Interim Results

Stagecoach Theatre Arts PLC 31 January 2008 31 January 2008 Stagecoach Theatre Arts plc (STA/L) ('Stagecoach' or 'the Group') Interim Results for the half year ended 30 November 2007 Stagecoach Theatre Arts plc operates the UK's largest franchise network of part-time performing arts schools for children aged between 4 and 16. Highlights: • Significantly improved Group profit before tax of £261,000 (2006: loss of £51,000), reflecting reduction in UK and overseas cost base and continued increase in new schools and student numbers • Franchise network fees (ie. underlying school fees throughout franchise network) up 9.6% to £12.6m (2006: £11.5m) • Earnings per share improved strongly to 1.7p (2006: loss 0.8p) • Net cash balance increased to £1.2m (2006: £0.6m) • Total student numbers worldwide up by 8% to over 40,000 (2006: 37,000), as demand for performing arts tuition for children in the UK countries continues to grow • Launch of new retail offering - an on-line shop (www.stagecoachshop.co.uk) offering children's merchandise to students and the general public Overseas schools • Stagecoach have entered into an Area Development Agreement with a US corporation for them to open and operate Stagecoach Theatre Arts schools in New Jersey and Pennsylvania, USA • German subsidiary is trading well and looking to expand • January 2008 - Granted exclusive franchise development rights for Stagecoach Theatre Arts in Athens to a well-established Greek business with a presence across Greece David Sprigg, Joint Managing Director, commented: 'The Stagecoach UK business continues to expand as demand for tuition in the performing arts continues to increase.' 'The benefits of the restructuring and cost reductions throughout the Group are evident in these results. Your Board intends to maintain a tight control over costs, whilst continuing to expand the number of schools and capitalising on new growth areas.' Enquiries: Stagecoach Theatre Arts: Tel: 01932 254 333 www.stagecoach.co.uk 07775 643 939 Richard Dawson, Finance Director and Investor Relations Smith & Williamson Corporate Finance Limited: Tel: 020 7131 4000 David Jones / Siobhan Sergeant Public Relations, Adventis Financial PR Tel: 020 7034 4758 Tarquin Edwards 07879 458 364 Chairman's Statement Results and Overview I am delighted to report on an excellent performance by Stagecoach Theatre Arts. The Group's results for the six months ended 30 November 2007 reflect continuing growth in the number of Stagecoach Theatre Arts schools and the benefit of reductions in our cost base over the past eighteen months. Consequently, the Group reports significantly improved results for this half-year period. There are now over 40,000 students attending Stagecoach Theatre Arts, SportsCoach and Mini Stages schools throughout the Group (2006: 37,000 students), an increase of over 8%. These interim results are our first set of results prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). While the application of Adopted IFRS has no fundamental impact on the reported results for the Group, the interim results of 2006 and full year results to 31 May 2007 have been restated in accordance with Adopted IFRS. Reconciliation of prior periods' results to those restated under Adopted IFRS is shown in note 8. The network fees, which represent the underlying school fees throughout the franchise network, were £12.6 million for the period, an increase of 9.6% (2006: £11.5 million). Group profit before tax was £261,000 (2006: loss before tax £51,000). The swing from interim loss last year to profit this year predominantly reflects cutting of UK and overseas overheads, in combination with a continued increase in new schools and student numbers. Group cash balances increased to £1.2 million (2006: £0.6 million). Earnings per share were 1.7 pence (2006: loss per share 0.8 pence). Operational Performance UK Schools The numbers of Stagecoach Theatre Arts schools in the UK and students attending them have increased over the period to 620 schools, 681 Early Stages classes and 35,884 students (2006: 603 schools, 640 Early Stages classes and 33,972 students). Across the Stagecoach Theatre Arts UK network, including the new schools opened this Autumn Term, 95% of all available places are taken. Student numbers have increased to 42.7 students per school, up from 42.0 for the previous year. Similarly, Early Stages average student numbers have increased from 13.2 to 13.4 students per class. The demand for performing arts tuition for children in the UK continues to increase each year and given that Stagecoach Theatre Arts provides the highest standards of education and service, and with schools geographically spread across the UK, we are well positioned to continue to meet this increasing demand. Following the cost cutting exercise the Group no longer runs separate divisions for SportsCoach and Mini Stages, thus improving operational efficiency and reducing overheads. The SportsCoach network has 27 SportsCoach schools, 10 Early Sporties Classes and 1,097 students (2006: 1,360 students). There are 64 Mini Stages sessions and 625 students (2006: 523 students) and 84 Montessori nursery students. The Stagecoach Agency maintains its status as the largest performing arts agency for children in the UK, securing hundreds of professional auditions or actual work placements each month for our Stagecoach students. During the period we launched our own on-line shop, www.stagecoachshop.co.uk, offering children's toys, clothing and literature and other merchandise to our Stagecoach students and the general public. Plans are underway to increase the range of products for purchase on the website to over 400 items. We have seen an increased trend for potential students to make on-line applications to join Stagecoach schools and a marked increase in the number of hits on the main Stagecoach website (which is linked to the on-line Stagecoach shop). It is expected that this trend of increased website hits will naturally enhance awareness, and subsequently revenues, of the on-line Stagecoach shop. Overseas schools Following the restructuring in the prior year, the Stagecoach USA subsidiary continues to trade at around breakeven. Post period-end we have entered into an Area Development Agreement with a US corporation for them to open and operate Stagecoach Theatre Arts schools in New Jersey and Pennsylvania. Following the acquisition of the outstanding 10 per cent of Stagecoach Germany, the German subsidiary is trading well and we are now looking to expand our franchise network in Germany. During January 2008, we granted exclusive franchise development rights for Stagecoach Theatre Arts in Athens, Greece, to a Greek group that has the Western Union Agency for the whole of Greece, among other business interests. In all overseas markets there are 41 Stagecoach schools, 57 Early Stages classes, 4 Further Stages classes and a total of 2,350 students. Creative and Educational The annual Easy Stages showcase production this year was 'Oliver' featuring 70 Stagecoach students from schools across the country and overseas. The Group staged a number of other successful events during the period, including two performances at Her Majesty's Theatre, London, where 16 Stagecoach schools from around the UK took part in an evening of song and dance. In December 2007, 2,000 Stagecoach students from the Midlands raised the roof at Birmingham's National Indoor Arena performing in aid of our children's charity, InterAct. Creative Dance workshops for our principals and teachers have been held around the country. These form part of our continuing training to maintain the highest standards of performing arts tuition. Our Stagecoach Theatre Arts Foundation Course, a course for performing arts teachers, is recognised as being equal to Unit One of the Trinity/Guildhall A.T.C.L. diploma in Teaching Theatre Arts. The Foundation Course continues to gain industry recognition and popularity and has attracted many attendees from outside the Stagecoach network, including overseas. Dividend No interim dividend has been proposed (2006: £nil). Current trading and future prospects The Stagecoach UK business continues to expand as demand for tuition in the performing arts continues to increase. The benefits of the restructuring and cost reductions throughout the Group are evident in these results. Your Board intends to maintain a tight control over costs, whilst continuing to expand the number of schools and capitalising on new growth areas. Graham Cole Chairman 31 January 2008 Unaudited Consolidated Income Statement Six months Six months Year ended ended ended 30 Nov 2007 30 Nov 2006 31 May 2007 Notes £'000 £'000 £'000 Network fees (see note) 12,627 11,548 26,544 ====== ====== ====== Revenue 2 3,099 3,074 6,324 Cost of sales (1,798) (2,065) (3,654) ------ ------ ------- Gross profit 1,301 1,009 2,670 Other operating income 13 11 22 Administrative expenses (1,053) (1,062) (2,299) ------ ------ ------- Operating profit/(loss) 261 (42) 393 Finance income 7 3 10 Finance expenses (7) (12) (28) ------ ------ ------- Net financing costs - (9) (18) ------ ------ ------- Profit/(loss) before taxation 261 (51) 375 Taxation 3 (90) (30) (205) ------ ------ ------- Profit/(loss) after taxation 171 (81) 170 ====== ====== ======= Attributable to: Equity holders of the parent 171 (77) 180 Minority interest - (4) (10) ------ ------ ------- Profit/(loss) for the period 171 (81) 170 ====== ====== ======= Earnings/(loss) per share, pence - Basic and diluted 4 1.7 (0.8) 1.7 Note: Network fees represent total school fees earned over the period by our franchisees from over 40,000 students (30 November 2006: 37,000) that attend Stagecoach, SportsCoach and Mini Stages worldwide. Unaudited Consolidated Statement of Recognised Income and Expense Six months Six months Year ended ended ended 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000 Foreign exchange translation 1 1 (1) differences ----- ----- ----- Net income/(expense) recognised 1 1 (1) directly in equity Profit/(loss) for the period 171 (81) 170 ----- ----- ----- Total income and expense 172 (80) 169 recognised for the period ===== ===== ===== Attributable to: Equity holders of the parent 172 (76) 179 Minority interest - (4) (10) ----- ----- ----- Total income and expense 172 (80) 169 recognised for the period ===== ===== ===== Unaudited Consolidated Balance Sheet 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000 Assets Intangible assets 1,441 1,455 1,505 Property, plant and equipment 92 107 90 ----- ----- ----- Total non-current assets 1,533 1,562 1,595 ----- ----- ----- Inventories 327 313 298 Trade and other receivables 1,016 1,288 1,932 Cash and cash equivalents 1,243 551 341 ----- ----- ----- Total current assets 2,586 2,152 2,571 ----- ----- ----- Total assets 4,119 3,714 4,166 ===== ===== ===== Equity Share capital 494 494 494 Share premium 1,601 1,601 1,601 Translation reserve (12) (12) (13) Retained earnings 584 131 407 ----- ----- ----- Total equity attributable to 2,667 2,214 2,489 equity holders of the parent Minority interest - (19) - ----- ----- ----- Total equity 2,667 2,195 2,489 ----- ----- ----- Liabilities Long term loans and borrowings 83 152 116 Other payables 15 80 98 Deferred tax liabilities 64 2 64 ----- ----- ----- Total non-current liabilities 162 234 278 ===== ===== ===== Current portion of long term 63 54 61 loans and borrowings Trade and other payables 1,227 1,231 1,338 ----- ----- ----- Total current liabilities 1,290 1,285 1,399 ----- ----- ----- Total liabilities 1,452 1,519 1,677 ----- ----- ----- Total equity and liabilities 4,119 3,714 4,166 ===== ===== ===== Unaudited Consolidated Cash Flow Statement Six months Six months Year ended ended ended 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000 Cash flows from operating activities Profit/(loss) for the period 171 (81) 170 Adjustments for: Depreciation and amortisation 77 63 140 Foreign exchange differences (1) 4 4 Employee share option scheme 6 - 20 Loss on disposal of property, - - 8 plant and equipment Net financing costs - 9 18 Taxation 90 30 205 ----- ----- ----- Operating profit before changes 343 25 565 in working capital and provisions Increase in inventories (29) (34) (19) Decrease in trade and other receivables 914 947 281 Decrease in trade and other payables (194) (351) (354) ----- ----- ----- Cash generated from operations 1,034 587 473 Interest received 7 3 10 Interest paid (7) (12) (28) ----- ----- ----- Net cash generated from 1,034 578 455 operating activities ===== ===== ===== Cash flows from investing activities Proceeds from sale of property, - - 1 plant and equipment Acquisition of additional (84) - (51) shares in subsidiary Acquisition of property, plant (15) (13) (21) and equipment Acquisition of intangible assets - (184) (184) ----- ----- ----- Net cash used in investing (99) (197) (255) activities ----- ----- ----- Cash flows from financing activities Proceeds from borrowings - 150 150 Repayment of borrowings (33) (25) (54) ----- ----- ----- Net cash (used in)/generated (33) 125 96 from financing activities ----- ----- ----- Net increase in cash and cash 902 506 296 equivalents Cash and cash equivalents at 341 45 45 beginning of the period ----- ----- ----- Cash and cash equivalents at 1,243 551 341 end of the period ===== ===== ===== Notes to the Unaudited Interim Report 1. Accounting Policies General Stagecoach Theatre Arts plc is a company incorporated in the UK. The interim financial statements for the six months ended 30 November 2007 consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). Basis of preparation The financial statements are presented in sterling, rounded to the nearest thousand and are prepared on the historical cost basis. The accounting policies set out below have been consistently applied to all the periods presented. The interim financial information does not constitute statutory accounts as defined under section 240 of the Companies Act 1985. The AIM rules require that the next annual consolidated financial statements of the Group for the year ending 31 May 2008 be prepared in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). The Group's consolidated financial statements were prepared in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP) until 31 May 2007. UK GAAP differs in some areas from Adopted IFRS. In preparing the 2007 consolidated interim financial statements, management has amended certain accounting methods applied in the UK GAAP financial statements to comply with Adopted IFRS. The interim financial information has been prepared on the basis of the recognition and measurement requirements of Adopted IFRS in issue that either are endorsed by the EU and effective (or available for early adoption) at 30 November 2007 or are expected to be endorsed and effective (or available for early adoption) at 31 May 2008, the Group's first annual reporting date at which it is required to use Adopted IFRS. The Adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 May 2008 are still subject to change and to additional interpretations and therefore cannot be determined finally with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 31 May 2008. The comparative figures for the year ended 31 May 2007 are not the Group's statutory accounts for that financial year. Those accounts, which were prepared under UK Generally Accepted Accounting Practice, have been reported on by the Group's auditors and delivered to the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not include a statement under section 237(2) or (3) of the Companies Act 1985. Transition to Adopted IFRS An explanation of how the transition to Adopted IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in note 8. The Group's date of transition to Adopted IFRS is 1 June 2006. IFRS 1 grants certain exemptions from the full requirements of Adopted IFRS in the transition period. The following exemptions have been taken: Share-based payments The Group has taken the exemption not to apply IFRS 2 'Share-based Payment' to equity-settled share options granted before 7 November 2002 or granted after that date but which had vested by the transition date. Business combinations The Group has chosen not to restate business combinations completed prior to the transition date on an Adopted IFRS basis. The transition to Adopted IFRS did not result in substantial changes to the Group's accounting policies under UK GAAP and as set out in the Group's financial statements of the year ended 31 May 2007. In summary the changes are: • IAS 1 'Presentation of Financial Statements' and IAS 7 'Cash Flow Statements' have affected the overall presentation of the financial statements and certain disclosures. • The adoption of IFRS 3 'Business Combinations', IAS 36 'Impairment of Assets' and IAS 38 'Intangible Assets' have resulted in a change in the accounting policy for goodwill. Under UK GAAP, goodwill was amortised on a straight line basis over a period of 20 years and assessed for an indication of impairment at each balance sheet date. In accordance with the provisions of IFRS 3 and IFRS 1, the Group ceased amortisation of goodwill from 1 June 2006. Accumulated amortisation as at 31 May 2007 has been eliminated with a corresponding decrease in the cost of goodwill. From the year ended 31 May 2007 onwards, goodwill is tested for impairment at each balance sheet date, as well as when there are indications of impairment. The Group has reassessed the useful lives of its intangible assets in accordance with the provisions of IAS 38. No adjustment resulted from this reassessment. • The transition to Adopted IFRS has resulted in the recognition of a liability in respect of the minority put and call option agreement, because minority interests are considered to be part of Group equity under IFRS. • Development costs that do not meet the criteria of IAS 38 'Intangible Assets' have not been recognised at the transition date. The remaining standards are either not applicable to the business or have no material effect on the Group's policies. Basis of consolidation Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly and indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated interim financial statements from the date that control commences until the date that control ceases. All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. The revised accounting policies now followed by the Group are shown below. Revenue Group revenue comprises income earned for franchising services, tuition fees and agency revenues, net of value added tax, discounts and after eliminating revenues within the Group. Revenue is recognised as follows: Management fees Revenue represents invoiced management fees based on franchisees' school fees and is recognised in the period in which the related classes run. Initial franchise fees and re-sale of schools Revenue is recognised upon the execution of the individual franchise agreements, and attendance on the franchisee training course for new franchisees, which is the date when the Group has performed substantially all services and satisfied substantially all conditions relating to a sale. Other Revenues derived from other incidental franchising services are recognised as and when services are rendered. Tuition fees Revenue from the Group's operating schools is recognised in the period in which the related classes run. Agency revenues Revenue represents licence fees, agency commission for work obtained for and performed by the students and fees for the production of a brochure containing portfolios of the students. Licence fees and agency commission are recognised as and when services are rendered. Fees for the production of the brochure are recognised in the financial year during which the brochure is published. Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classed as operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Net financing costs Net financing costs comprise interest payable and interest receivable on funds invested. Interest income and interest payable is recognised in the income statement as it accrues, using the effective interest method. Share based payments The share options programme allows employees to acquire shares of the Company. The fair value of options granted after 7 November 2002 and not yet vested as at 1 June 2006 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option pricing model, QCA-IRS Option Valuer model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where variations are due only to share prices not achieving the threshold for vesting. The Company has not granted any cash-settled share based payments. Taxation The income tax expense for the year represents the sum of current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Foreign currency translation Transactions in foreign currencies are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date and the gains or losses on translation are included in the income statement in administration expenses. On consolidation, results of foreign subsidiary undertakings are translated at the average rates of exchange during the year. The assets and liabilities of overseas subsidiary undertakings are translated at rates ruling at the balance sheet date. Exchange differences arising from the retranslation of the opening net investments in foreign subsidiary undertakings and between the results for the year translated at average and closing rates are disclosed as movements in the translation reserve within equity. Segment reporting A segment is a distinguishable component of the Group that is engaged in providing related products or services (business segment) or in providing products or services within a particular economic environment (geographical segment) which is subject to risks and rewards that are different from those of other segments. Based on management's assessment of the risks and returns the consolidated entity operates in one reportable business segment being franchising (primary segment) and in four geographic segments (secondary segments), the United Kingdom, Continental Europe, the Americas and the rest of the world. Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities of the subsidiary or business. Goodwill on acquisition is recognised as an intangible asset and is tested for impairment at each balance sheet date. Goodwill is stated at cost less accumulated impairment losses. Any impairment is recognised immediately in the income statement and may not be subsequently reversed. On the disposal of a subsidiary or business, the attributable goodwill is included in determination of the profit or loss on disposal. IFRS 1 grants certain exemptions from the full requirements of Adopted IFRS in the transition period. The Group elected not to restate business combinations that took place prior to 1 June 2006. In respect of acquisitions prior to that date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. On transition, amortisation of goodwill ceased. Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that it is estimated will generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Computer software is stated at cost and amortised on a straight line basis over its estimated useful life, not exceeding five years. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation is provided at the following annual rates in order to write off the cost of each asset over its estimated useful life or over the lease term, whichever is shorter: Improvements to property - over the term of the lease Wardrobe and Props - 10% - 25 % on reducing balance Fixtures and equipment - 15% on reducing balance Motor vehicles - 25% on reducing balance Computer equipment - 33% on reducing balance Inventories Inventories of goods and territories for re-sale are stated at the lower of cost and net realisable value. Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested at each balance sheet date for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever there is an indication of impairment to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such conditions exist, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, estimates are made of the cashflows of the cash generating unit to which the asset belongs. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific asset or cash generating unit. If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in the income statement. In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Impairment losses in respect of goodwill are not reversed. Trade and other receivables Trade and other receivables are stated at nominal value (discounted if material) less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of provision is recognised in the income statement in administrative expenses. Cash and cash equivalents Cash and cash equivalents include cash-in-hand, cash balances and call deposits with maturity of less than or equal to three months. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Trade and other payables Trade and other payables are stated at nominal value (discounted if material). Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, long term borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Borrowings are classified as non-current liabilities where the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Other financial instruments: recognition and measurement Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group does not hold or issue derivative financial instruments for trading purposes. 2. Segment Reporting Primary reporting format - business segments The Group operates as one business segment franchising (Stagecoach, SportsCoach and Mini Stages). This is the Group's primary segment, as no other activities are significant enough to report separately. The unallocated segment relates to a nursery school business and corporate overheads, assets and liabilities. The segment results for the six months ended 30 November 2007 are as follows: Franchising Unallocated Total £'000 £'000 £'000 Network fees 12,498 129 12,627 ------ ----- ------ Revenue 2,970 129 3,099 ------ ----- ------ Operating profit/(loss) 1,004 (743) 261 ------ ----- ------ Total assets 2,763 1,356 4,119 Total liabilities (805) (647) (1,452) ------ ----- ------ Net assets 1,958 709 2,667 ------ ----- ------ Other segment items: Capital expenditure 99 - 99 Depreciation and amortisation 70 7 77 The segment results for the six months ended 30 November 2006 are as follows: Franchising Unallocated Total £'000 £'000 £'000 Network fees 11,435 113 11,548 ------ ----- ------ Revenue 2,961 113 3,074 ------ ----- ------ Operating profit/(loss) 763 (805) (42) ------ ----- ------ Total assets 3,114 600 3,714 Total liabilities (973) (546) (1,519) ------ ----- ------ Net assets 2,141 54 2,195 ------ ----- ------ Other segment items: Capital expenditure 197 - 197 Depreciation and amortisation 56 7 63 Secondary reporting format - geographical segments The Group's operations are based in four main geographical areas. The UK is the home country of the Parent Company. Revenue is analysed on an origination basis and is all derived from external customers. Segment assets, which comprise total assets, including capital expenditure, are allocated on the basis of location. The main operations in the principal territories for the six months are as follows: Network fees Revenue Operating profit/ (loss) 30 Nov 30 Nov 30 Nov 30 Nov 30 Nov 30 Nov 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom Stagecoach 11,561 10,570 2,749 2,591 409 134 SportsCoach 377 460 109 133 (28) (40) Mini Stages 65 61 19 103 (32) (56) Montessori 129 113 129 113 13 13 ------ ------ ----- ----- ---- ---- United Kingdom total 12,132 11,204 3,006 2,940 362 51 Europe 345 188 45 109 (77) (61) Americas 128 137 44 21 (28) (36) Rest of the world 22 19 4 4 4 4 ------ ------ ----- ----- ---- ---- 12,627 11,548 3,099 3,074 261 (42) ====== ====== ===== ===== ==== ==== Segment assets Capital Expenditure Six months ended Year Six months ended Year ended ended 30 Nov 30 Nov 31 May 30 Nov 30 Nov 31 May 2007 2006 2007 2007 2006 2007 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 3,950 3,457 3,985 99 197 256 Europe 87 133 123 - - - Americas 82 124 58 - - - Rest of the world - - - - - - ----- ----- ----- --- --- --- 4,119 3,714 4,166 99 197 256 ===== ===== ===== === === === 3. Taxation The income tax expense is based on an effective annual tax rate estimated individually for each tax jurisdiction in which the group operates and applied to the pre-tax profits of the relevant entity. Six months Six months Year ended ended ended 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000 UK taxation 90 30 205 === === === 4. Earnings/(loss) per share Earnings/(loss) per share has been calculated on profits/(losses) for the period divided by the weighted average number of ordinary shares in issue of 9,879,317 (2006: 9,879,317). The average market value of the company's shares during the period was less than the average exercise price for the company's options, consequently these options are deemed to be non-dilutive. 5. Acquisition of minority interests On 1 June 2007 the Company exercised the put and call option agreement, which existed at the year end, and purchased the remaining 25 per cent in Stagecoach Agency (UK) Limited from the minority shareholders for £165,875 (£84,125 was paid during the period and £81,750 is due on 1 July 2008), resulting in goodwill of £165,897. The net assets of Stagecoach Agency (UK) Limited were hived-up into the Company's operations on 1 June 2007. 6. Responsibility The Directors of the company accept responsibility for the information contained in this document and to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. 7. Availability of Interim Report Copies of these results together with the Chairman's statement are available from the Company's registered office at The Courthouse, Elm Grove, Walton-on-Thames, Surrey KT12 1LZ, and are posted on the Company's website, www.stagecoach.co.uk. 8. Transition to Adopted IFRS As stated in note 1, the interim financial information has been prepared on the basis of the recognition and measurement requirements of Adopted IFRS. The accounting policies set out in note 1 have been applied (subject to IFRS 1 exemptions taken) in preparing the financial statements for the six months ended 30 November 2007, the comparative information presented in these financial statements for the six months ended 30 November 2006 and the preparation of the opening IFRS balance sheet at 1 June 2006 (the Group's transition date). The changes in accounting policies as a consequence of the transition to Adopted IFRS and the reconciliations of the effects of the transition to Adopted IFRS on the Group's financial statements are presented below. The transition to Adopted IFRS resulted in the following changes in accounting policies: (a) Goodwill is not amortised but measured at cost less impairment losses. Under UK GAAP, goodwill was amortised on a straight line basis through profit and loss over its estimated useful economic life of 20 years. The effect of the change is an increase in intangible assets, equity and profit before tax of £22,555 at 30 November 2006 and £46,001 at 31 May 2007. The change does not affect intangible assets, equity or profit before tax at 1 June 2006. The change has no tax effect as deferred taxes are not recognised for temporary differences arising from goodwill for which amortisation is not deductible for tax purposes. (b) Computer software has been reclassified from tangible fixed assets to intangible fixed assets. The effect of the change is an increase in intangible assets and a decrease of tangible assets of £567,041 at 1 June 2006, £584,605 at 30 November 2006 and £524,170 at 31 May 2007. The change does not affect equity or profit before tax of any period. (c) Development costs which do not meet the recognition criteria under IAS 38 have not been recognised at the transition date which has resulted in a decrease in equity and intangible assets of £24,823 at 1 June 2006, an increase in profit before tax of £6,206 at 30 November 2006 and £18,921 at 31 May 2007 and a decrease of intangible assets and equity of £18,617 at 30 November 2006 and £5,902 at 31 May 2007. The change has no tax effect as deferred taxes were not recognised under UK GAAP for temporary differences arising from development costs for which amortisation was not deductible for tax purposes. (d) The translation reserve is shown as separate reserve component of equity. (e) The put and call option agreement for the purchase of minority interest, has been recognised as a liability. The effect of the change is an increase in non-current liabilities and intangible assets of £156,486 at 1 June 2006, an increase in non-current liabilities and current liabilities of £80,556 at 30 November 2006 and £82,949 at 31 May 2007 and an increase of intangible assets of £161,112 at 30 November 2006 and £165,898 at 31 May 2007. The change does not affect equity or profit before tax of any period. (f) The deferred tax liability has been reclassified from current liabilities to non-current liabilities. The effect of the change is an increase in non-current liabilities and a decrease of current liabilities of £1,852 at 1 June 2006 and at 30 November 2006 and £63,252 at 31 May 2007. The change does not affect equity or profit before tax of any period. Reconciliation of Profit Six months ended Year ended 30 November 2006 31 May 2007 (comparable interim period (end of last period under UK GAAP) presented under UK GAAP) Note Under Effect of Under Under Effect of Under UK GAAP transition IFRS UK GAAP transition IFRS to IFRS to IFRS £'000 £'000 £'000 £'000 £'000 £'000 Revenue 3,074 - 3,074 6,324 - 6,324 Cost of sales (2,065) - (2,065) (3,654) - (3,654) ------- ---- ------- ------- ---- ------- Gross profit 1,009 - 1,009 2,670 - 2,670 Other operating income 11 - 11 22 - 22 Administrative expenses a, c (1,091) 29 (1,062) (2,364) 65 (2,299) -------- ---- ------- ------- ---- ------- Operating (loss)/profit (71) 29 (42) 328 65 393 Finance income 3 - 3 10 - 10 Finance expenses (12) - (12) (28) - (28) -------- ---- ------- ------- ---- ------- Net financing costs (9) - (9) (18) - (18) -------- ---- ------- ------- ---- ------- (Loss)/profit before (80) 29 (51) 310 65 375 taxation Taxation (30) - (30) (205) - (205) -------- ---- ------- ------- ---- ------- (Loss)/profit after (110) 29 (81) 105 65 170 taxation ======== ==== ======= ======= ==== ======= Attributable to: Equity holders of the (106) 29 (77) 115 65 180 parent Minority interest (4) - (4) (10) - (10) -------- ---- ------- ------- ---- ------- (Loss)/profit for the (110) 29 (81) 105 65 170 period ======== ==== ======= ======= ==== ======= (Loss)/earnings per share, pence Basic (1.1) 0.3 (0.8) 1.1 0.6 1.7 Diluted (1.1) 0.3 (0.8) 1.1 0.6 1.7 Reconciliation of Equity As at 1 June 2006 As at 30 November 2006 As at 31 May 2007 (date of transition) (comparable interim (end of last period period under UK GAAP) presented under UK GAAP) Notes Under Effect of Under Under Effect of Under Under Effect of Under UK transition IFRS UK transition IFRS UK transition IFRS GAAP to IFRS GAAP to IFRS GAAP to IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Assets Intangible a, b 735 698 1,433 705 750 1,455 775 730 1,505 assets c, e Property, b 673 (567) 106 692 (585) 107 614 (524) 90 plant and ---- ----- ----- ----- ----- ----- ---- ----- ----- equipment Total 1,408 131 1,539 1,397 165 1,562 1,389 206 1,595 non-current ----- ----- ----- ----- ----- ----- ----- ----- ----- assets Inventories 279 - 279 313 - 313 298 - 298 Trade and 2,128 - 2,128 1,288 - 1,288 1,932 - 1,932 other receivables Cash and 304 - 304 551 - 551 341 - 341 cash equivalents ----- ----- ----- ----- ----- ----- ----- ----- ----- Total 2,711 - 2,711 2,152 - 2,152 2,571 - 2,571 current assets ----- ----- ----- ----- ----- ----- ----- ----- ----- Total assets 4,119 131 4,250 3,549 165 3,714 3,960 206 4,166 ===== ===== ===== ===== ===== ===== ===== ===== ===== Equity Share capital 494 - 494 494 - 494 494 - 494 Share premium 1,601 - 1,601 1,601 - 1,601 1,601 - 1,601 Translation d - (12) (12) - (12) (12) - (13) (13) reserve Retained a, c 220 (13) 207 115 16 131 354 53 407 earnings d ----- ----- ----- ----- ----- ----- ----- ----- ----- 2,315 (25) 2,290 2,210 4 2,214 2,449 40 2,489 Minority interest (15) - (15) (19) - (19) - - - ----- ----- ----- ----- ----- ----- ----- ----- ------ Total equity 2,300 (25) 2,275 2,191 4 2,195 2,449 40 2,489 ----- ----- ----- ----- ----- ----- ----- ----- ------ Long term e 57 - 57 152 - 152 116 - 116 loans and borrowings Other payables - 156 156 - 80 80 15 83 98 Deferred tax f - 2 2 - 2 2 - 64 64 ----- ---- ---- ---- ----- ----- ----- ------ ----- Total non-current 57 158 215 152 82 234 131 147 278 liabilities ===== ==== ==== ==== ===== ===== ===== ====== ===== Loans and 283 - 283 54 - 54 61 - 61 borrowings Trade and f 1,479 (2) 1,477 1,152 79 1,231 1,319 19 1,338 other payables ----- ----- ----- ----- ----- ----- ----- ------ ----- Total current 1,762 (2) 1,760 1,206 79 1,285 1,380 19 1,399 liabilities ----- ----- ----- ----- ----- ----- ----- ------ ----- Total 1,819 156 1,975 1,358 161 1,519 1,511 166 1,677 liabilities ----- ----- ----- ----- ----- ----- ----- ------ ----- Total equity 4,119 131 4,250 3,549 165 3,714 3,960 206 4,166 and liabilities ===== ===== ===== ===== ===== ===== ===== ====== ===== As at Six months ended Year ended 1 June 2006 30 November 2006 31 May 2007 (date of transition) (comparable interim (end of last period period under UK GAAP) presented under UK GAAP) Effect of Effect of Effect of transition transition transition to IFRS to IFRS to IFRS £'000 £'000 £'000 Total equity UK GAAP 2,300 2,191 2,449 Goodwill not - 23 46 amortised after date of transition Development costs (25) (19) (6) not recognised ----- ----- ----- Total equity IFRS 2,275 2,195 2,489 ===== ===== ===== There are no material adjustments to the cash flow statement in either period. This information is provided by RNS The company news service from the London Stock Exchange

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