05/12/2000
Financial Highlights
- Turnover excluding discontinued operations for six months was £1,085.5 million, up 29.8% (1999 - £836.4 million) (Total turnover £1,085.5 million, up 1.6%, 1999 - £1,068.0 million)
- Earnings before interest, tax & amortisation ("EBITA") excluding discontinued operations £126.6 million, up 12.5% (1999 - £112.5 million)
- Profit before tax, goodwill amortisation and exceptional items for the six months was £91.8 million (compared to £130.2 million in 1999)
- Earnings per share before goodwill amortisation and exceptional items was 5.3p (H1 1999 - 7.6p)
- Interim dividend of 1.3p, 8.3% increase on last year (1999 - 1.2p)
Operational Highlights
- Continuing progress across core bus and rail operations.
- Coach USA restructuring and consolidation continues. Management team strengthened.
- UK Bus strategic review has resulted in a reduction in number of operating companies from 19 down to 12. Management team restructured to focus on revenue growth.
- Continued performance focus at South West Trains and Virgin Rail Group, with emphasis on safety, punctuality, reliability and customer service. Operations affected by network disruption following Hatfield restrictions and severe flooding.
- Delivering value from Hong Kong and New Zealand.
Keith Cochrane, Chief Executive, said: "Following the high levels of acquisition and disposal activity in the last financial year, my priority has been to consolidate our existing operations and put in place a strategy for growth going forward. The overall performance of the Group in the six months reflects this and demonstrates a solid business performance on which we can build with a degree of confidence."
Chairman's Statement
I am pleased to present the Group's results for the six months ended 31 October 2000.
The disposal of Porterbrook in April 2000 reduced the Group's earnings. Earnings per share before goodwill amortisation and exceptional items was 5.3p (1999- 7.6p). However, excluding the contributions made by Porterbrook and Swebus to our results for the equivalent prior-year period, turnover has increased by 29.8% and profit before interest, tax and goodwill amortisation has increased by 12.5%. Turnover from continuing operations for the six months was £1,085.5m (1999 - £836.4m) and earnings before interest, tax and amortisation from continuing operations was £126.6m (1999 - £112.5m). These increases include a full six-months contribution from Coach USA.
The directors have declared an interim dividend of 1.3p per share which is an 8.3% increase on last year (1999 - 1.2p per share). The interim dividend is payable to shareholders on the register at 23 February 2001 and will be paid on 14 March 2001.
Our UK Rail business and Virgin Rail Group have both delivered strong financial performances in the first six months of the year with increased revenues of 7.3% in our UK Rail subsidiaries and 13.3% at Virgin Rail Group over the prior year.
Since mid October, rail operating performance has however been significantly impacted by the emergency engineering work being carried out by Railtrack following the tragic accident at Hatfield and the subsequent flooding. Conditions for customers and staff have been extremely difficult and we have been working hard with Railtrack and the Shadow Strategic Rail Authority (sSRA) to get services back to normal as quickly as possible. This has been largely achieved at South West Trains but we still have some way to go at Virgin with full services on the West Coast expected to resume by January.
Initial revenue reductions have largely been offset by the compensation payments which we have received from Railtrack but it is too early to predict the overall financial impact on each of our businesses.
At South West Trains, we recognise the need for innovative solutions to the capacity constraints which are presently being encountered. Delivering timely and effective solutions to this problem is a key aspect of our proposal to the sSRA for an extended franchise. Recent events on the railways in the UK have again highlighted the need to strive much harder if this country is to have a modern railway to satisfy passenger requirements in the 21st century. The technical complexities of re-engineering the South West Trains franchise are very significant but as the incumbent operator I am confident of our ability to both identify and implement value for money solutions to these problems. Our final bid for an extended franchise was submitted on 30 November.
The Virgin-Stagecoach proposals for the East Coast Main Line franchise are also innovative and offer an attractive proposition to rail passengers and the sSRA as well as to our shareholders. We await an announcement on this franchise in the near future.
During the period we restructured our UK Bus division and, despite a challenging operating environment, I am confident that the changes that we have implemented will benefit the division in the medium term.
At Coach USA our focus has been on restructuring and consolidation of the business. The restructuring is progressing to plan, and we expect to realise the first significant cost savings from this in the next financial year. The demographics in North America remain positive for our business and we believe the market still offers good growth opportunities. We have completed a number of small acquisitions so far this year that are complementary to our existing business and we shall continue to pursue such opportunities moving forward.
Our other overseas bus operations continue to perform well with both underlying revenue growth and improved profitability.
On 20 April 2000 we disposed of Porterbrook realising £773.3 million of cash proceeds for the group, in addition to a reduction in net debt of £361.6 million. This provided the group with substantial financial flexibility and we advised shareholders of our intention to buy back up to £250 million of share capital in the next 12 months, subject to there being no significant investment alternatives to enhance shareholder value. To date the company has repurchased 333.9 million shares for a total cost of £221 million. The Board will continue to look at value enhancing opportunities that demonstrate long-term returns for shareholders. If such opportunities are not forthcoming the company may buy back further shares in excess of £250 million.
Barry Hinkley left the Board in July 2000 and Graham Eccles was appointed to the Board in September 2000. Barry Hinkley had been a major contributor to the success of the Group over many years and I wish him well for the future. Graham has an outstanding track record in the UK Rail industry and his expertise and experience is an undoubted asset to the development of our Rail businesses at this time.
With the exception of the rail situation, the second half of this financial year has started satisfactorily with the trends we experienced in the first six months largely continuing. In common with the rest of the industry we are monitoring the financial impact of the current rail disruptions. We also recognise the current volatility in world-wide oil prices and we will continue to evaluate our hedging position and long-term cost base in the light of oil price movements.
We have a solid asset base together with the financial resources required to support the continued development of our bus and rail businesses.
BRIAN SOUTER
Executive Chairman
5 December 2000
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