our renewed
facility at Rainham, will provide increased capacity and position us strongly
for the anticipated population and employment growth in the Thames Gateway
corridor. Similarly, we are well served in West London with our recently opened
facility at Willesden Junction and our extended depot at Westbourne Park which
will strengthen our competitive advantage to provide further bus services if
the congestion charge is extended to the west.
Outside London
Outside London in our urban bus operations, which comprise approximately 55% of
UK Bus turnover, we have continued to see revenue growth in locations where we
have been able to forge quality partnerships with Local Authorities. Passenger
growth continues to be driven by a combination of marketing initiatives and
partnerships with Local Authorities to develop bus priority measures. Our
policy is to allocate capital investment to those locations where there is a
clear commitment to develop bus services through active traffic management and
car restraint.
New buses have been allocated to Quality Partnership routes in Leeds and
Sheffield and further deliveries will be used to upgrade services in Bath,
Bristol, Devon and Cornwall, Edinburgh and the Lothians, Glasgow, Greater
Manchester and South Wales. In July we opened the fifth Park and Ride site in
York, and we are already operating over 12,000 passenger journeys per week from
this new site. We now carry 2 million passengers per annum in our Park and Ride
schemes in York.
Patronage on `Aircoach', our premium shuttle service between Dublin's city
centre and the Airport, reached an all time high in September this year. During
the period we launched further express services linking the Airport with
Portaloise, Cork and Belfast. We believe there will be further opportunities
for expansion of bus services in the Irish Republic as the regulatory regime is
liberalised.
Costs
Driver recruitment, efficiency and retention remains a high priority within the
bus division. During the period we have introduced a number of initiatives at
local level to address this important issue. In particular we are the first in
our sector to recruit drivers and engineers from an alternative labour market
with approximately 80 drivers and engineers from Poland joining our bus
operations in the South West. This pilot has proved to be very successful and
we anticipate further schemes of this nature.
BUSINESS DEVELOPMENT
The Group continues to develop new ideas and initiatives to extend and enhance
the services we provide.
In September we announced a new concept in passenger transport, called `ftr',
designed to offer a quality and frequency of service that will encourage
motorists out of their cars. The key element of `ftr' is the development of a
route system with tram-like priorities, terminus points and information systems
operated with an innovative articulated vehicle called `Streetcar' which has
been designed with input from existing and potential customers as well as
drivers and engineers. `ftr' will be trialled in Yorkshire and interest in the
concept has already been expressed in Scotland and Wales.
In our Rail division we have invested in three driver simulators and a driver
training academy to enhance driver training and ensure that key skills are
developed and practiced in relation to everyday performance incidents. It is
intended that further simulators will be purchased for First TransPennine
Express and First ScotRail.
Our UK Bus and Rail divisions have invested in new technology to enable
passengers to access journey information through both e-mail bulletins and
mobile phones.
Our UK Yellow school bus initiative continues to attract considerable interest.
We recently launched two further operations in Northampton and Carmarthenshire
and we believe that with Government and Local Authority support there is
significant potential for this business to expand.
On integrated transport we are a proven leader in delivering joined-up journeys
in the West of England and Wales whether by train, bus or other modes. We
participate in over 160 through-ticketing schemes in the region. It is intended
that these successful initiatives will be extended throughout our other rail
operations including First ScotRail in due course.
Our innovative timetable proposals for the integration of services from London
Paddington were a key factor in the award of the First Great Western Link
franchise, enabling us to provide a 20% increase in passenger capacity on the
existing infrastructure and some faster journey times.
GROUP OUTLOOK
The Group has very strong and predictable cash flows with approximately 50% of
our revenues coming from contracted business. In recognition of this the Board
has increased the interim dividend by 10% and is confident that this improved
level of dividend growth is sustainable for the medium term. Going forward, we
will continue to use the Group's strong free cash flows to grow our businesses
in the UK and North America, increase dividends and, where appropriate, buy
back shares and pay down debt. The second half of the year has started well and
we expect to achieve our earnings targets for the full year.
Moir Lockhead
Chief Executive
Finance Director's review
Overview
The Group has a portfolio of businesses in the UK and North America which
generate strong and predictable revenue streams with 50% of turnover arising
from contracts with government and statutory bodies in the UK and North
America. The Group's cash flows are used to increase shareholder value by
investing for growth, increasing dividends and, where appropriate, repurchasing
shares. The results for the six months to 30 September 2004 are particularly
encouraging with growth in adjusted basic earnings per share (EPS) in excess of
10%. The interim dividend has been set at 4.125 pence per share, an increase of
10% and this rate of dividend increase has been adopted as the medium term
dividend policy. In addition during the first half of 2004 we have returned £
11.8m to shareholders through share repurchases and, despite an expected
working capital outflow of £43m on the loss of the Great Eastern Railways
franchise, have achieved a year on year reduction in net debt of £16.9m.
Results
Turnover was £1,207.3m (2003: £1,127.7m), an increase of 7.1%. Operating profit
was £84.0m (2003: £78.1m), an increase of 7.6%. The Rail division performed
extremely well as a result of volume growth. North American profits were down
due to a combination of an anticipated lower level of contracted school
operating days, adverse foreign exchange movements and other one-off items. UK
Bus produced a creditable performance with improved results before the impact
of a strike in South Yorkshire.
6 months to 6 months to Year to
30 September 2004 30 September 2003 31 March 2004
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 473.1 45.4 9.6 443.0 46.2 10.4 906.2 111.2 12.3
UK Rail 446.6 34.3 7.7 395.4 22.1 5.6 945.0 49.8 5.3
North America 284.3 14.7 5.2 286.1 18.0 6.3 620.7 63.5 10.2
Financing - (4.5) - - (4.1) - - (8.3) -
element of
leases **
Other *** 3.3 (5.9) - 3.2 (4.1) - 7.1 (12.1) -
Total Group 1,207.3 84.0 7.0 1,127.7 78.1 6.9 2,479.0 204.1 8.2
* Before goodwill amortisation, rail bid costs, 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, rail bid costs and exceptional
items
UK Rail turnover was £446.6m (six months to September 2003: £395.4m). Operating
profit was £34.3m (six months to 30 September 2003: £22.1m). Inclusion of the
operating results for a full six periods of TransPennine Express and GWT Link
franchises more than made up for the loss of the Great Eastern franchise.
Passenger revenue growth in First Great Western (FGW) was 12.1% during the
period compared to an industry average of 6.0% enabling FGW to deliver improved
results despite a further reduction in subsidy of £4.6m. As a result of changes
to our rail franchise portfolio, the performance of our rail operations has
changed from being second half biased to a more even spread of turnover and
profits throughout the year. The Group was awarded the ScotRail franchise
during the period and commenced operating this franchise during October 2004.
In addition we have been short-listed for the Intercity East Coast and
Integrated Kent franchises.
North American turnover was £284.3m or $514.6m (six months to 30 September
2003: £286.1m or $460.9m). Operating profit was £14.7m or $26.0m (six months to
30 September 2003: £18.0m or $28.8m). During the period, both First Transit and
First Vehicle delivered improved profits however profits in First Student were
down due to the timing of school holidays which resulted in up to 5 fewer
operating days in the period compared to the first half of last year. The
revenue days lost in the first half of 2004 will be recovered during May and
June 2005. The results were also impacted by hurricanes, fuel costs and one-off
dilapidations.
UK Bus turnover was £473.1m (six months to 30 September 2003: £443.0m), an
increase of 6.8%. Operating profit was £45.4m (six months to 30 September 2003:
£46.2m), a reduction of 1.7%. In our London division we were successful in
winning contracts for a net 62 new buses and revenues have increased by 15%
when compared to the first half of last year. UK Bus results were hit by a
three-week strike in South Yorkshire that had an impact of approximately £3m.
The period also saw a significant investment in engineering and it is
anticipated that this will lead to improved reliability and reduced lost
mileage.
Property
Property gains on disposal of £3.7m (six months to 30 September 2003: £6.1m)
were realised during the period as part of the Group's ongoing programme of
disposing of older UK Bus depots in high value city centre locations and
re-investing in out of town brownfield sites with more modern and efficient
facilities.
Goodwill
The goodwill amortisation charge for the period was £12.9m (six months to 30
September 2003: £13.0m) with favourable foreign exchange movements of £1.0m
offsetting £0.9m of incremental goodwill on acquisitions made either during the
period or the preceding financial year.
UK Rail bid costs and other exceptional items
UK Rail bid costs of £2.7m (six months to 30 September 2003: £3.1m) were
incurred during the period. There were no other exceptional costs during the
period (2003: £4.4m).
Interest payable and similar charges
The net interest charge was £21.9m (six months to 30 September 2003: £21.3m)
with the increase of £0.6m principally due to higher interest rates. The net
interest charge is covered 6.0 times (six months to 30 September 2003: 5.9
times) by earnings before interest, taxation, depreciation and amortisation
(EBITDA).
There was no exceptional interest charge during the period whereas in the
period to 30 September 2003 there was an exceptional charge of £18.7m in
relation to the cancellation of certain interest rate swaps.
Taxation
The taxation charge for the period, on profit before tax after exceptional
items, was £12.3m (six months to 30 September 2003: £4.6m). The increase in the
taxation charge is due to a higher operating profit and a lower level of
exceptional charges (including interest) in the first half of this year. No tax
has been provided on property gains as it is not envisaged that tax will become
payable on these gains. The taxation charge for the half-year has been based on
the estimated effective rate for the full year of 27.5% (six months to
September 2003: 30.0%) on profit before goodwill and exceptional items. The
reduction in the effective tax rate reflects favourable settlements achieved
during the period and we anticipate that this benefit will extend into the next
financial year. The actual cash cost of taxation to the Group is estimated to
be 16% of profit before tax after exceptional items for the full year (year to
31 March 2004: 17%).
Dividends
The interim dividend of 4.125 pence (six months to 30 September 2003: 3.75
pence) per ordinary share represents an increase of 10.0%. The interim dividend
will be paid on 9 February 2005 to shareholders on the register of members at
the close of business on 14 January 2005.
EPS
The adjusted basic EPS, before goodwill amortisation, exceptional items and
profit on disposal of fixed assets, was 10.6 pence (six months to 30 September
2003: 9.6 pence), an increase of 10.4%. Basic EPS was 8.8 pence (six months to
30 September 2003: 4.6 pence) with the increase due to a higher operating
profit and a lower level of exceptional charges (including interest) in the
first half of this year.
Cash flow
The Group's businesses continue to generate strong operating profits which are
converted into cash. EBITDA for the period was £131.4m (six months to 30
September 2003: £125.0m and year to 31 March 2004: £307.1m). EBITDA by division
is set out below:
6 months to 6 months to Year to
30 September 2004 30 September 2003 31 March 2004
Turnover EBITDA EBITDA Turnover EBITDA EBITDA Turnover EBITDA EBITDA
£m £m % £m £m % £m £m %
UK Bus 473.1 72.2 15.3 443.0 71.8 16.2 906.2 163.4 18.0
UK Rail 446.6 36.0 8.1 395.4 24.9 6.3 945.0 55.2 5.8
North 284.3 32.4 11.4 286.1 35.9 12.5 620.7 107.1 17.3
America
Financing - (4.5) - - (4.1) - - (8.3) -
element of
leases
Other 3.3 (4.7) - 3.2 (3.5) - 7.1 (10.3) -
Total Group 1,207.3 131.4 10.9 1,127.7 125.0 11.1 2,479.0 307.1 12.4
During the period there was a working capital outflow of £91.4m of which the
largest element was the working capital outflow of £43m on the loss of the
Great Eastern franchise. The Group anticipates an overall working capital
inflow of a similar magnitude to the Great Eastern outflow in the second half
of the year as a result of winning the ScotRail franchise.
Capital expenditure and acquisitions
Capital expenditure, as set out in note 7 to the interim financial information,
was £47.3m (six months to 30 September 2003: £81.8m and year to 31 March 2004:
£164.7m). Capital expenditure was predominantly in North American operations of
£26.1m and UK Bus operations of £13.9m.
On 27 August 2004 First Services acquired SKE Support Services Inc for a net
cash consideration of $26.0m. Provisional goodwill arising on this acquisition
amounted to $17.4m.
In addition the North American division acquired US School Bus businesses for a
total consideration of $4.5m. Provisional goodwill arising amounted to $3.3m.
Net investment in capital expenditure and acquisitions was £31.1m (six months
to 30 September 2003: £93.5m), with the reduction principally due to the timing
of new bus
purchases in the UK and North America, higher property receipts and a lower
level of acquisitions, in the first half of this year compared to the first
half of last year.
Net debt
The Group's net debt at 30 September 2004 was £692.6m and was comprised as
follows:
Analysis of net debt Fixed Variable Total
£m £m £m
Cash - 19.8 19.8
Rail ring-fenced cash and deposits - 61.7 61.7
Sterling bond (2013 6.875%) (295.8) - (295.8)
Bond (2019 6.125%) * (240.4) - (240.4)
Sterling bank loans and overdrafts - (156.1) (156.1)
US dollar bank loans and overdrafts - (13.9) (13.9)
Canadian bank loans and overdrafts - (12.0) (12.0)
Euro bank loans and overdrafts - (9.3) (9.3)
HP and finance leases (12.7) (12.9) (25.6)
Loan notes (8.7) (12.3) (21.0)
Interest rate swaps,net 18.4 (18.4) -
Total (539.2) (153.4) (692.6)
* The 2019 bond was swapped to floating rate US Dollars, and is shown net of
arrangement costs and foreign exchange gains on translation to Sterling at
period end.
Balance sheet and net assets
Net assets increased by £9.5m over the period principally reflecting retained
earnings for the period of £18.8m, net movement in minority interest (net of
dividends paid to minority shareholders) for the period of £1.9m and favourable
foreign exchange movements of £1.3m partly offset by share repurchases of £
12.9m.
Shares in issue
During the period 4.6m shares were repurchased for a total consideration of £
12.9m (see note 13). Of these 4.2m shares were cancelled during the period
whereas 0.4m shares were held as treasury shares at period end. As at 30
September 2004 there were 398.8m (30 September 2003: 413.4m and 31 March 2004:
403.0m) shares in issue. 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 400.9m (six months to 30 September 2003: 413.2m and
year to 31 March 2004: 410.0m).
Foreign exchange
The results of the North American businesses have been translated at an average
rate of £1:$1.82 (six months to 30 September 2003: £1:$1.62 and year to 31
March 2004: £1:$1.69). The period end rate was £1:$1.80 (30 September 2003: £1:
$1.66 and 31 March 2004: £1:$1.81).
Commodity price risk
In the UK we remain insulated from the recent crude oil price fluctuations this
year through our fully hedged position and we have hedges that protect 80% of
our requirements in North America. Looking forward we expect to achieve 70%
coverage in the UK at approximately $32 per barrel for 2005/06. In North
America we already have 70% of our requirement for 2005/06 covered at an
average price of $28 per barrel. We will continue to monitor the market seeking
opportunities to increase our cover to 100% for 2005/06.
International Financial Reporting Standards (IFRS)
The Group has made significant progress in the conversion to IFRS and will
report under IFRS for the first time when we report our Interim results for
financial year 2005/06.
Accounting policies
The Group has adopted UITF 38 'Accounting for ESOP Trusts'. Investments in own
shares are now deducted from shareholders' funds whereas previously such
investments were treated as fixed assets. Further details are set out in note 2
to the interim financial information.
The Group has continued to account for pension costs on a SSAP 24 basis and
will continue to do so until the adoption of IAS 19 in financial year 2005/06.
Dean Finch
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, rail bid
30 costs 30 2004
and rail bid September rail bid September
costs and 2003 £m
rail bid costs 2004 and exceptional £m
costs 6 months to £m exceptional items
6 months to 30 September items 6 months to
30 September 2004 6 months to 30 September
2004 £m 30 September 2003
£m 2003 £m
£m
Turnover
Continuing 1,207.3 - 1,207.3 1,127.7 - 1,127.7 2,479.0
operations
Operating profit
Continuing 84.0 (15.6) 68.4 78.1 (20.5) 57.6 164.7
operations
Group operating 84.0 - 84.0 78.1 - 78.1 204.1
profit before
goodwill
amortisation and
exceptional items
Goodwill - (12.9) (12.9) - (13.0) (13.0) (25.9)
amortisation
UK Rail bid costs - (2.7) (2.7) - (3.1) (3.1) (5.9)
Other exceptional - - - - (4.4) (4.4) (7.6)
items, net
Operating profit 84.0 (15.6) 68.4 78.1 (20.5) 57.6 164.7
Profit on disposal - 3.7 3.7 - 6.1 6.1 19.6
of fixed assets
Profit on ordinary 84.0 (11.9) 72.1 78.1 (14.4) 63.7 184.3
activities before
interest
Net interest payable (21.9) - (21.9) (21.3) (18.7) (40.0) (61.5)
and similar charges
Profit on ordinary 62.1 (11.9) 50.2 56.8 (33.1) 23.7 122.8
activities before
taxation
Tax on profit on 3 (17.1) 4.8 (12.3) (17.0) 12.4 (4.6) (30.6)
ordinary activities
Profit on ordinary 45.0 (7.1) 37.9 39.8 (20.7) 19.1 92.2
activities after
taxation
Equity minority (2.7) - (2.7) - - - (0.9)
interests
Profit for the 42.3 (7.1) 35.2 39.8 (20.7) 19.1 91.3
financial period
Equity dividends 4 (16.4) - (16.4) (15.5) - (15.5) (47.3)
paid and proposed
Retained profit for 13 25.9 (7.1) 18.8 24.3 (20.7) 3.6 44.0
the financial period
Adjusted basic 5 10.6p 9.6p 27.3p
earnings per share
Adjusted cash 5 22.4p 21.0p 52.4p
earnings per share
Basic earnings per 5 8.8p 4.6p 22.3p
share
Diluted earnings per 5 8.7p 4.6p 22.2p
share
Consolidated balance sheet
Notes Unaudited Unaudited Audited
30 September 30 September 31 March
2004 2003 2004
£m (restated) (restated)
£m £m
Assets employed:
Fixed assets
Goodwill 6 461.3 486.4 461.2
Tangible fixed assets 7 795.6 803.9 797.6
1,256.9 1,290.3 1,258.8
Current assets
Stocks 40.8 31.8 35.1
Debtors 8 438.6 403.1 394.7
Investments 9 5.1 45.8 30.3
Cash at bank and in hand 76.4 27.6 94.9
560.9 508.3 555.0
Creditors: amounts falling due 10 (590.5) (595.8) (647.9)
within one year
Net current (liabilities)/assets
Amounts due within one year (84.2) (133.4) (143.0)
Amounts due after more than one 8 54.6 45.9 50.1
year
Net current liabilities (29.6) (87.5) (92.9)
Total assets less current 1,227.3 1,202.8 1,165.9
liabilities
Creditors: amounts falling due 10 (739.5) (695.7) (682.8)
after more than one year
Provisions for liabilities and 11 (123.3) (124.7) (128.1)
charges
364.5 382.4 355.0
Financed by:
Capital and reserves
Called up share capital 12 19.9 20.7 20.1
Share premium account 13 238.8 238.8 238.8
Revaluation reserve 13 1.8 3.5 3.4
Other reserves 13 4.6 3.8 4.4
Profit and loss account 13 95.4 113.9 86.2
Equity shareholders' funds 360.5 380.7 352.9
Equity minority interests 4.0 1.7 2.1
364.5 382.4 355.0
Consolidated cash flow statement
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 31 March
2004 September
£m 2003 2004
£m £m
Net cash inflow from operating 14(a) 37.3 92.6 312.3
activities
Returns on investment and servicing 14(b) (26.1) (52.6) (65.2)
of finance
Taxation
Corporation tax received/(paid) 3.0 (15.0) (23.7)
Capital expenditure and financial 14(c) (12.5) (64.6) (147.3)
investment
Acquisitions and disposals 14(d) (18.6) (28.9) (49.7)
Equity dividends paid (31.5) (30.6) (45.9)
Cash outflow before use of liquid (48.4) (99.1) (19.5)
resources and financing
Management of liquid resources
Decrease/(increase) in liquid bank 25.2 (0.1) 15.4
deposits
Financing 14(e) 37.5 77.9 46.2
Increase/(decrease) in cash in 14.3 (21.3) 42.1
period
Reconciliation of net cash flows to movements in net debt
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 31 March
2004 September
£m 2003 2004
£m £m
Increase/(decrease) in cash in 14.3 (21.3) 42.1
period
Cash inflow from increase in debt (49.6) (78.3) (75.4)
and HP contract and finance lease
financing
Movement in current asset (25.2) 0.1 (15.4)
investments
Fees on issue of Bond and loan - - 1.3
facility
Amortisation of debt issuance fees (0.4) (0.4) (0.8)
Foreign exchange differences (1.0) 14.8 41.9
Movement in net debt in period (61.9) (85.1) (6.3)
Net debt at beginning of period 15 (630.7) (624.4) (624.4)
Net debt at end of period 15 (692.6) (709.5) (630.7)
Consolidated statement of total recognised gains and losses
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2004 31 March
September
£m 2003 2004
£m £m
Profit for the financial period 35.2 19.1 91.3
Foreign exchange differences 1.3 (24.1) (63.0)
Total recognised gains/(losses) for the 36.5 (5.0) 28.3
period
Prior period adjustment on adoption of (0.6)
UITF 38
Total recognised gains since last annual 35.9
report
Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30
2004 31 March
September
(restated) 2003 2004
£m (restated) (restated)
£m £m
Profit for the financial period 35.2 19.1 91.3
Dividends (16.4) (15.5) (47.3)
18.8 3.6 44.0
Own shares purchased and cancelled (11.8) - (29.2)
Movement in EBT, QUEST and treasury (0.7) 0.2 0.1
shares during the period
Foreign exchange differences 1.3 (24.1) (63.0)
Net addition to/(reduction in) 7.6 (20.3) (48.1)
shareholders' funds
Shareholders' funds at beginning of 352.9 401.0 401.0
period
Shareholders' funds at end of period 360.5 380.7 352.9
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 2004 include the results of the
rail businesses for the period ended 18 September 2004 and the results of the
other businesses for the 26 weeks ended 25 September 2004.
These results are unaudited but have been reviewed by the auditors. The
comparative figures for the six months to 30 September 2003 are unaudited and
are derived from the interim report for the six months ended 30 September 2003,
which was also reviewed by the auditors.
The comparative figures for the year to 31 March 2004 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.
The comparative figures have been restated for the adoption of UITF 38 as
explained in
note 2.
This interim report will be sent to all shareholders in November 2004 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 2
November 2004.
2 Principal accounting policies
The results for the six months ended 30 September 2004 have been prepared using
the same accounting policies as were used in the preparation of the annual
report for the year ended 31 March 2004 except as set out below.
UITF 38 'Accounting for ESOP Trusts' has been adopted. Investments in own
shares are now deducted from shareholders' funds whereas previously such
investments were treated as assets. The impact of this restatement is to reduce
shareholders' funds at 30 September 2003 by £0.5m and to reduce shareholders'
funds at 31 March 2004 by £0.6m.
3 Tax on profit on ordinary activities 6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
Corporation tax 10.0 1.9 21.3
Deferred tax 2.3 2.7 9.3
12.3 4.6 30.6
4 Dividends 6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
Ordinary shares of 5p each
- Interim proposed 16.4 15.5 15.5
- Final paid - - 31.8
16.4 15.5 47.3
The interim dividend of 4.125p per ordinary share will be paid on 9 February
2005 to shareholders on the register of members at the close of business on 14
January 2005.
5 Earnings per share (EPS)
Basic EPS is based on earnings of £35.2m (six months to 30 September 2003: £
19.1m and year to 31 March 2004: £91.3m) and on a weighted average number of
ordinary shares of 400.9m (six months to 30 September 2003: 413.2m and year to
31 March 2004: 410.0m) 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 403.7m (six months to 30
September 2003: 415.7m and year to 31 March 2004: 411.5m). 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:
Six months to 30 September
2004
£m Earnings per
share (p)
Profit for basic EPS calculation 35.2 8.8
Goodwill amortisation 12.9 3.2
UK Rail bid costs 2.7 0.7
Profit on disposal of fixed assets (3.7) (0.9)
Taxation effect of adjustments (4.8) (1.2)
Profit for adjusted basic EPS calculation 42.3 10.6
Depreciation * 47.3 11.8
Profit for adjusted cash EPS calculation 89.6 22.4
* Depreciation charge of £47.4m per note 7 less £0.1m of
depreciation attributable to equity minority interests.
Six months to 30 September
2003
£m Earnings per
share (p)
Profit for basic EPS calculation 19.1 4.6
Goodwill amortisation 13.0 3.1
UK Rail bid costs 3.1 0.7
Other exceptional items, net 4.4 1.1
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
Year to 31 March 2004
£m Earnings per
share (p)
Profit for basic EPS calculation 91.3 22.3
Goodwill amortisation 25.9 6.3
UK Rail bid costs 5.9 1.4
Other exceptional items, net 7.6 1.9
Exceptional interest rate charge 18.7 4.6
Profit on disposal of fixed assets (19.6) (4.8)
Taxation effect of adjustments (17.8) (4.4)
Profit for adjusted basic EPS calculation 112.0 27.3
Depreciation 103.0 25.1
Profit for adjusted cash EPS calculation 215.0 52.4
6 Goodwill £m
Cost
At 1 April 2004 562.6
Additions 11.4
Exchange rate differences 2.1
At 30 September 2004 576.1
Amortisation
At 1 April 2004 101.4
Charge for period 12.9
Exchange rate differences 0.5
At 30 September 2004 114.8
Net book value
At 30 September 2004 461.3
At 31 March 2004 461.2
At 30 September 2003 486.4
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 2004 141.5 1,174.0 154.6 1,470.1
Subsidiary undertakings and - 0.8 1.9 2.7
businesses acquired
Additions 4.3 35.5 7.5 47.3
Disposals (3.5) (10.1) (3.4) (17.0)
Exchange rate differences 0.2 1.7 0.2 2.1
At 30 September 2004 142.5 1,201.9 160.8 1,505.2
Depreciation
At 1 April 2004 21.5 548.5 102.5 672.5
Subsidiary undertakings and - - 0.1 0.1
businesses acquired
Charge for period 1.6 38.4 7.4 47.4
Disposals (0.5) (8.2) (2.3) (11.0)
Exchange rate differences - 0.6 - 0.6
At 30 September 2004 22.6 579.3 107.7 709.6
Net book value
At 30 September 2004 119.9 622.6 53.1 795.6
At 31 March 2004 120.0 625.5 52.1 797.6
At 30 September 2003 111.6 640.9 51.4 803.9
8 Debtors 30 September 30 September 31 March
2004 2003 2004
£m £m £m
Amounts due within one year
Trade debtors 262.6 219.8 233.9
Other debtors 52.3 64.4 52.7
Pension funds' prepayments 10.2 10.2 10.4
Other prepayments and accrued income 58.9 62.8 47.6
384.0 357.2 344.6
Amounts due after more than one year
Pension funds' prepayments 53.3 44.6 48.7
Other prepayments and accrued income 1.3 1.3 1.4
54.6 45.9 50.1
438.6 403.1 394.7
9 Current asset investments 30 September 30 September 31 March
2004 2003 2004
£m £m £m
Bank deposits 5.1 45.8 30.3
10 Creditors 30 September 30 September 31 March
2004 2003 2004
£m £m £m
Amounts falling due within one year
Bank loans and overdrafts 20.0 60.6 52.0
Obligations under hire purchase contracts 14.3 26.3 20.8
and finance leases
Loan notes 0.3 0.3 0.3
Trade creditors 128.2 94.5 156.4
Corporation tax 38.3 14.3 25.1
Other tax and social security 23.0 24.7 21.2
Other creditors 37.8 53.1 15.9
Pension funds' creditors 9.3 12.3 11.7
Accruals and deferred income 291.7 256.9 271.8
Season ticket deferred income 11.2 36.9 40.3
Proposed dividends 16.4 15.9 32.4
590.5 595.8 647.9
10 Creditors (continued) 30 September 30 September 31 March
2004 2003 2004
£m £m £m
Amounts falling due after more than one
year
Bank loans
- Due in more than two years but not more 171.3 363.2 110.6
than five years
Obligations under hire purchase contracts
and finance leases
- Due in more than one year but not more 3.6 12.8 7.7
than two years
- Due in more than two years but not more 3.4 3.3 3.6
than five years
- Due in more than five years 4.3 - 4.8
Loan notes
- Due in more than one year but not more 20.7 21.1 21.0
than two years
Bonds due in more than five years
- £300.0m Sterling bond - 6.875% 2013 295.8 295.3 295.5
- £250.0m bond - 6.125% 2019 240.4 - 239.6
739.5 695.7 682.8
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 £20.2m (30
September 2003: £20.5m and 31 March 2004: £20.5m) are supported by bank
guarantees.
Bonds
The £300m bond is repayable in 2013 and is shown net of £4.2m (30 September
2003: £4.7m and 31 March 2004: £4.5m) of issue related costs which are being
amortised over the term of the bond.
The £250m bond is repayable in 2019 and was swapped to US Dollars on a floating
six month LIBOR basis. The Sterling equivalent shown is net of a foreign
exchange gain of £8.3m (30 September 2003: £nil and 31 March 2004: gain of £
9.1m) on retranslation at period end and is also shown net of £1.3m (30
September 2003: £nil and 31 March 2004: £1.3m) of issue related costs which are
being amortised over the term of the bond.
11 Provisions for liabilities and Deferred Insurance Pensions Total
charges
tax claims * £m £m
£m £m
At 1 April 2004 96.4 25.8 5.9 128.1
Provided in the period 2.3 10.9 - 13.2
Utilised in the period - (17.3) - (17.3)
Subsidiary undertakings acquired (2.2) - - (2.2)
Notional interest - 1.3 - 1.3
Exchange rate differences 0.1 0.1 - 0.2
At 30 September 2004 96.6 20.8 5.9 123.3
* Insurance claims accruals due within one year at 30 September 2004 amounted
to £42.8m (31 March 2004: £36.1m) and are included in 'accruals and deferred
income' within note 10.
12 Called up share capital 30 September 30 31 March
September
2004 2004
2003
£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 19.9 20.7 20.1
The number of ordinary shares of 5p each in issue, excluding treasury shares,
at the end of the period was 398.4m (30 September 2003: 413.4m and 31 March
2004: 403.0m).
13 Reserves Share Revaluation Profit and
premium reserve loss
account
account £m
£m
£m
At 1 April 2004 as previously reported 238.8 3.4 86.8
Prior period adjustment on adoption of - - (0.6)
UITF 38
At 1 April 2004 as restated 238.8 3.4 86.2
Cancellation of shares - - (11.8)
Retained profit for the financial period - - 18.8
Movement in EBT, QUEST and treasury - - (0.7)
shares during the period
Transfer of realised revaluation reserve - (1.6) 1.6
Foreign exchange differences - - 1.3
At 30 September 2004 238.8 1.8 95.4
Capital Capital Total other
redemption reserve reserves
reserve £m £m
£m
At 1 April 2004 1.7 2.7 4.4
Cancellation of shares 0.2 - 0.2
At 30 September 2004 1.9 2.7 4.6
Between 14 May 2004 and 24 September 2004, 4,200,000 shares were repurchased at
a total cost of £11.8m and cancelled. In addition 400,000 shares were
repurchased at a total cost of £1.1m and are being held as treasury shares at
30 September 2004.
14 Notes to the consolidated cash flow 6 months to 6 months to Year to
statement
30 September 30 September 31 March
2004 2003 2004
£m £m £m
(a) Reconciliation of operating profit to
net cash inflow from operations
Group operating profit 68.4 57.6 164.7
Depreciation charges 47.4 46.9 103.0
Goodwill amortisation 12.9 13.0 25.9
Loss on sale of non-property fixed assets - 0.2 1.3
Increase in stocks (0.7) (0.1) (1.3)
Increase in debtors (47.4) (42.6) (49.4)
(Decrease)/increase in creditors and (43.3) 17.6 68.1
provisions
Net cash inflow from operating activities 37.3 92.6 312.3
(b) Returns on investments and servicing
of finance
Interest received 1.1 0.9 2.4
Interest paid (25.1) (32.9) (44.3)
Cancellation of interest rate swaps - (18.7) (18.7)
Interest element of hire purchase (1.3) (1.9) (3.3)
contracts and finance lease payments
Dividends paid to minority shareholders (0.8) - -
Fees on issue of bond and loan facilities - - (1.3)
Net cash outflow from returns on (26.1) (52.6) (65.2)
investments and servicing of finance
(c) Capital expenditure and financial
investment
Purchase of tangible fixed assets (30.1) (69.8) (179.8)
Sale of fixed asset properties 16.9 2.5 25.4
Sale of other tangible fixed assets 0.7 2.7 7.1
Net cash outflow from capital expenditure (12.5) (64.6) (147.3)
and financial investment
(d) Acquisitions and disposals
Purchase of subsidiary undertakings (18.8) (21.9) (33.7)
Purchase of businesses (2.6) (17.4) (26.4)
Net cash acquired with purchase of 2.8 10.4 10.4
subsidiary undertakings and businesses
Net cash outflow from acquisitions and (18.6) (28.9) (49.7)
disposals
(e) Financing
Own shares repurchased (11.8) - (29.2)
Bond 2019 - - 250.0
Shares purchased by Employee Benefit (0.3) (0.5) -
Trust
New bank loans 61.2 98.4 -
Repayments of amounts borrowed:
- Bank loans - - (149.2)
- Loan notes (0.3) (0.5) (0.6)
New hire purchase contracts and finance - - 10.2
leases
Capital element of hire purchase and (11.3) (19.5) (35.0)
finance lease payments
Net cash inflow from financing 37.5 77.9 46.2
15 Analysis of net debt At Cash flow Other At 30
September
31 March £m non-cash 2004
2004 changes £m
£m £m
Cash at bank and in hand 94.9 (18.7) 0.2 76.4
Bank overdrafts (33.0) 33.0 - -
Cash 61.9 14.3 0.2 76.4
Current asset investments 30.3 (25.2) - 5.1
Bank loans due within one (19.0) (1.0) - (20.0)
year
Bank loans due after one year (110.6) (60.2) (0.5) (171.3)
Sterling bond 2013 (295.5) - (0.3) (295.8)
Bond 2019 (239.6) - (0.8) (240.4)
Obligations under hire (36.9) 11.3 - (25.6)
purchase contracts and
finance leases
Loans and loan notes (21.3) 0.3 - (21.0)
Financing (722.9) (49.6) (1.6) (774.1)
Net debt (630.7) (60.5) (1.4) (692.6)
Other non-cash charges include £1.0m (six months to 30 September 2003: £14.8m
and year to 31 March 2004: £41.9m) of foreign exchange movements.