Interim Results
Embargoed until 07.00am on Wednesday 9 November 2005
FIRSTGROUP PLC
INTERIM RESULTS FOR THE
SIX MONTHS TO 30 SEPTEMBER 2005
SUMMARY
* Solid performance in challenging trading conditions
* Revenue increased by 14%
* Overall impact of additional fuel costs £13.0m
* Interim dividend increased by 10%
* Excellent performance in UK Rail
+ New franchises performing ahead of expectations
+ Successful first year of operating First ScotRail franchise
+ Strong passenger growth at First TransPennine Express
+ Submitted bids for three new enlarged rail franchises
* Revenue growth and margin improvement in North America
+ Highest ever H1 sales and earnings
+ First Student - good revenue growth and contract retention
+ First Transit - retention of important contracts and new business wins
+ First Services - earnings more than doubled during period
* UK Bus
+ Strong underlying revenue growth
+ Improved operating performance
+ Improved positions in London league tables
+ Continued focus on service reliability
FINANCIAL SUMMARY*
* Revenue £1,376.5m (2004: £1,207.3m)
* Operating profit1 £81.4m (2004: £85.6m)
* Adjusted profit before tax1 £55.5m (2004: £63.7m)
* Profit before taxation £55.3m (2004: £64.3m)
* Adjusted basic earnings per share 9.2p (2004: 10.9p)
* Basic earnings per share 9.0p (2004: 11.0p)
* EBITDA2 £135.3m (2004: £133.0m)
* EBITDA:interest cover3 5.2x (2004: 6.1x)
* Interim dividend per share up 10% to 4.55p (2004: 4.125p)
*2004 as restated for transition to International Financial Reporting Standards
1 Before intangible asset amortisation, bid costs and profit on disposal of
fixed assets
2 Operating profit1 as defined, plus depreciation
3Calculated as EBITDA divided by net interest payable and similar charges
Commenting, FirstGroup's Chief Executive, Moir Lockhead said:
'I am pleased to report another set of solid results in a challenging trading
environment. We have faced considerable cost increases in the period with the
overall impact of additional fuel costs being £13.0m. Our UK Rail Division
continues to do well with a particularly strong performance from our two
longer-term rail franchises First TransPennine Express and First ScotRail. We
are beginning to see a recovery in patronage on our First Great Western and
First Great Western Link franchises following the July terrorist attacks in
London. We have now submitted bids for the three new enlarged rail franchises -
Integrated Kent, Thameslink/Great Northern and Greater Western.
Our North American business recorded its highest first half earnings to date
and has delivered improved US Dollar margins. First Student has continued to
expand and maintain an excellent record of contract retention. Our Services
business has delivered another excellent result with earnings more than doubled
during the period.
In UK Bus, we have seen a further period of strong revenue growth and improved
operating performance. Our focus on service quality has already delivered some
early positive results with lost mileage and driver turnover at the lowest
levels for two years. We continue to see encouraging patronage growth where we
are able to work with Local Authorities to provide bus services alongside
traffic management schemes.
The Board has increased the dividend by 10% for the third time since November
2004 when we announced our commitment to this level of dividend growth in the
medium-term. Our strategy is to enhance shareholder value by growing our core
business, developing opportunities in new markets, progressive dividend growth
together with share repurchases, while maintaining a strong balance sheet.
Early indications are that trading in the second half of the year is in line
with our expectations'
Enquiries:
FirstGroup plc
Moir Lockhead, Chief Executive Tel: 020 7291 0512
Dean Finch, Finance Director Tel: 020 7291 0512
Rachael Borthwick, Head of Group Corporate Communications 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
£2.7 billion a year and over 67,000 employees throughout the UK and North
America.
ï‚· 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 major towns and cities.
ï‚· The Group is also one of the UK's largest rail operators with four passenger
franchises - First Great Western, First Great Western Link, First TransPennine
Express and First ScotRail - and one open access operator Hull Trains.
ï‚· The Group operates nearly one-sixth of the UK passenger rail network, with a
balanced portfolio of intercity, commuter and regional services.
ï‚· The Group is shortlisted for the new Integrated Kent, Thameslink/Great
Northern and Greater Western franchises.
ï‚· The Group also operates freight services through GB Railfreight.
ï‚· The Group holds the operating contract for the Croydon Tramlink network,
which carries over 20 million passengers a year.
ï‚· In North America the Group has three operating divisions: Yellow School Buses
(First Student), Transit Contracting and Management Services (First Transit)
and Vehicle Fleet Maintenance and Support Services (First Services).
Headquartered in Cincinnati the businesses operate across the US and Canada.
- First Student is the second largest provider of student transportation in
North America with a fleet of over 20,000 yellow school buses, carrying nearly
2 million students every day across the US and Canada.
- First Transit is one of the largest private sector providers of transit
management and contracting, managing public transport systems on behalf of
transit authorities in cities such as Atlanta, Los Angeles, Houston and
Seattle. We are one of the largest providers of airport shuttle bus services in
the US, serving airports in cities such as Cincinnati, Miami and Philadelphia.
We also manage call centres, paratransit operations and other light transit
activities.
- First Services is the largest private sector provider of vehicle maintenance
and support services in the US. We provide fleet maintenance for public sector
customers such as the Federal Government, cities and fire and police
departments. We also provide a range of support services including vehicle
maintenance, logistics support and facilities management to public and private
sector clients including the US Navy and US Air Force.
Chairman's statement
We were all deeply shocked and saddened by the tragic events in London on 7
July. On behalf of the Board of FirstGroup plc and all of its employees I would
like to express my condolences to the injured and the bereaved. As a major
transport operator in the capital we are proud of the exceptional efforts our
staff made to continue their duties and assist passengers in very difficult
circumstances.
Safety is our highest priority and we continuously strive to improve our
performance to achieve the highest standards.
I am pleased to report another strong set of results for the first half. Group
revenue increased by 14% to £1,376.5m (2004: £1,207.3m) and profit before tax
was £55.3m (2004: £64.3m). This is a creditable performance given the
additional cost increases, most notably fuel prices which had an overall impact
of £13.0m during the period. Cash generation has remained strong with EBITDA
(Group operating profit* plus depreciation) for the period rising to £135.3m
(2004: £133.0m). Adjusted basic earnings per share (before intangible asset
amortisation, bid costs and property profits) was 9.2p (2004: 10.9p). In
recognition of the Group's continuing strong cash generation the Board has
recommended an increase in the interim dividend of 10% to 4.55p (2004: 4.125p).
The dividend will be paid on 8 February 2006 to shareholders on the register on
13 January 2006. The Board remains confident that this level of dividend growth
is sustainable for the medium term.
We have now been operating First ScotRail, Scotland's national railway and the
UK's largest rail franchise, for 12 months. A tremendous amount has been
achieved during this first year and we continue to initiate improvements to
services and facilities to benefit passengers. We are shortlisted for three new
enlarged rail franchises worth up to £1.1bn of additional revenue per annum and
during the period we submitted bids for these important rail franchises.
In our UK Bus business we are encouraged by growth in areas where we are able
to develop partnerships with Local Authorities to improve services through bus
priority schemes and other traffic management measures.
Contract retention remains high within our North American division. We continue
to grow and win new business across all of our North American operations. In
October our Services division commenced operation of a major contract for the
US Navy.
In July Professor David Begg joined the Board as a Non-Executive Director.
David has vast experience and an impressive record in public transport and
transport policy. Sid Barrie joined the Board as Commercial Director in August
and his appointment further strengthens our commercial team. I am confident
that both will make a significant contribution to the Group.
I would like to take this opportunity to thank all employees for their
continued hard work and commitment in delivering another year of growth and to
welcome new staff to the Group who have joined our businesses in the UK and US
during the period.
Our strategy is to deliver shareholder value by continuing to grow in our core
businesses and explore opportunities to develop in new markets. As well as
investing for growth we remain committed to a programme of progressive dividend
growth and share repurchases, while maintaining a strong balance sheet.
Martin Gilbert
Chairman
*Operating profit referred to throughout this document refers to operating
profit before intangible asset amortisation, bid costs and profit on disposal
of fixed assets.
Chief Executive's operating review
OVERVIEW
Safety
The safety and security of our passengers and staff is at the forefront of
everything we do and we actively endorse a culture of `Safety First' throughout
our business. We continually assess our working practices and procedures to
ensure that we are doing everything we can to meet the highest possible
standards of safety.
Results
Revenue has increased to £1,376.5m (2004: £1,207.3m). Operating profit was £
81.4m (2004: £85.6m). Operating profit was impacted by £13.0m by the
significant rise in fuel costs as a result of the increase in global oil
prices. The Group generated EBITDA (operating profit as defined plus
depreciation) of £135.3m (2004: £133.0m) enabling us to invest £113.1m in the
business predominantly in our UK Bus and North American businesses.
UK RAIL
The UK Rail division operates passenger and freight services in the UK.
Passenger rail franchises consist of First Great Western, First Great Western
Link, First TransPennine Express and First ScotRail. We also operate Hull
Trains, a non-franchised open access intercity passenger train operator, and we
provide rail freight services through GB Railfreight.
Results
Revenue in the Group's rail division increased by 18% to £526.0m (2004: £
446.6m). Operating profit was £34.3m (2004: £32.7m). This is a particularly
strong performance, given the effect of the terrorist attacks on London which
had a significant adverse impact on our rail franchises during the second
quarter, and demonstrates the strength of our longer-term rail franchises First
TransPennine Express and First ScotRail.
Current Operations
It is now 12 months since we commenced operation of First ScotRail. The strong
performance reflects the enormous effort put in to delivering service
enhancements for passengers and raising standards across all areas of the
franchise. We have worked particularly hard to improve train service
performance and as a result have seen a 20% reduction in operator delays, for
which we are responsible, in the past 12 months, compared to a franchise
commitment of a 2% reduction per annum. Significant improvements have also been
made in other areas. For example, we have brought our on-board catering
in-house, established a new Customer Contact Centre and introduced new
passenger information services such as JourneyCheck and JourneyAlert enabling
passengers to receive instant information on how services are running and
details of planned engineering works. We launched a Customer Service Quality
Initiative aimed at delivering cleaner stations and trains, a safer environment
with improved CCTV and better information for customers. We were delighted to
record the strongest customer satisfaction figures for punctuality and
reliability for the past five years. We have also seen significant improvements
in customer satisfaction for on-train cleanliness, comfort, provision of
information on trains and at stations and in many other areas of the business.
Revenue protection is one of our key priorities and we have implemented a
number of initiatives to improve ticket purchasing opportunities and increase
ticket checks across the network. As a result we have seen a substantial
reduction in revenue leakage across the franchise.
First TransPennine Express has performed extremely well with passenger income
increased by 12.7%. Passenger volumes across the First TransPennine network
increased by 6% in the first 12 months of operation with substantial volume
growth of 29% achieved on key services to and from Manchester Airport. We have
continued to focus on train performance and introduced a team of technical
riding inspectors who are on call to travel around the network and attend to
faults on trains in service that might otherwise have led to delay or
cancellation. Initiatives such as these have led to a significant improvement
in the performance of the rolling stock. We continue to manage the introduction
of a new fleet of 51 new 100mph Siemens trains. The first of the new trains is
due to arrive for testing in the UK in December with entry into passenger
service scheduled for Spring 2006.
In First Great Western we are working closely with Network Rail and other
industry partners as part of a Joint Performance Improvement Plan. First Great
Western has reduced the operator delays, for which they are responsible, by
over 30% in the last four years. In September we launched a further integrated
transport initiative with the launch of a new range of PlusBus season tickets
enabling passengers to switch between bus and rail services with one ticket.
PlusBus can be added to both ends of a rail journey allowing passengers to
leave their car at home and make their entire journey by public transport. We
were pleased that our Exeter St Davids station was the latest First Great
Western station to be accredited with `Secure Station' status, further
demonstrating our commitment to enhance security and safety at our stations for
the benefit of our staff and passengers.
We have now successfully delivered the integrated timetable for First Great
Western and First Great Western Link. This major overhaul to the scheduling of
services has enabled us to offer passengers increased capacity, faster trains
and improved journey times on certain routes. We were pleased to launch a
package of security and safety improvements, in partnership with Transport for
London (TfL), for stations across the First Great Western Link network.
Improvements such as new CCTV and Help Points at stations provide increased
security for rail users.
Hull Trains, our non-franchised, open access intercity train company operating
between London Kings Cross and Hull, performed well during the period with
strong revenue and passenger growth. In May we introduced new 125mph trains in
to service which are performing well. We were granted regulatory approval to
introduce two new weekday services which commenced operation in June. We were
delighted to be awarded the Guardian, Observer and Guardian Unlimited Travel
Award for Best Train Operator 2005.
GB Railfreight
GB Railfreight (GBRf), our freight company, has continued to show encouraging
growth with a number of new contract wins including Royal Mail, Knights Rail,
Petrochem Carless, Angel Trains and Network Rail. Most recently GBRf won a
significant contract with Metronet to transport infrastructure materials as
part of the programme to renew the London Underground network. A number of
locomotives and wagons have been ordered, for delivery early next year, to
support the new contracts.
Franchise bidding
We were delighted to be shortlisted for the three new enlarged rail franchises;
Integrated Kent, Thameslink/Great Northern and Greater Western. We have now
submitted bids for all three franchises to the Department for Transport and
hope to hear the outcome towards the end of the year.
NORTH AMERICA
In North America the Group is the second largest operator of student
transportation with over 20,000 yellow school buses carrying nearly 2 million
students every day across the US and Canada. We operate the largest transit
contracting and management business in North America and we have an expanding
services business.
Results
Our three North American operations achieved their highest level of first half
revenue and earnings and delivered margin improvement during the period.
Revenue was £353.3m or $647.2m (2004: £284.3m or $514.6m) and an increase of
25.8% in US Dollar terms. Operating profit was £19.0m or $35.9m (2004: £15.3m
or $27.1m). Results from this division were impacted by additional fuel costs
as a result of global oil price increases.
We continue to generate excellent returns in our three North American
businesses with EBITDA of £39.6m or $74.0m (2004: £33.0m or $59.0m) and the
division remains self-financing for maintenance capital expenditure, organic
growth and in-fill acquisitions.
First Student
During the period we have continued to grow our yellow school bus operations
and deliver margin improvement despite ongoing fuel cost pressures. US Dollar
revenue increased by 22% and US Dollar operating profit rose by 31%. As in
previous years, the highly seasonal nature of this business (with the summer
holidays being a period when we earn minimal revenue but still incur fixed
costs) means that results in the first half of the year are not representative
of the full year. Contract retention remained high with over 90% of our
existing business that came up for renewal retained by First Student. We
continued to gain market share during the period through a combination of new
business wins, acquisitions and organic growth. New business was won in the
states of California, Massachusetts, Vermont, Illinois, Iowa, Louisiana,
Minnesota and Maryland and we made two in-fill acquisitions in Ohio and
Wisconsin. First Student was pleased to be able to assist the relief effort in
Louisiana following the impact of Hurricane Katrina. Yellow school buses were
used to evacuate people from the region and provide transport for children who
were re-located to new schools outside of the state.
First Transit
US Dollar revenue increased by 15%, however operating profit was impacted by
additional fuel costs. During the period we successfully commenced operation of
new contracts in Texas, Washington DC, New York and North Carolina. In addition
we were pleased to retain a number of important contracts that came up for
renewal including paratransit business in Houston and management and
contracting business in Los Angeles, Colorado as well as contracts in
Massachusetts, North Carolina, Illinois and Alabama. We also renewed an
important shuttle bus service contract with Philadelphia Airport. In October we
were delighted to be awarded a new contract to operate a call centre in
Indianapolis.
We continue to focus on expanding in the fast growing `light transit' market
such as call centre operations, logistics consultancy, paratransit, and public/
private shuttle services where we can utilise our expertise and continue to
profitably grow this side of the business.
First Services
This has been another very successful period for our Services Division, which
provides a range of outsourced vehicle maintenance, operations and support
services to public and private sector clients. US Dollar revenue rose by 73%
and operating profit increased by 112% primarily as a result of a full six
months trading contribution from the services business we acquired last year.
First Vehicle Services continued to win new business in the private sector with
vehicle maintenance contracts in Massachusetts and California. We also won new
contracts to fit specialist communications and mobile technology products for
clients in Tennessee, Kansas, New York, Florida and Los Angeles. In October
First Services commenced operation of a substantial contract to provide a range
of land-based support services to the US Navy.
UK BUS
The Group is the largest bus operator in the UK with a fleet of 9,300 buses and
a market share of approximately 23%. We carry some 2.8 million passengers every
day.
Results
During the period on-bus revenue increased by 5.9% and total revenue rose to £
493.6m (2004: £473.1m) as a result of revenue growth initiatives, patronage
growth, improved tender revenues and pricing. Operating profit before the
finance element of leasing costs was £40.7m (2004: £49.4m). UK Bus faced
significant cost pressures throughout the first half most notably the increase
in fuel costs, which were partly mitigated through revenue growth initiatives,
cost reductions through further operational efficiencies and pricing. We are
now fully hedged for our fuel consumption in the UK for the remainder of the
financial year to 31 March 2006. We also made significant investment in our
engineering and maintenance functions to improve operational performance. We
are encouraged to see that this is already beginning to yield results with lost
mileage currently at its lowest level in two years. While we continue to face
margin pressure in UK Bus our priority is to achieve sustainable profit growth
and continue to bear down on costs and drive more efficient processes and
higher productivity. We are closely managing the issue of driver retention and,
as a result of our initiatives such as the recruitment of European drivers,
have seen a very encouraging decrease in driver turnover.
In London we were pleased to significantly improve our performance the league
tables issued by Transport for London (TfL) for punctuality and reliability.
This marked improvement reflects the significant effort to improve service
quality and the investment in additional focused supervision of specific
routes. We were also delighted to be awarded the contract to operate one of the
two Heritage Bus Routes on behalf of TfL. The service, which will commence on
12 November, is a high profile contract and we are pleased to be entrusted with
providing this high quality service.
The Mayor of London has now approved plans to extend the Congestion Charging
zone westward in 2007. We have already prepared, and are well positioned with
depot location and capacity, to provide further services should they be
required in order to meet the needs of passengers.
Following the announcement in July that London is to host the Olympics in 2012
we look forward to working closely with the Olympic Transport Authority to
develop innovative and comprehensive transport plans that will deliver the best
transport system for London and the Olympic Games.
Outside London in our urban bus operations, which comprise approximately 60% of
UK Bus revenue, we have continued to see strong revenue growth in those towns
and cities where we are able to work with Local Authorities to provide bus
services alongside traffic management schemes to tackle congestion. We continue
our policy to target our capital investment in those areas where there is a
clear commitment to support public transport.
We have developed `Punctuality Improvement Partnerships' (PIPs) where we work
together with Local Authorities to minimise the impact of traffic congestion
and identify areas where we can deliver time-saving solutions to improve the
reliability of services. The first PIP was introduced in Manchester earlier
this year and we are working closely with Local Authorities throughout the UK
to roll out these innovative partnerships across our operating areas.
In Glasgow, which has one of the fastest growing bus networks in the UK, we
were delighted to join Glasgow City Council in a £30m partnership agreement
over 10-years to boost bus transport in the city. This innovative agreement
will see Glasgow City Council, together with West Dunbartonshire Council with
backing from the Scottish Executive and Strathclyde Passenger Transport, invest
£27m to provide bus information and signalling systems, traffic management
measures on key corridors to improve journey times and reliability as well as
other infrastructure such as new bus shelters and bus access. The Group has
already made a significant investment in 220 new vehicles for the city and will
contribute a further £4m towards bus improvements including tracking equipment
linked to the Council's traffic control systems and improved security equipment
such as CCTV. This partnership, known as `Streamline', is a complete package
which is only possible when the public and private sector work together to
deliver a high quality public transport system which provides a viable
alternative to the car.
Capital expenditure has been focused on areas with the potential for high
passenger growth. During the period £52.1m was spent on new, low floor, easy
access buses for towns and cities including Aberdeen, Bath, Edinburgh, Glasgow,
Manchester, Halifax, Huddersfield, Norwich and Stoke-on-Trent.
Investment in our people is key to our success and we continue to develop a
number of employee training programmes and facilities. During the last year
over 200 managers and supervisors have completed specially tailored training
courses. For the current trading year a further 560 places are being taken up
ensuring that our staff have the necessary skills and training to meet the
needs of passengers. In London we have introduced, in partnership with London
Buses, a simulator for bus drivers. The simulator, based at our Willesden
Junction depot, will be used to support traditional driver training for new and
existing employees.
We were delighted that our bus operations in York won `Public Transport
Operator of the Year' at the National Transport Awards in June. It was
particularly pleasing to have been nominated for this award by the City of York
Council in recognition of the close and effective partnership between us.
As part of our ongoing drive to improve operational efficiency and increase
productivity we have continued to make significant investment in our
engineering and maintenance functions. We have rolled out standardised
maintenance procedures across all of our operating companies and we have
reviewed and improved our processes for inspection and repair. We have already
started to see a positive impact from these reforms and expect to continue to
see an improved operating performance and reduction in costs over the medium
term.
GROUP OUTLOOK
We remain optimistic about our future prospects. In UK Railways our two
longer-term franchises, First TransPennine Express and First ScotRail, continue
to outperform and we are well positioned to benefit from rail re-franchising,
having been shortlisted and now submitted bids for three new enlarged rail
franchises in this current round. Our North American business has highly
dependable revenue streams, of which 80% are covered by medium-term contracts,
and has continued to deliver excellent returns. In UK Bus we are seeing strong
revenue growth together with encouraging passenger growth where we are able to
work with Local Authorities who are committed to public transport and reducing
congestion through traffic management measures. Our investment in service
quality and reliability has already begun to deliver some encouraging
improvements and we continue to bear down on costs and drive further process
efficiencies and increased productivity. Our strategy remains clear - we will
use the Group's strong cash flows to invest for growth in our core businesses;
we will explore opportunities to develop in new markets and we will increase
dividends and buy back shares while maintaining a strong balance sheet. Early
indications are that trading in the second half of the year is in line with our
expectations.
Moir Lockhead
Chief Executive
Finance Director's review
Overview
FirstGroup has a portfolio of businesses in the UK and North America which
generate strong predictable profits and cash flows which are used to increase
shareholder value by investing for growth, increasing dividends and where
appropriate, repurchasing shares. We aim to create value for our shareholders
through a competitive dividend yield, our progressive dividend growth policies
and earnings growth.
This is the first set of results prepared under International Financial
Reporting Standards (IFRS) and comparative results for the six months to 30
September 2004 and the year to 31 March 2005 have been restated under IFRS.
Results
I am pleased to report revenue growth of 14% for the group as a whole. We are
currently bidding for three rail franchises worth up to £1.1 billion of
additional revenue per annum.
6 months to 6 months to Year to
30 September 2005 30 September 2004 31 March 2005
Divisional Revenue Operating Operating Revenue Operating Operating Revenue Operating Operating
results
£m profit * Margin * £m profit * Margin * £m profit * Margin *
£m % £m % £m %
UK Bus 493.6 40.7 8.2 473.1 49.4 10.4 960.7 115.2 12.0
UK Rail 526.0 34.3 6.5 446.6 32.7 7.3 1,059.7 64.5 6.1
North America 353.3 19.0 5.4 284.3 15.3 5.4 665.8 62.4 9.4
Financing - (4.5) - - (4.5) - - (9.0) -
element of
leases **
Other *** 3.6 (8.1) - 3.3 (7.3) - 7.2 (18.3) -
Total Group 1,376.5 81.4 5.9 1,207.3 85.6 7.1 2,693.4 214.8 8.0
* Before intangible asset amortisation, bid costs and profit on disposal of
fixed assets.
** Financing element of UK PCV operating lease costs.
*** Tram operations, central management and other items.
Throughout the financial review, operating profit and operating margin are
defined as being before intangible asset amortisation and bid costs
UK Bus revenue was £493.6m (six months to 30 September 2004: £473.1m) an
increase of 4.3%. Operating profit was £40.7m (six months to 30 September 2004:
£49.4m). There were significant cost pressures during the period in particular
fuel costs and drivers' wage settlements in excess of inflation. The period
also saw a continued investment in engineering. These cost pressures were
partly mitigated by price/yield activities and reduced costs elsewhere through
operational efficiencies. UK operations are now 100% hedged on crude oil price
risk for the remainder of financial year 2005/06 at $38 per barrel. Fuel aside,
we are focusing on improving bus margins and believe that opportunities exist
to both grow revenues and improve efficiency.
UK Rail revenue was £526.0m (six months to 30 September 2004: £446.6m), an
increase of 17.8%. Operating profit was £34.3m (six months to 30 September
2004: £32.7m). There were extremely strong performances during the period from
both First ScotRail and First TransPennine Express. First Great Western profits
however were down on last year due to a lower subsidy and the impact of the
London bombings. We have submitted bids for three major franchises - Integrated
Kent, Greater Western and Great Northern/Thameslink and we anticipate hearing
the outcomes of these bids by the end of the year.
North America revenue was £353.3m (six months to 30 September 2004: £284.3m),
an increase of 25.8% in US Dollar terms. Operating profit was £19.0m (six
months to 30 September 2004: £15.3m), an increase of 32.5% at constant exchange
rates. Operating margin in US Dollars increased to 5.5% from 5.3%. First
Student benefited by $4.0m in incremental profit recovering the 'lost'
operational days from 2004/05. Student results were impacted however by
additional fuel costs of a similar amount. First Services performed extremely
well with profits up by 112% principally due to a full half year of SKE which
was acquired towards the end of the first half of last year. First Transit
results were down year on year principally due to higher fuel costs.
Operating profit in both Rail and North America have grown with record first
half earnings in both divisions. Overall operating profit is down by 5% as a
result of both high fuel costs and continued investment in improving
engineering reliability in UK Bus. We are pleased to report a strong turnaround
in the reliability of our UK Bus services both in terms of Transport for London
league tables and overall lost mileage.
Property
Property gains on disposal of £11.8m (six months to 30 September 2004: £3.7m)
were realised during the period with the most significant being the disposals
of depots in Leicester and Motherwell. These sales reflect the Group's ongoing
programme of disposing of older UK Bus depots in high value city centre
locations and re-investing in more modern and efficient facilities.
Bid costs
Bid costs of £10.0m (six months to 30 September 2004: £2.7m) were incurred
during the period principally on our bids for Integrated Kent, Greater Western
and Great Northern/Thameslink franchises as well as the Docklands Light Railway
bid.
Intangible asset amortisation
The intangible asset amortisation charge for the period was £2.0m (six months
to 30 September 2004: £0.4m) with the increase due to amortisation on the
ScotRail pension intangible, which arose in the second half of last year, and a
full period charge for contract related intangibles acquired in financial year
2004/05.
Interest payable and similar charges
The net interest charge was £25.9m (six months to 30 September 2004: £21.9m)
with the increase principally due to a higher average level of net debt
compared to the first half of last year. The net interest charge is covered 5.2
times (six months to 30 September 2004: 6.1 times) by earnings before interest,
taxation, depreciation and amortisation (EBITDA).
Taxation
The taxation charge for the period, on profit before tax after exceptional
items, was £15.2m (six months to 30 September 2004: £17.6m) with the reduction
being principally due to lower pre-tax profits. 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 2004: 27.5%) on profit before intangible asset
amortisation and bid costs. The actual cash cost of taxation to the Group is
estimated to be 5% of profit before tax after exceptional items for the full
year (year to 31 March 2005: 16%). The reduction in the cash tax rate is
largely due to tax depreciation from higher capital expenditure, pension
payments and increased property gains.
Dividends
The interim dividend of 4.55 pence (six months to 30 September 2004: 4.125
pence) per ordinary share represents an increase of 10.3%. The interim dividend
will be paid on 8 February 2006 to shareholders on the register of members at
the close of business on 13 January 2006. Under the new international
accounting rules this interim dividend has not been provided in the accounts as
at 30 September 2005.
EPS
The adjusted basic EPS, before intangible asset amortisation, bid costs and
profit on disposal of fixed assets, was 9.2 pence (six months to 30 September
2004: 10.9 pence). Basic EPS was 9.0 pence (six months to 30 September 2004:
11.0 pence).
Cash flow
The Group's businesses continue to generate strong operating profits which are
converted into cash. EBITDA for the period was £135.3m (six months to 30
September 2004: £133.0m and year to 31 March 2005: £322.4m). EBITDA by division
is set out below:
6 months to 6 months to Year to
30 September 2005 30 September 2004 31 March 2005
Revenue EBITDA EBITDA Revenue EBITDA EBITDA Revenue EBITDA EBITDA
£m £m % £m £m % £m £m %
UK Bus 493.6 69.6 14.1 473.1 76.2 16.1 960.7 168.6 17.5
UK Rail 526.0 37.3 7.1 446.6 34.4 7.7 1,059.7 69.4 6.5
North 353.3 39.6 11.2 284.3 33.0 11.6 665.8 109.3 16.4
America
Financing - (4.5) - - (4.5) - - (9.0) -
element of
leases
Other 3.6 (6.7) - 3.3 (6.1) - 7.2 (15.9) -
Total Group 1,376.5 135.3 9.8 1,207.3 133.0 11.0 2,693.4 322.4 12.0
During the period there was a working capital outflow of £27.2m which was
principally due to pension payments and growth in both the United Kingdom and
North America.
Capital expenditure and acquisitions
Capital expenditure, as set out in note 9 to the interim financial information,
was £113.1m (six months to 30 September 2004: £47.3m and year to 31 March 2005:
£135.3m). Capital expenditure was predominantly in North American operations of
£52.9m and UK Bus operations of £55.8m.
The North American division acquired US School Bus businesses for a total
consideration of £3.5m. Provisional goodwill arising amounted to £2.3m.
Net cash invested in capital expenditure and acquisitions was £107.8m (six
months to 30 September 2004: £31.1m), with the increase principally due to the
timing of new bus purchases in the UK and North America, partly offset by 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 2005 was £759.9m and was comprised as
follows:
Analysis of net debt Fixed Variable Total
£m £m £m
Cash - 48.4 48.4
Rail ring-fenced cash and deposits - 71.4 71.4
Sterling bond (2013 6.875%) * (296.2) - (296.2)
Sterling bond (2019 6.125%) ** (245.2) - (245.2)
Sterling bank loans and overdrafts - (231.6) (231.6)
US dollar bank loans and overdrafts (3.6) (13.5) (17.1)
Canadian bank loans and overdrafts (2.5) (39.8) (42.3)
Euro bank loans and overdrafts - (10.0) (10.0)
HP and finance leases (8.5) (8.2) (16.7)
Loan notes (8.7) (11.9) (20.6)
Interest rate swaps (57.0) 57.0 -
Total (621.7) (138.2) (759.9)
* excludes accrued interest
** excludes accrued interest, swapped to US Dollars and is stated net of a gain
on the associated currency swaps
Balance sheet and net assets
Net assets increased by £46.2m over the period principally reflecting retained
earnings for the period of £35.5m, an increase in the hedging reserve of £
23.2m, favourable movements on foreign exchange reserves of £18.5m, and higher
minority interest (net of dividends paid to minority shareholders) for the
period of £2.4m, partly offset by dividends paid of £34.2m.
Shares in issue
As at 30 September 2005 there were 393.6m (30 September 2004: 398.4m and 31
March 2005: 393.6m) shares in issue, excluding treasury shares. 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
393.3m (six months to 30 September 2004: 400.9m and year to 31 March 2005:
399.2m).
Foreign exchange
The results of the North American businesses have been translated at an average
rate of £1:$1.83 (six months to 30 September 2004: £1:$1.82 and year to 31
March 2005: £1:$1.85). The period end rate was £1:$1.78 (30 September 2004: £1:
$1.80 and 31 March 2005: £1:$1.87).
Accounting policies
The Interim Report for the six months to 30 September 2005 has been prepared
using accounting policies that comply with International Accounting Standards
(IAS) and IFRS. These accounting policies were used for the preparation of the
restated IFRS financial information for the six months ended 30 September 2004
and the year ended 31 March 2005, issued in a press release on 28 September
2005. The accounting policies and the IFRS restatements are available on the
group's website, www.firstgroup.com.
We expect to use consistent accounting policies for the preparation of the
results for the year ending 31 March 2006. There is, however, a possibility
that the accounting policies may have to be changed due to any new standards
that may be issued by the International Accounting Standards Board between now
and our financial year end. In addition, interpretations may be issued by the
International Financial Reporting Interpretations Committee, and interpretation
of existing IFRS or industry practice may evolve.
Dean Finch
Finance Director
Consolidated income statement
Notes Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
before
before amortisation total amortisation amortisation total total
amortisation
impairment 6 months impairment impairment 6 months year to
impairment charges and to charges and charges and to
charges and 31 March
bid 30 bid bid 30
bid September September 2005
costs costs costs 2004
costs 2005
6 months to 6 months to 6 months to
6 months to
30 September 30 September 30 September
30 September
2005 2004 2004
2005
£m £m £m £M £m £m £m
Revenue
Continuing operations 2 1,376.5 - 1,376.5 1,207.3 - 1,207.3 2,693.4
Operating costs before
profit on disposal of
fixed assets
Continuing operations (1,295.1) (12.0) (1,307.1) (1,121.7) (3.1) (1,124.8) (2,492.7)
Operating profit before
profit on disposal of
fixed assets
Continuing operations 81.4 (12.0) 69.4 85.6 (3.1) 82.5 200.7
Operating profit before 81.4 - 81.4 85.6 - 85.6 214.8
amortisation, impairment
charges and bid costs
Amortisation and - (2.0) (2.0) - (0.4) (0.4) (2.2)
impairment charges
Bid costs - (10.0) (10.0) - (2.7) (2.7) (11.9)
Operating profit before 81.4 (12.0) 69.4 85.6 (3.1) 82.5 200.7
profit on disposal of
fixed assets
Profit on disposal of - 11.8 11.8 - 3.7 3.7 3.3
fixed assets
Operating profit 81.4 (0.2) 81.2 85.6 0.6 86.2 204.0
Finance income 3 5.2 - 5.2 1.5 - 1.5 4.3
Finance cost 3 (31.1) - (31.1) (23.4) - (23.4) (52.6)
Profit before taxation 55.5 (0.2) 55.3 63.7 0.6 64.3 155.7
Taxation 4 (15.3) 0.1 (15.2) (17.4) (0.2) (17.6) (41.4)
Profit for the period 40.2 (0.1) 40.1 46.3 0.4 46.7 114.3
from continuing
operations
Attributable to:
Equity holders of the 35.9 (0.4) 35.5 43.6 0.4 44.0 107.8
parent
Minority interest 4.3 0.3 4.6 2.7 - 2.7 6.5
40.2 (0.1) 40.1 46.3 0.4 46.7 114.3
Basic earnings per share 6 9.0p 11.0p 27.0p
Diluted earnings per 6 9.0p 10.9p 26.8p
share
Dividends of £34.2m were paid during the period (30 September 2004: £31.8m).
Dividends of £17.9m were proposed for approval during the period (30 September
2004: £16.4m and 31 March 2005: £34.2m). Consolidated balance sheet
Notes Unaudited Unaudited Unaudited
30 30 31 March
September September
2005 2004 2005
£m £m £m
Non-current assets
Goodwill 7 485.8 469.9 465.8
Other intangible assets 8 28.0 8.0 29.4
Property, plant and equipment 9 904.9 789.8 835.0
1,418.7 1,267.7 1,330.2
Current assets
Inventories 54.4 40.8 40.1
Trade and other receivables 10 396.4 375.1 368.7
Financial assets 13 57.4 - -
Short-term deposits - 5.1 7.5
Cash and cash equivalents 119.8 76.4 146.6
628.0 497.4 562.9
Non-current assets classified as 11 5.7 5.8 5.2
held for sale
Total assets 2,052.4 1,770.9 1,898.3
Current liabilities
Trade and other payables 12 503.1 468.9 503.5
Retirement benefit obligation 4.0 3.9 3.8
Tax liabilities 59.1 61.3 52.8
Obligations under finance leases 13 5.2 14.3 9.0
Bank overdrafts and loans 13 6.1 20.0 51.4
Loan notes 13 2.8 0.3 0.5
580.3 568.7 621.0
Net current assets/(liabilities) 47.7 (71.3) (58.1)
Non-current liabilities
Financial liabilities - other 13 2.4 - -
Bonds 13 576.8 536.2 527.9
Bank loans 13 294.9 171.3 192.8
Retirement benefit obligation 205.4 233.0 221.1
Deferred tax liabilities 62.6 19.2 39.0
Long-term provisions 14 38.2 31.6 44.6
Obligations under finance leases 13 11.5 11.3 15.1
Loan notes 13 17.8 20.7 20.5
1,209.6 1,023.3 1,061.0
Total liabilities 1,789.9 1,592.0 1,682.0
Net assets 262.5 178.9 216.3
Equity
Share capital 16 19.9 19.9 19.9
Share premium account 17 238.8 238.8 238.8
Hedging reserves 17 23.2 - -
Other reserves 17 4.6 4.6 4.6
Own shares 17 (18.8) (1.3) (18.9)
Translation reserves 18 13.3 1.3 (14.2)
Retained earnings 17 (31.5) (88.4) (24.5)
Equity attributable to equity 249.5 174.9 205.7
holders of the parent
Minority interests 13.0 4.0 10.6
Total equity 262.5 178.9 216.3
Consolidated cash flow statement
Note Unaudited Unaudited Unaudited
6 months to 6 months to Year to
30 September 30 September 31 March
2005
2004 2005
£m
£m £m
Net cash from operating activities 20 62.9 13.9 193.7
Investing activities
Interest received 2.7 1.1 6.8
Proceeds of disposal of property, 2.0 17.6 27.1
plant and equipment
Purchases of property, plant and (106.3) (30.1) (124.3)
equipment
Acquisition of businesses (3.5) (2.6) (14.9)
Acquisition of subsidiaries - (16.0) (22.3)
Net cash used in investing (105.1) (30.0) (127.6)
activities
Financing activities
Repurchase of ordinary share capital - (11.8) (29.7)
Share purchased by Employee Benefit (0.7) (0.3) (0.3)
Trust
Dividends paid (34.0) (31.5) (48.0)
Dividends paid to minority (2.5) (0.8) (3.1)
shareholders
Repayments of bank borrowings (222.8) - -
Repayment of obligations under (7.4) (11.3) (20.2)
finance leases
Repayment of loan notes (0.4) (0.3) (0.3)
Payment of new bank facility issue (1.0) - -
costs
New bank loans raised 286.8 61.2 90.4
Net cash from financing activities 18.0 5.2 (11.2)
Net (decrease)/increase in cash and (24.2) (10.9) 54.9
cash equivalents
Cash and cash equivalents at 145.9 92.2 92.2
beginning of period
Effect of foreign exchange rate (1.9) 0.2 (1.2)
changes
Cash and cash equivalents at end of 119.8 81.5 145.9
period
Cash and cash equivalents for cash flow 30 30 September 31 March
statement purposes comprise: September
2004 2005
2005
£m £m
£m
Cash and cash equivalents per balance 119.8 76.4 146.6
sheet
Short-term bank deposits - 5.1 7.5
Overdrafts - - (8.2)
119.8 81.5 145.9
Cash and cash equivalents for the purposes of the cash flow statement comprise
cash at bank and in hand, overdrafts and other short-term highly liquid
investments with a maturity of three months or less.
Reconciliation of net cash flows to movement in net debt
Unaudited Unaudited Unaudited
6 months to 6 months to Year to
30 September 30 September 31 March
2005
2004 2005
£m
£m £m
(Decrease)/Increase in cash and cash (24.2) (10.9) 54.9
equivalents in year
Cash inflow from increase in debt (56.2) (49.6) (70.0)
and HP contract and finance lease
financing
Debt acquired on acquisition of - - (20.6)
businesses
Lease and hire purchase contracts - - (2.2)
acquired with new franchise
Fees on issue of Bond and loan 1.0 - -
facility
Foreign exchange differences (15.9) (1.0) 7.0
Other non-cash movements in relation (1.5) (0.4) (1.5)
to financial instruments
Movement in net debt in year (96.8) (61.9) (32.4)
Net debt at beginning of year (663.1) (630.7) (630.7)
Net debt at end of year (759.9) (692.6) (663.1)
Net debt includes the value of foreign exchange derivatives in connection to
the £250m bond and excludes all accrued interest.
Consolidated statement of recognised income and expense
Unaudited Unaudited Unaudited
6 months 6 months Year to
to to
31 March
30 30
September September 2005
2005 2004
£m
£m £m
Derivative hedging instrument movements (13.8) - -
Share based payments 1.6 1.4 2.9
Exchange differences on translation of foreign 35.2 1.3 (14.2)
operations
Actuarial gains on defined benefit pension - - 20.8
schemes
Movement in EBT, QUEST and Treasury Shares (0.6) (0.7) (17.8)
during period
Deferred tax on share based payments (0.2) 0.3 0.9
Deferred tax on actuarial gains - - (6.3)
Net income recognised directly in equity 22.2 2.3 (13.7)
Profit for the period 40.1 46.7 114.3
Total recognised income and expense for the 62.3 49.0 100.6
period
Attributable to:
Equity holders of the parent 57.7 46.3 94.1
Minority interests 4.6 2.7 6.5
62.3 49.0 100.6
Balances recognised on 1 April 2005 on 20.3 - -
adoption of IAS 39, net of tax
Notes to the interim financial information
1 Basis of preparation
This interim consolidated report is for the six months ended 30 September 2005.
IFRS 1 'First-time Adoption of IFRS' has been applied as the accounting period
forms part of the Group's first IFRS financial statements for the year ended 31
March 2006. The comparatives for the period 30 September 2004 and the year
ended 31 March 2005 have been restated under IFRS. The transition date to IFRS
is 1 April 2004.
This interim consolidated report has been prepared in accordance with the
accounting policies that are anticipated to be used in preparation of the
annual financial statements those IFRS standards and IFRIC interpretations
issued and effective or issued and early adopted as at the time of preparing
this report. The IFRS standards and IFRIC interpretations that will be
applicable at 31 March 2006, including those that will be applicable on an
optional basis, are not known with certainty at the time of preparing these
financial statements. In particular the accounting policies assume that the
amendments to IAS 19 'Employee Benefits', allowing actuarial gains and losses
to be recognised in full through reserves, is adopted by the European Union.
The Group prepared financial statements in accordance with UK Generally
Accepted Accounting Principles (UK GAAP) until 31 March 2005. UK GAAP differs
in some areas from IFRS. IFRS accounting policies, reconciliations and
descriptions of the effect of the transition from UK GAAP to IFRS on the
Group's equity at 1 April 2004, 30 September 2004 and 31 March 2005 and on its
profit for the 6 months ended 30 September 2004 and for the year ended 31 March
2005 are available on the Company's website www.firstgroup.com.
The accounting policies have been consistently applied to all the periods
presented except those relating to the classification and measurement of
financial instruments. The Group has made use of the exemption available under
IFRS 1 to only apply IAS 32 'Financial Instrument: Disclosure and Presentation'
and IAS 39 'Financial Instruments: Recognition and Measurement' from 1 April
2005.
The results for the six months ended 30 September 2005 are unaudited but have
been reviewed by the auditors. The information shown for the year ended 31
March 2005 has been derived from the IFRS transition document published on the
Group's website on 28 September 2005. Prior to 1 April 2005, the Group prepared
its audited annual financial statements and unaudited interim results under UK
GAAP. The audited UK GAAP annual financial statements for 31 March 2005, which
represents the statutory accounts for that year, and on which the auditors gave
an unqualified opinion, have been delivered to the Registrar of Companies.
The figures for the six months to 30 September 2005 include the results of the
rail businesses for the period ended 17 September 2005 and the results of the
other businesses for the 26 weeks ended 24 September 2005.
This interim consolidated report is unaudited and does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985.The
interim report will be sent to all shareholders in November 2005 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 8 November 2005.
2 Segment information
For management purposes, the Group is currently organised into three operating
divisions - UK Bus, UK Rail and North America. These divisions are the basis on
which the Group reports its primary segment information. The principal
activities of these divisions are set out in the operating and financial
review.
The segment results for the six months to 30 September 2005 are as follows:
UK Bus UK Rail North Group Consolidated
America items
6 months 6 months 6 months to
to 30 to 30 6 months 6 months 30 September
September September to 30 to 30
September September 2005
2005 2005
2005 2005 £m
£m £m
£m £m
Revenue 493.6 526.0 353.3 3.6 1,376.5
Segment results * 40.7 34.3 19.0 (8.1) 85.9
Amortisation of intangible - (1.3) (0.7) - (2.0)
assets
Financing element of (4.5) - - - (4.5)
operating leases
Bid costs - (9.5) - (0.5) (10.0)
Profit on disposal of 11.8 - - - 11.8
fixed assets
Operating profit 48.0 23.5 18.3 (8.6) 81.2
Investment income 5.2
Finance costs (31.1)
Profit before tax 55.3
Tax (15.2)
Profit for the period 40.1
The segment results for the six months to 30 September 2004 are as follows:
UK Bus UK Rail North Group Consolidated
America items
6 months 6 months 6 months
6 months 6 months
to 30 to 30 to 30
September September to 30 to 30
September September September
2004 2004
2004 2004 2004
£m £m
£m £m £m
Revenue 473.1 446.6 284.3 3.3 1,207.3
Segment results * 49.4 32.7 15.3 (7.3) 90.1
Amortisation of intangible - (0.3) (0.1) - (0.4)
assets
Financing element of (4.5) - - - (4.5)
operating leases
Bid costs - (2.7) - - (2.7)
Profit on disposal of 3.7 - - - 3.7
fixed assets
Operating profit 48.6 29.7 15.2 (7.3) 86.2
Investment income 1.5
Finance costs (23.4)
Profit before tax 64.3
Tax (17.6)
Profit for the period 46.7
2 Segment information (continued)
The segment results for the year to 31 March 2005 are as follows:
UK Bus UK Rail North Group Consolidated
America items
Year to Year to Year to
Year to Year to
31 March 31 March 31 March
31 March 31 March
2005 2005 2005
2005 2005
£m £m £m
£m £m
Revenue 960.7 1,059.7 665.8 7.2 2,693.4
Segment results * 115.2 64.5 62.4 (18.3) 223.8
Amortisation of intangible - (1.6) (0.6) - (2.2)
assets
Financing element of (9.0) - - - (9.0)
operating leases
Bid costs - (11.4) - (0.5) (11.9)
Profit on disposal of fixed 3.3 - - - 3.3
assets
Operating profit 109.5 51.5 61.8 (18.8) 204.0
Investment income 4.3
Finance costs (52.6)
Profit before tax 155.7
Tax (41.4)
Profit for the period 114.3
* before amortisation of intangible assets, financing element of leases, bid
costs and profit on disposal of fixed assets.
3 Net finance costs
6 months to 6 months to Year to
30 September 30 31 March
2005 September
2004 2005
£m
£m £m
Interest income on bank deposits 5.2 1.5 4.3
Bond and bank facilities (26.9) (20.2) (43.3)
Loan notes (0.9) (0.8) (1.6)
Finance charges payable in respect of hire (0.5) (1.1) (2.2)
purchase contracts and finance leases
Notional interest (2.8) (1.3) (5.5)
Finance costs (31.1) (23.4) (52.6)
Net finance costs (25.9) (21.9) (48.3)
4 Tax 6 months to 6 months to Year to
30 30 31 March
September September 2005
2005 2004
£m
£m £m
Corporation tax 2.6 10.0 19.0
Deferred tax 12.6 7.6 22.4
Tax on profit on ordinary activities 15.2 17.6 41.4
5 Dividends paid and proposed 6 months 6 months Year to
to 30
September to 30 31
2005
September March
£m 2004
2005
£m
£m
Final dividend paid for the year ended 31 March 34.2 31.8 31.8
2005 of 8.69p (2004: 7.9p) per share
Interim dividend paid for the year ended 31 March - - 16.4
2005 of 4.125p (2004: 3.75p) per share
Amounts recognised as distributions to equity 34.2 31.8 48.2
holders in the period
Proposed interim dividend for the year ended 31 17.9 16.4 -
March 2006 of 4.55p (2005: 4.125p) per share
The proposed interim dividend will be paid on 8 February 2006 to shareholders
on the register of members at the close of business on 13 January 2006. The
proposed interim dividend has not been included as a liability as at 30
September 2005.
6 Earnings per share (EPS)
Basic EPS is based on earnings of £35.5m (six months to 30 September 2004: £
44.0m and year to 31 March 2005: £107.8m) and on a weighted average number of
ordinary shares (excluding own shares held in trust for employees and treasury
shares) of 393.3m (six months to 30 September 2004: 400.9m and year to 31 March
2005: 399.2m) in issue.
Diluted EPS is based on the same earnings and on the weighted average number of
ordinary shares of 394.6m (six months to 30 September 2004: 403.7m and year to
31 March 2005: 402.0m). The difference in the number of shares between the
basic calculation and the diluted calculation represents the weighted average
number of potentially dilutive ordinary shares.
The adjusted basic EPS and adjusted cash EPS are intended to demonstrate
recurring elements of the results of the Group before amortisation of
intangible assets, rail bid costs and profit on disposal of fixed assets. A
reconciliation of the earnings used in the bases is set out below:
6 months to
30 September 2005
£m Earnings
per share
(p)
Profit for basic EPS calculation 35.5 9.0
Amortisation of intangible assets 2.0 0.5
UK Rail bid costs 10.0 2.6
Profit on disposal of fixed assets * (11.3) (2.9)
Taxation effect of adjustments (0.2) -
Profit for adjusted basic EPS calculation 36.0 9.2
Depreciation ** 53.8 13.6
Profit for adjusted cash EPS calculation 89.8 22.8
* Profit on disposal of fixed assets of £11.8m per note 2 less
£0.5m of profit on disposal attributable to equity minority
interests before tax.
** Depreciation charge of £53.9m per note 9 less £0.1m of
depreciation attributable to equity minority interests.
6 Earnings per share (EPS) (continued)
6 months to
30 September 2004
£m Earnings
per share
(p)
Profit for basic EPS calculation 44.0 11.0
Amortisation of intangible assets 0.4 0.1
UK Rail bid costs 2.7 0.7
Profit on disposal of fixed assets (3.7) (0.9)
Taxation effect of adjustments 0.2 -
Profit for adjusted basic EPS calculation 43.6 10.9
Depreciation * 47.3 11.8
Profit for adjusted cash EPS calculation 90.9 22.7
* Depreciation charge of £47.4m less £0.1m of
depreciation attributable to equity minority interests.
Year to
31 March 2005
£m Earnings
per share
(p)
Profit for basic EPS calculation 107.8 27.0
Amortisation of intangible assets 2.2 0.5
UK Rail bid costs 11.9 3.0
Profit on disposal of fixed assets (3.3) (0.8)
Taxation effect of adjustments (3.2) (0.8)
Profit for adjusted basic EPS calculation 115.4 28.9
Depreciation * 107.4 26.9
Profit for adjusted cash EPS calculation 222.8 55.8
* Depreciation charge of £107.6m less £0.2m of
depreciation attributable to equity minority interests.
7 Goodwill £m
Cost
At 1 April 2005 465.8
Additions 2.3
Exchange rate differences 17.7
At 30 September 2005 485.8
Accumulated impairment losses
At 1 April 2005 -
Charge for period -
Exchange rate differences -
At 30 September 2005 -
Carrying amount
At 30 September 2005 485.8
At 31 March 2005 465.8
At 30 September 2004 469.9
8 Other intangible assets Contracts Franchise Total
acquired
agreements £m
£m
£m
Cost
At 1 April 2005 10.6 21.0 31.6
Exchange rate differences 0.6 - 0.6
At 30 September 2005 11.2 21.0 32.2
Amortisation
At 1 April 2005 0.6 1.6 2.2
Charge for period 0.7 1.3 2.0
At 30 September 2005 1.3 2.9 4.2
Carrying amount
At 30 September 2005 9.9 18.1 28.0
At 31 March 2005 10.0 19.4 29.4
At 30 September 2004 4.2 3.8 8.0
Contracts acquired through the purchases of businesses and subsidiary
undertakings, are amortised on a straight-line basis over their useful lives,
which is on average, eight years.
The rail franchise agreements intangible asset represents the part of the
economic benefit derived from the rail franchise agreements that is realised as
a result of recognising our share of the rail pension deficit and is amortised
on a straight-line basis over the term of the franchise.
9 Property, plant and Land and Passenger Other Total
equipment
buildings carrying plant and £m
£m vehicle equipment
fleet
£m
£m
Cost or valuation
At 1 April 2005 149.1 1,228.7 161.4 1,539.2
Subsidiary undertakings and - 1.5 - 1.5
businesses acquired
Additions 3.1 102.0 8.0 113.1
Disposals (3.6) (21.8) (0.9) (26.3)
Reclassifications (5.1) - 5.1 -
Classified as held for sale - (15.6) - (15.6)
Exchange rate differences 1.3 24.0 1.9 27.2
At 30 September 2005 144.8 1,318.8 175.5 1,639.1
Depreciation
At 1 April 2005 23.7 581.2 99.3 704.2
Subsidiary undertakings and - - - -
businesses acquired
Charge for period 1.6 42.0 10.3 53.9
Disposals (0.4) (20.8) (0.3) (21.5)
Reclassifications (5.1) - 5.1 -
Classified as held for sale - (13.7) - (13.7)
Exchange rate differences 0.4 9.9 1.0 11.3
At 30 September 2005 20.2 598.6 115.4 734.2
Carrying amount
At 30 September 2005 124.6 720.2 60.1 904.9
At 31 March 2005 125.4 647.5 62.1 835.0
At 30 September 2004 119.9 616.8 53.1 789.8
10 Trade and other receivables 30 September 30 September 31 March
2005 2004
2005
£m £m
£m
Amounts due within one year
Trade debtors 260.1 262.6 258.2
Other debtors 71.2 52.3 61.1
Other prepayments and accrued income 65.1 60.2 49.4
396.4 375.1 368.7
11 Non-current assets classified as held for sale
Non-current assets held for resale comprise of North American yellow school
buses which are surplus to requirement and are being actively marketed on the
Internet. Gains or losses arising on the disposal of such assets are included
in arriving at operating profit in the income statement.
12 Trade and other payables 30 September 30 September 31 March
2005 2004
2005
£m £m
£m
Amounts falling due within one year
Trade creditors 141.1 128.2 122.4
Other creditors 46.7 37.8 43.2
Accruals and deferred income 301.6 291.7 324.6
Season ticket deferred income 13.7 11.2 13.3
503.1 468.9 503.5
13 Financial assets and liabilities
The Group has elected to apply the exemption available in IFRS 1 'First-time
Adoption of IFRS', from restatement of comparatives for IAS 32 'Financial
instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments:
Recognition and Measurement'. It applies previous UK GAAP rules to derivatives,
financial assets and financial liabilities and to hedging relationships for the
30 September 2004 and 31 March 2005 comparative information. The adjustments
required for differences between UK GAAP and IAS 32 and IAS 39 are determined
and recognised at 1 April 2005.
13 Financial assets and liabilities (continued)
30 September 30 31 March 1 April
2005 September
2004 2005 2005
£m
£m £m £m
Financial instruments held as
current assets
Interest and foreign exchange 21.1 - - 20.2
derivatives
Fuel derivatives 36.3 - - 31.4
57.4 - - 51.6
Financial instruments held as
current liabilities
Bank and other loans and (6.1) (20.0) (51.4) (51.4)
overdrafts
Obligations under finance leases (5.2) (14.3) (9.0) (9.0)
Loan notes (2.8) (0.3) (0.5) (0.5)
(14.1) (34.6) (60.9) (60.9)
Financial instruments held as
non-current liabilities
Bank and other loans and (294.9) (171.3) (192.8) (192.8)
overdrafts
Obligations under finance leases (11.5) (11.3) (15.1) (15.1)
Loan notes (17.8) (20.7) (20.5) (20.5)
Interest and foreign exchange (2.4) - - (7.6)
derivatives
£300m bond (305.3) (295.8) (296.0) (315.6)
£250m bond (271.5) (240.4) (231.9) (250.1)
(903.4) (739.5) (756.3) (801.7)
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. 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 £19.6 m (30
September 2004: £20.2m and 31 March 2005: £20.0m) are supported by unsecured
bank guarantees.
Bonds
The £300m bond is repayable in 2013 and is shown inclusive of accrued interest.
The £250m bond is repayable in 2019 and is shown both inclusive of accrued
interest and of the movement in the market value of the Sterling LIBOR risk
that is fully hedged by interest rate derivatives.
14 Provisions for liabilities and charges Insurance Pensions Total
claims * £m £m
£m
At 1 April 2005 34.5 10.1 44.6
Provided in the period 25.3 - 25.3
Utilised in the period (35.7) (0.3) (36.0)
Subsidiary undertakings acquired - - -
Notional interest 2.8 - 2.8
Exchange rate differences 1.5 - 1.5
At 30 September 2005 28.4 9.8 38.2
At 30 September 2004 20.8 10.8 31.6
* Insurance claims accruals due within one year at 30 September 2005 amounted
to £45.4m (31 March 2005: £39.8m) and are included in 'accruals and deferred
income' in note 12.
15 Business combinations 30 September 30 31 March
2005 September
2004 2005
£m
£m £m
Provisional fair values of net assets
acquired:
Tangible assets 1.5 2.6 34.8
Intangible assets - 4.3 10.6
Other current assets - 10.2 17.1
Cash at bank and in hand - 2.8 3.5
Loans and finance leases - - (20.6)
Minority shareholders' interests - - (4.2)
Other creditors (0.3) (5.6) (19.2)
1.2 14.3 22.0
Goodwill (note 7) 2.3 7.1 15.2
3.5 21.4 37.2
Satisfied by cash paid and payable 3.5 21.4 37.2
There was no material difference between the book value and the provisional
fair values of the net assets acquired and there were no adjustments required
in respect of accounting policy alignments.
The businesses and subsidiary undertakings acquired during the period and dates
of acquisition were:
Business acquired Date acquired % Voting
equity
instruments
acquired
Thunderbird Transit, Inc 30 June 2005 100
SBS Transit, Inc 14 September 2005 100
16 Share capital 30 September 30 31 March
September 2005
2005
2004 £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 19.9 19.9
The number of ordinary shares of 5p each in issue, excluding treasury shares,
at the end of the period was 393.6m (30 September 2004: 398.4m and 31 March
2005: 393.6m). At the end of the period 5.2m shares (30 September 2004: 0.4m
shares and 31 March 2005: 5.2m shares) were being held as treasury shares.
17 Reserves Hedging Share Own Retained
reserve shares earnings
premium
£m £m £m
account
£m
At 1 April 2005 - 238.8 (18.9) (24.5)
Financial instrument recognition * 37.0 - - (9.0)
Retained profit for the financial - - - 35.5
period
Dividends paid - - - (34.2)
Movement in EBT, QUEST and treasury - - 0.1 (0.7)
shares during the year
Derivative hedging instrument (13.8) - - -
movements *
Share based payments - - - 1.6
Deferred tax on share based payments - - - (0.2)
At 30 September 2005 23.2 238.8 (18.8) (31.5)
At 30 September 2004 - 238.8 (1.3) (88.4)
*Net of deferred tax
The adjustments required for differences between UK GAAP and IAS 32 and IAS 39
are determined and recognised at 1 April 2005. The impact of recognising the
interest rate swaps, currency swaps, fuel derivatives and the related deferred
tax, is included in the statement of recognised income and expense at 1 April
2005.
Actuarial valuations of pensions schemes are not carried out at the half year
therefore no actuarial gains or losses are recognised.
Capital Capital Total
other
redemption reserve
reserves
reserve £m
£m
£m
At 1 April 2005 1.9 2.7 4.6
Cancellation of shares - - -
At 30 September 2005 1.9 2.7 4.6
At 30 September 2004 1.9 2.7 4.6
18 Translation reserves
£m
At 1 April 2005 (14.2)
Transfer to hedging reserve on financial instrument recognition (7.7)
Movement for the financial period 35.2
At 30 September 2005 13.3
At 30 September 2004 1.3
19 Analysis of net debt At 1 April Cash flow Other At 30
non-cash September
2005 £m
changes 2005
£m
£m £m
Cash and cash equivalents 146.6 (24.9) (1.9) 119.8
Bank overdrafts (8.2) 8.2 - -
Cash 138.4 (16.7) (1.9) 119.8
Short-term bank deposits 7.5 (7.5) - -
Bank loans due within one year (43.2) 37.1 - (6.1)
Bank loans due after one year (192.8) (100.1) (2.0) (294.9)
Loans and loan notes (21.0) 0.4 - (20.6)
Obligations under hire purchase (24.1) 7.4 - (16.7)
contracts and finance leases
£300m bond (296.0) - (0.2) (296.2)
£250m bond (swapped to US dollars) (231.9) - (13.3) (245.2)
Financing (809.0) (55.2) (15.5) (879.7)
Net debt (663.1) (79.4) (17.4) (759.9)
Net debt includes the value of foreign exchange derivatives in connection with
the £250m bond and excludes all accrued interest.
20 Notes to the consolidated cash flow 6 months to 6 months Year to
statement to
30 September 31 March
2005 30 2005
September
£m £m
2004
£m
Operating profit 69.4 82.5 200.7
Adjustments for:
Depreciation charges 53.9 47.4 107.6
Amortisation of intangible assets 2.0 0.4 2.2
Share based payments 1.6 1.4 2.9
Loss on disposal of property, plant and 0.3 - 1.9
equipment
Operating cash flows before working capital 127.2 131.7 315.3
Increase in inventories (5.7) (0.7) (2.6)
Increase in receivables (3.9) (43.0) (41.0)
Decrease in payables (17.6) (50.7) (24.5)
Cash generated by operations 100.0 37.3 247.2
Corporation tax repaid/(paid) 0.7 3.0 (16.1)
Interest paid (37.3) (25.1) (35.1)
Interest element of hire purchase contracts (0.5) (1.3) (2.3)
and finance lease payments
Net cash from operating activities 62.9 13.9 193.7
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