Annual Results Year ended 27 April 2019 26 June 2019 2 Cautionary - PowerPoint PPT Presentation

1 Annual Results Year ended 27 April 2019 26 June 2019

2 Cautionary statement This document is solely for use in connection with a briefing on the group headed by Stagecoach Group plc (“the Group”). This document contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward- looking statements in this presentation will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation. This document is not a full record of the presentation because it does not include comments made verbally by Stagecoach Group management or by others.

3 MARTIN GRIFFITHS CHIEF EXECUTIVE

4 Overview  2018/19 financial targets achieved ‒ Adjusted earnings per share 22.1p (2018: 22.3p) ‒ Net debt £253.3m (2018: £395.8m) ‒ Non-rail net debt £374.9m (2018: £567.0m)  Good cash generation  Solid performance from core UK bus operations  Continued investment in £80 million of new greener vehicles  Sale of the North American business  Good financial position  Share buyback programme underway  Full year dividend maintained at 7.7p per share  Outlook: No change in our expected 2019/20 earnings per share

5 ROSS PATERSON FINANCE DIRECTOR

6 UK Bus (regional operations) Driving continued growth and returns through strong customer service Year to Year to 28 April 2018 27 April 2019 (Restated) Change Revenue (£m) 1,043.3 1,013.8 2.9% Like-for-like revenue (£m) 1,041.7 1,007.1 3.4% Operating profit (£m) 117.0 112.9 3.6% Operating margin (%) 11.2% 11.1% 10bp Estimated like-for-like passenger journeys* (m) 646.6 646.7 -  Growth in revenue, profit and margin – revenue per mile up 3.8%; revenue per journey up 3.4%  Around 10% of sales to fare paying customers were through digital channels  Customer satisfaction maintained at 90% in England (92% in Scotland)  66% response rate (+4%) to second national employee survey  Plans in place to offset higher fuel costs in 2019/20 ‒ selective price increases ‒ tactical marketing plans ‒ commercial initiatives ‒ maintaining control of other costs * Excludes inter-city coach services operated as a sub-contractor

7 UK Bus (London) Consolidating strategic position in a competitive market Year to Year to 27 April 2019 28 April 2018 Change Revenue and like-for-like revenue (£m) 252.8 251.8 0.4% Operating profit (£m) 10.7 13.3 (19.5)% Operating margin (%) 4.2% 5.3% (110)bp  Continuing margin pressure in competitive bidding environment  Reducing costs and improving incentive income  Maintaining sustainable contract pricing

8 North America Sale of business successfully completed Year to 29 April 2018 to Disposal 28 April 2018 Revenue (US$m) 595.7 630.0 Operating profit (US$m) 25.8 28.1 Operating margin (%) 4.3% 4.5%  Sale of business successfully completed April 2019  US$65m 5.5 year Deferred Payment Instrument  Continuation of Stagecoach guarantees

9 North America Presentation of results – discontinued operations Year to 27 April 2019 Pre- Exceptional Year to Trading to 16 April 2019: exceptionals items Reported 28 April 2018 Revenue (US$m) 595.7 - 595.7 630.0 Pre-exceptional EBITDA (US$m) 80.9 - 80.9 86.2 Depreciation & amortisation (US$m) (55.1) - (55.1) (58.1) Pre-exceptional operating profit before restructuring costs (US$m) 25.8 - 25.8 28.1 Restructuringcosts (US$m) (0.3) - (0.3) (1.1) Goodwill impairment (US$m) - (112.4) (112.4) - Reversal of depreciation & amortisation since 19 Dec 18 (US$m) - 21.4 21.4 - Loss on sale (US$m) - (31.1) (31.1) - Other exceptional items (US$m) - - - 1.6 Interest & tax (US$m) (5.3) - (5.3) (7.6) Reported discontinuedoperations (US$m) 20.2 (122.1) (101.9) 21.0 - £m 15.5 (93.6) (78.1) 15.7

10 Rail Carefully managing de-mobilisation & unwinding of rail franchises Year to Year to 28 April 2018 27 April 2019 (Restated) Change Revenue (£m) 589.5 1,556.0 (62.1)% Like-for-like revenue (£m) 444.1 434.1 2.3% Operating profit (£m) 26.4 24.9 6.0% Operating margin (%) 4.5% 1.6% 290bp  Continued strong operational delivery and profitability at East Midlands Trains  East Midlands franchise expected to end August 2019  Continued positive resolution of contractual matters for former South West franchise  Managed unwind of East Coast franchise  Utilisation of East Coast tax losses - £17.1m exceptional net tax credit recognised  Legal challenge of 2019 franchise decisions

11 Virgin Rail Group (incorporates West Coast franchise) Continued strong financial performance Year to Year to 27 April 2019 28 April 2018 Revenue – 49% share (£m) 609.5 574.0 Operating profit – 49% share (£m) 25.7 30.0 Operating margin (%) 4.2% 5.2% Dividends received (£m) 24.3 24.1  2018/19 profit at contractual maximum ‒ £37.1m revenue and profit share payable by Virgin Rail Group to DfT for year to 27 April 2019  West Coast franchise expected to end November 2019 ‒ could run until March 2020 under current contract

12 Stagecoach Group A strong continuing business Interest on Pro forma net North UK non-rail Reported Year to Exclude Reported America Year to 27 April North continuing cash 27 April America operations 2019 proceeds Exclude Rail 2019 EBITDA (1)(2) (£m) 327.0 (61.8) 265.2 - (58.5) 206.7 Net finance charges (1)(2) (£m) (31.3) 3.7 (27.6) 4.4 (3) (0.5) (23.7) Net debt (£m) (253.3) - (253.3) - (121.6) (374.9) EBITDA (1)(2) /Net finance charges (1)(2) 10.4 9.6 8.7 Net debt/EBITDA (1)(2) 0.8 1.0 1.8 Notes (1) Includes share of joint ventures (2) Excludes exceptional items (3) Estimated effect of applying net cash sales proceeds to reduce debt

13 Capital structure  Dividend maintained at 7.7p ‒ 1.6 times covered by 2018/19 adjusted non-rail UK earnings ‒ 1.2 times covered by 2018/19 non-rail normalised cash flow (see slide 33)  Share buy backs ‒ Commenced buy backs on 25 April 2019 ‒ £0.2m buy backs in 2018/19 ‒ £9.0m buy backs in 2019/20 to date ‒ Average purchase price 130p ‒ Continuing with programme, up to £60m

14 IFRS 16, Leases  New accounting standard on leases, IFRS 16  Applying for 2019/20 with no restatement of comparatives  Will result in a number of leases, previously accounted for as operating leases (rentals expensed), being capitalised within fixed assets as right of use assets and depreciated  Increases in lease liability, depreciation charges and finance charges; reduction in operating lease expense  Accounting for current rail leases will not be affected – less than one year to run  No impact on net cash flow  No immediate impact on our debt covenants  No expected impact on our investment grade credit ratings

15 Forecast Impact of IFRS 16 IFRS 16, Leases, is forecast to have the following impact on transition (28 April 2019) Current operating lease After application of IFRS 16 Net impact accounting £m £m £m Depreciation - (22.0) (22.0) 2019/20 Operating lease expense 24.0 - 24.0 Income statement Operating profit 24.0 (22.0) 2.0 Finance charges - (3.0) (3.0) Profit before tax 24.0 (25.0) (1.0) Operating profit 24.0 (22.0) 2.0 Depreciation - 22.0 22.0 2019/20 Net interest - (3.0) (3.0) Cash flow Operating cash flow 24.0 (3.0) 21.0 Repayment of lease liabilities - (21.0) (21.0) Financing cash flow - (21.0) (21.0) Net cash flow 24.0 (24.0) - Right of use assets - 85.0 85.0 Balance sheet Lease liabilities - (85.0) (85.0) At 28 Apr 19 Equity - - -

16 Summary and outlook  Good results for 2018/19  Good financial position  No change to our expectation of 2019/20 earnings per share

17 MARTIN GRIFFITHS CHIEF EXECUTIVE

18 Successful delivery of business initiatives in 2018/19 - 1  Our people : more agile and responsive management structure enabling a ‘one team’ approach  Stakeholder engagement : proactive programme of national and regional engagement based on insight from detailed reputation research  Policy development : Urban Mobility Partnership focus on mobility credits, planning and grey fleet initiatives to address road congestion and air quality  Digital technology : completion of roll-out of UK’s biggest bus contactless payment initiative; harnessing of data to improve bus scheduling

19 Successful delivery of business initiatives in 2018/19 - 2  Commercial development : ‒ Ticket trials • reduced price 4-week megarider in South East – revenue up slightly, journeys up 26% in first four weeks • flat fare trial in Hartlepool – revenue neutral with significant rise in customer satisfaction • six other ticketing trials focused on simplification ‒ Timetable and customer information simplification ‒ National student campaign • Student product sales up 7% year on year