12th May 2010 07:00
Embargoed until 07:00hrs on Wednesday 12 May 2010
FIRSTGROUP PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2010
ROBUST PERFORMANCE AND INCREASED CASH GENERATION IN CHALLENGING TRADING ENVIRONMENT
* Resilient performance despite impact of recession on trading and increased
hedged fuel costs of c.£90m
* Successfully delivered cost reduction programme - exceeded target of £200m
of annual savings
* Flexible operating models - delivered mileage reductions to protect revenue
per mile
* Exceeded cash targets - £136m net cash generated and used to reduce net
debt
* Confident of further opportunities within Group to accelerate deleveraging
plans
* Increased net cash generation target to £150m in 2010/11
NORTH AMERICA - COST AND OPERATING EFFICIENCIES MAINTAINING INDUSTRY LEADING MARGINS
* First Student - strong contract retention >90%, cost actions offsetting margin pressure from weaker economy * First Transit - further margin improvement - increasing market share through new contract wins
GREYHOUND - FLEXIBLE MODEL, ENCOURAGING REVENUE TRENDS
* A robust performance in toughest year - mileage reduced by >11% to protect
margin and revenue per mile
* Encouraging passenger revenue trends continue
UK BUS - STEADY AND RESILIENT, COST AND MILEAGE REDUCTIONS PROTECT MARGIN
* Like-for-like passenger revenue growth up 1.9% * Cost control and network management protecting margin despite fuel cost increase
UK RAIL - STRONG PERFORMANCE AHEAD OF EXPECTATIONS
* Like-for-like passenger revenue growth up 2.3% - encouraging trends
continue
* Cost actions underpin performance - operating profit margin broadly in line
with prior year FINANCIAL SUMMARY 2009/10
 Revenue £6,319.3m (2009: £6,187.3m)
 Adjusted operating profit1£453.9m (2009: £497.5m)
 Operating profit £368.5m (2009: £371.1m)
 Adjusted EBITDA2£769.6m (2009: £772.2m)
 Adjusted profit before tax1£264.0m (2009: £326.4m)
 Profit before tax £179.6m (2009: £200.0m)
 Adjusted basic earnings per share139.5p (2009: 48.6p)
 Basic earnings per share 27.5p (2009: 30.2p)
 Dividend per share 20.65p (2009: 18.75p)
 Net debt3£2,281.5m (2009: £2,503.5m)
1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties, as shown in the consolidated income statement on p.24.
2Adjusted operating profit as defined plus depreciation.
3.Net debt is stated excluding accrued interest.
Commenting, FirstGroup's Chief Executive, Sir Moir Lockhead said:
"The Group has delivered a resilient performance in line with management expectations against the backdrop of a challenging trading environment and significantly higher hedged fuel costs which increased by approximately £90m during the year.
"Our clear strategy to lead the Group through this tough trading environmentenabled us to take prompt and decisive action to mitigate the impact of therecession on trading. We have a strong track record in cost management and theactions we have implemented during the year have delivered annual savings ofover £200m. Rigorous management of our networks on a route by route basis hasensured that service provision closely matched changing demand and revenue permile was maintained."Looking ahead we anticipate the new financial year will remain challenging.While we are encouraged by improving revenue trends in parts of our business,consistent with economic recovery, the global economic outlook remainsuncertain and we expect the pressure on public spending in North America tocontinue. Despite these challenges we are confident that the Group will returnto earnings growth in the coming year. The Group will continue to benefit froma diverse portfolio of businesses providing strength and resilience as theycontinue to trade robustly through the economic cycle."We have set out our clear priorities to increase net cash generation andreduce net debt. We have increased the Group's net cash generation target to £150m for 2010/11. The continued strong cash generation supports our objectivesof targeted capital investment, accelerating our deleveraging plans anddelivering sustained real dividend growth for investors."Looking ahead the Board is confident of the inherent strength and resilienceof the Group, an expected return to earnings growth and strong cash generationsupports the Board's commitment to dividend growth of at least 7% per annumover the next three years.
"We have established leading positions and critical mass in all our core markets and believe that each of our businesses has significant potential for long-term growth. The actions we have taken have created a stronger, more efficient base and will ensure that the Group is well placed to continue to deliver long term value for shareholders."
"While it is still early in the new financial year, overall the Group has continued to trade well and is in line with our expectations."
Enquiries FirstGroup plc:
Sir Moir Lockhead, Chief Executive
Tel: +44 207 291 0512Jeff Carr, Finance DirectorTel: +44 207 291 0512
Rachael Borthwick, Corporate Communications Director
Tel: +44 207 291 0508 / +44 7771 945432
A CONFERENCE CALL OF THE PRESENTATION TO ANALYSTS WILL BE HELD AT 9:00AM ON WEDNESDAY 12 MAY 2010 FOR DETAILS PLEASE CONTACT FIRSTGROUP TEL: 020 7291 0507
PHOTOGRAPHS FOR THE MEDIA ARE ALSO AVAILABLE
NOTES TO EDITORS
FirstGroup plc is the leading transport operator in the UK and North Americawith revenues of over £6 billion a year. We employ more than 130,000 staff andtransport some 2.5 billion passengers a year.
North America contract businesses
Headquartered in Cincinnati, FirstGroup America Inc. operates across the US andCanada. The Group's contract businesses include Yellow School Buses (FirstStudent), Transit Contracting and Management Services (First Transit), VehicleFleet Maintenance and Support Services (First Services).
* First Student is the largest provider of student transportation in North
America with a fleet of approximately 60,000 yellow school buses, carrying
some 6 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
city transit authorities. It is one of the largest providers of airport
shuttle bus services in the US and also manages call centres, paratransit
operations and other light transit activities. * First Services is the largest private sector provider of vehicle maintenance and ancillary support services in the US. Providing fleet
maintenance for public sector customers such as the Federal Government and
fire and police departments. It also provides support services to public
and private sector clients.
Greyhound
Greyhound is the only national provider of scheduled intercity coach servicesin the US and Canada. Based in Dallas, Greyhound provides scheduled passengerservices to approximately 3,800 destinations carrying approximately 20 millionpassengers a year.UK Bus
The Group is Britain's largest bus operator running more than one in five of all local bus services. A fleet of some 8,000 buses carries approximately 3 million passengers a day in more than 40 major towns and cities. We also operate Greyhound UK providing regular services each way between London and Bournemouth, Portsmouth and Southampton.
UK Rail
The Group operates one quarter of the UK passenger rail network, with a balanced portfolio of intercity, commuter and regional services, carrying over 280 million passengers a year.
* We are the UK's largest rail operator with four passenger franchises - First Capital Connect, First Great Western, First ScotRail and First TransPennine Express - and one open access operator, First Hull Trains.
* We provide rail freight services through First GBRf and operate the London
Tramlink network on behalf of Transport for London carrying over 28 million
passengers a year. EuropeIn mainland Europe we operate some 150 buses in south west Germany and, withour partner DSB, we operate the ˜resund rail franchise which includes routes inand between Denmark and Sweden.
Chairman's statement
As we expected, the continued economic weakness presented a number ofchallenges for the Group during the year. The impact of the recession onpassenger volumes in the UK and North America and pressures on public spendingin North America were combined with significantly higher hedged fuel costsduring the year. Our strategy to build a diverse portfolio of operations hasdelivered a resilient performance during the year despite the tough tradingenvironment and, as parts of our business moved through the economic cycle atdifferent times, ensured that the Group is not wholly dependent on one market.We had a clear strategy to lead the Group through these challenging times andtook prompt and decisive action to mitigate the effects of the recession. Asignificant programme of cost reduction was delivered during the year togetherwith rigorous network management to ensure that service provision was closelymatched to changing demand. Against this backdrop we continued to focus onsafety and customer service. The provision of safe, high quality and reliableservices is our key priority and during the year we made further advances inthese areas as we continue to develop our industry-leading initiatives.The Group's capital structure was further strengthened during the year as wemade progress in executing our plan to extend the maturity profile of our netdebt and reduce reliance on bank finance with the issue of £350m and £200mbonds in April and September 2009 respectively. Both bond issues attractedstrong support from fixed income investors demonstrating the continuedconfidence in the underlying strength and resilience of the Group. The maturityprofile of the Group's net debt is now 6.3 years. In addition the Groupcontinues to have a strong liquidity position with over £1bn of headroomavailable under committed revolver facilities.
Net debt reduction is a key priority for the Group. Despite the challenging trading environment during the year I am delighted that we have exceeded our target for net cash generation which will be used to reduce net debt. Furthermore, we are confident of the opportunities to increase net cash generation within the Group and to accelerate our deleveraging plans.
In line with our stated commitment the Board has proposed a final dividend,subject to approval by shareholders, of 14.0p, an increase of 10%, making afull year payment of 20.65p. It will be paid on 20 August 2010 to shareholderson the register at 16 July 2010. The dividend is covered 1.9 times by adjustedbasic EPS.Looking ahead, the Board recognises the importance of dividends to shareholdersand we remain committed to delivering sustained real growth in the dividend.Our confidence in the inherent strength and resilience of the Group, anexpected return to earnings growth and strong cash generation supports theBoard's commitment to dividend growth of at least 7% over the next three years.In March 2010 Ellis Watson, Group Marketing and Business Development Director,stepped down from the Board to take up the position of Chief Executive Officerof Syco Entertainment. We thank him for his contribution and wish him everysuccess in his new role.The performance of the Group is underpinned by the strong management team wehave established. Their range of skills and experience, from both within andoutside the industry, and track record of achievement have been fundamental tothe performance of the Group this year and going forward will drive itssuccessful future development.
On behalf of the Board I would like to extend sincere thanks to all of our employees across the Group. Their ongoing commitment and professionalism have enabled us to report a resilient performance against the weaker economic backdrop. We recognise the vital role they have played during the year in establishing an even stronger base from which the Group will continue to build.
Looking ahead we anticipate the new financial year will remain challenging asthe global economic outlook remains uncertain. However, the Group will continueto benefit from the diverse portfolio of operations, with contract-backed andpassenger revenues. Our management team have demonstrated their skill andexperience in cost control and network management. We will continue toimplement the necessary actions to reduce the cost base, increase operatingefficiencies as well as closely manage service provision against changingdemand.The Board is confident in the underlying strength and resilience of thebusiness which, combined with the actions taken to mitigate the adverse impactsof the recession, will ensure the Group is well placed to continue to deliverlong term value for our shareholders.
Martin Gilbert
Chairman
* Operating profit referred to throughout the Chairman's statement, Chief Executive's operating review and Finance Director's review refers to operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/ profit on disposal of properties. EBITDA is adjusted operating profit plus depreciation.
Chief Executive's operating review
OVERVIEW
Safety
Within the Group safety is a core value. Ensuring that our customers andemployees remain safe and secure while travelling on our services or working inour businesses lies at the heart of our strategy and underpins everything wedo. The industry-leading initiatives that we have established support our zerotolerance approach to unsafe acts and practices. I am pleased to report thatduring the year lost time injuries reduced by 18%. During the year we continuedto engage with our staff to ensure that support is provided through ongoingtraining and education. We continually monitor and review safety performancetrends to inform the ongoing development of our safety programmes. Furtherdetails of our safety initiatives and achievements during the year can be foundon our website www.firstgroup.com
Results
I am pleased to report a robust performance against a backdrop of economic weakness creating a difficult trading environment and higher hedged fuel costs which increased by approximately £90m in the year.
Group revenue was £6,319.3m (2009: £6,187.3m) an increase of 2.1% and includes£176.3m of favourable foreign exchange movements. Operating profit reduced to £453.9m (2009: £497.5m) as a result of the impact of the recession on tradingand increased fuel costs however, the effect was significantly mitigated by thepositive impact of our cost reduction programme. The unusually severe weatherwhich significantly disrupted our networks in the UK and North America duringthe fourth quarter of our financial year (Q4) also had an adverse impact onoperating profit of £16m. Statutory profit before taxation was £179.6m (2009: £200.0m) reflecting the lower operating profit and higher net finance costs as aresult of the issue of bonds in September 2008, April 2009 and September 2009.Adjusted basic EPS was 39.5p (2009: 48.6p). EBITDA was £769.6m (2009: £772.2m).We have set out our clear priorities of continuing to deliver strong cashgeneration and reducing the Group's net debt. I am delighted to report a strongperformance with net cash generation of £136.3m which exceeded our targets andwas used to reduce net debt.This performance is underpinned by the Group's diverse portfolio of operationstogether with the decisive and pre-emptive action we took to mitigate theeffects of the weaker economy on trading and the increased fuel costs. Duringthe year we successfully delivered a cost reduction programme which producedannual savings of over £200m. Reductions in overheads and increased operatingefficiencies have been key to achieving our plans. Headcount across the Groupwas reduced by more than 5,000.
NORTH AMERICA
Contract Businesses
Our North American contract businesses provide diversity alongside the passenger revenue dependent businesses within the Group.
Revenue from our contract businesses was $3,704.8m or £2,333.7m (2009:$3,739.0m or £2,224.1m). Operating profit reduced to $365.5m or £233.9m (2009:$391.8m or £246.1m) reflecting the impact of reduced ancillary revenues as aresult of budgetary pressure at school board level and increased hedged fuelcosts. During Q4 the unusually severe weather which affected the vast majorityof US states led to a higher than normal amount of lost operating days in ourcontract businesses. EBITDA was $608.7m or £386.4m (2009: $609.2m or £374.2m).
First Student
US Dollar revenue reduced by 3.2% to $2,544.7m (2009: $2,629.5m) and theoperating margin reduced to 11.0% (2009: 12.6%). Our focus on customer serviceand operational performance, together with the value-added services andsustainable economies that we can pass on to customers, has delivered anotherperiod of strong contract retention of over 90%.The core provision of contracted services remained largely resilient during theyear. However, we have seen the effects of economic weakness in North Americaas lower state and local tax receipts have resulted in unprecedented levels ofpressure on school board budgets, particularly during the second half of theyear. As a result ancillary revenues, from charter and additional routes toexisting contracts, were reduced and pricing pressure has been a feature of therecent bid season. In this environment our focus is on managing our cost baseand maintaining our industry leading margins. As the economy strengthens weexpect revenues to recover although it is our view that the pressure on schoolboard budgets will continue during 2010/11.We continued to win new business including contract awards to operate more than600 buses in Wichita, Kansas and a contract to operate 300 buses in Detroit,Michigan where the school district chose to outsource transportation.
With only 30% of the school bus market currently outsourced there remain significant growth opportunities. We continue to progress a pipeline of potential conversion contracts that are currently operated within the public sector. While the levels of interest around outsourcing are very high, particularly during this challenging economy, the quantity of conversions remains small in absolute terms and is often slow to materialise.
As the market leader First Student is uniquely placed to pass on itssignificant scale benefits to new and existing customers through cost andoperating efficiencies and procurement savings. The scope and breadth of ouroperations provides an overview of the marketplace and enables us to respond tothe changing trends and the needs of our customers.Notwithstanding the current economic environment the North American school busmarket provides significant opportunities for future growth. However, againstthe backdrop of public spending pressure, rigorous cost management to protectoperating margin remains a key priority. The actions we are taking to reducecosts will build on the cost synergies already achieved across the business. Webelieve that there is further scope to develop a more efficient operation andto provide an enhanced platform for growth as the economy strengthens.
First Transit
First Transit now generates over $1.1bn of annual revenues and provides prospects to deliver further profitable growth with minimal capital investment. During the year we delivered a strong performance with US Dollar revenue increased by 4.6%. The operating margin increased to 7.3% (2009: 5.4%).
While we have seen the effects of the recession also impacting TransitAuthorities as they come under pressure to reduce their budgets, we haveresponded by implementing actions that have reduced our cost base and increasedoperating efficiencies, while retaining a strong focus on customer service andoperational performance.I am pleased to report that contract retention remained high at over 90% and wewere pleased to be awarded new business during the year including a significantconversion from the public sector in San Diego. We have also increased ourshare of the paratransit market with new contracts in New Jersey and Oregon. Weare particularly pleased that First Transit is now the sole operator in bothcontracts where previously there were multiple providers of the paratransitservices.
First Vehicle Services continued to build on its market share during the year with the award of new business including two conversion contracts that were previously operated within the public sector in Michigan and Florida.
GREYHOUND
Greyhound performed in line with our expectations despite the significantimpact of the weaker North America economy on trading. Revenue was $963.4m or £603.3m (2009: $1,114.0m or £642.4m), a reduction of 13.9% at constant USDollar:Canadian Dollar exchange rates. Passenger revenue, on a like-for-likebasis, increased during Q4 and we are encouraged by trends which showcontinuing progress. Despite the significant reduction in revenues a creditableoperating profit was achieved of $39.6m or £23.9m (2009: $91.7m or £48.5m)supported by the cost reduction and network management actions taken.
During the year we took prompt action to utilise the highly flexible operating model at Greyhound and match service provision to any changing demand. As a result bus miles were reduced by 11.4% in the US and 10.7% in Canada, while retaining capability to restore service levels when demand returns. Through rigorous management of the network and targeted mileage reductions we maintained revenue per mile which is now ahead of prior year despite the difficult trading environment.
In Canada, where the market is more regulated, we made good progress during theyear with some important agreements reached with the Canadian Provinces thatenabled us to reduce mileage or receive a subsidy to operate certain routesthat were not financially viable. As a result the Canadian business model hasbeen significantly strengthened and is now more robust for the future.
We also implemented a number of actions across the business which have considerably reduced our operating costs including overhead reductions and increased operating efficiencies. In addition we made further progress in lowering the cost of sale through agency commission rates.
Whilst mitigating the impact of the weak economy and transforming Greyhound'soperating model, we retained a strong focus on customer service andreliability. I am pleased to report that `On Time Performance' has continued toimprove across Greyhound's US and Canadian operations.BoltBus, our low cost, high quality, point to point coach service operatingbetween city pair destinations in the North East continues to perform well. Weadded 38 new coaches to support growth during the year. The customer responseto BoltBus remains extremely positive with consistently good average loadingsand we are actively developing plans to expand BoltBus to new destinations.The adjustments we made to the network enabled us to retire a number of theoldest buses in the fleet. In addition we recently implemented a programme ofrefurbishment for 250 coaches over the next year which will improve operationalperformance and greatly enhance the customer experience.The actions we have taken during the year have ensured the sustained cashgeneration and profitability of the business. As a result, we have establisheda considerably stronger and lower cost base. Greyhound is on a firmer footingwith improved operating leverage and is well placed to realise the benefits
offuture economic recovery.UK BUSResultsOur UK Bus division delivered a steady and resilient performance despite thechallenging trading environment as we focused on cost control and mileagereduction to protect margin. Like-for-like passenger revenue increased by 1.9%.Total revenue was reduced slightly to£1,170.6m (2009: £1,182.0m) and operating profit was £124.6m (2009: £134.0m).However, despite the impact of the recession on revenues and increased hedgedfuel costs, the actions we took to reduce costs and mileage delivered a strongoperating margin performance of 10.6% (2009: 11.3%).The impact of lower economic activity in the towns and cities where we operate,together with increased hedged fuel costs, was mitigated by our managementactions to reduce our cost base and increase operational efficiencies.Initiatives such as new DriveGreen technology, which we rolled out across ourentire bus fleet, is delivering greater fuel efficiency as well as improvingdriving styles and reducing the carbon footprint of our buses. During the yeardriver turnover continued to reduce from 19% to below 17% as a result of ourinitiatives to improve recruitment and retention as well as reflecting thecurrent labour market conditions.During the year, we made use of the flexible operating model to carry outtargeted mileage reductions. This action to match service provision to changesin demand on a route by route basis led to an overall reduction in mileage of5% across the business and protected revenue per mile. We will be able toincrease the frequency of our services and grow our networks as the economicrecovery continues and passenger journeys increase.
Our customers
We continue to focus on operational performance and delivering our promise tocustomers. In February we welcomed Passenger Focus as the new statutorywatchdog for bus, coach and tram customers outside of London. The firstresearch published by Passenger Focus into passengers' priorities forimprovement highlighted `more punctual buses' as the top priority with `morefrequent services to a wider range of destinations' and `better value for moneyfares' as important. We look forward to working with Passenger Focus as its buspassenger satisfaction survey is developed and we were pleased with the initialresults which showed overall bus passenger satisfaction at 90% for all localbus services in the first six areas surveyed. The results of the research intoboth customer satisfaction and customers' priorities for improvement accordwith feedback from our customers and the results of our own research carriedout over a number of years.Despite the recessionary environment and increased hedged fuel costs, we aretrialling fares initiatives to stimulate passenger revenue growth in many partsof the country. For example, in Bristol we are focusing on popularmulti-journey tickets and are pleased with the encouraging results since thetrial began in February. We are also working with the West of England JointTransport Committee to develop plans for the introduction of a Travel+smartcard for Bath & North East Somerset, Bristol, North Somerset and SouthGloucestershire. The Committee received £2.2m of funding from the Departmentfor Transport (DfT) to set up the necessary back office systems.In March 2010 we launched the First SuperBus ticket in Bristol, agroundbreaking integrated transport initiative. First SuperBus offers trainpassengers spending £25 or more on a ticket to Bristol from any station withinthe First Great Western network inclusive onward bus travel in the Bristol areaat no extra cost. The scheme will operate for an initial three month trialperiod.We also launched a new ticket for young people aged 16-18 in Greater Glasgowoffering discounted travel to the standard adult equivalent tickets. We arepleased with sales of this new product which is increasing loyalty in this keydemographic group.In partnership with the other major public transport groups, we launched`Greener Journeys', a campaign encouraging people to get out of their cars andonto buses and coaches. The campaign aims to reduce carbon emissions bychanging travel behaviour and by switching one in 25 journeys from car to busor coach. This would mean one billion fewer car journeys on our roads over
thenext three years.Interurban services
We are pleased with the performance of Greyhound UK, our high quality, low costservices operating between London and Portsmouth and London and Southampton.The first services were launched in September 2009 and we have built on thesuccess of this new initiative with the introduction of a new service betweenLondon and Bournemouth in May 2010.
We continue to develop opportunities for further interurban services and in April 2009 we introduced a new limited stop service between Leeds and York. During the year we also improved links between Liverpool and Chester and developed our successful interurban services in the East of England by extending the Stansted Aircoach route from Colchester to Clacton and by doubling the frequency of services between Norwich and Lowestoft on Sundays.
London and other major contracts
In London our priority remains to deliver excellent operational performance andimprove operating and cost efficiencies. We retained a number of key contractsduring the year and reached agreement with Transport for London to construct anew maintenance and refuelling facility at Lea Interchange depot and to operatefive hydrogen fuel cell powered buses on a central London route.Following a competitive tender process, the Olympic Delivery Authorityconfirmed that the Group will transport spectators during the London 2012Games. We will provide around 500 buses and coaches for venue shuttle servicesand venue Park and Ride, around 90 buses and coaches for Park and Rideservices, aimed to connect parking sites on the periphery of the M25 with theOlympic Park and Ebbsfleet, and around 300 coaches (sub contracted from fleetsup and down the country) to operate a network of express coach services to theOlympic Park and Weymouth and Portland. In addition, we will provide managementof Direct Coach operations, a bus and coach reservations and ticketing systemand operational support staff at all bus and coach locations to manage thefleet.
Investment
We continued to make selected capital investment to support future growth.Investment has been focused on the major towns and cities where ourpartnerships with local authorities can deliver sustained real passengergrowth. During the period, we invested in new environmentally friendly vehiclesfor our operating companies in West and North Yorkshire, Bristol, Somerset andAvon, Glasgow and Hampshire and Dorset.
Partnerships
We believe that voluntary quality partnerships are the quickest and mosteffective route to increase bus patronage and address the twin challenges ofclimate change and congestion in our towns and cities. Some of our partnershipswith local authorities have been tested this year as we had to reduce ourmileage to match services to changing demand. During the year we continued towork with our partners in local government to deliver more bus prioritymeasures to improve the punctuality and reliability of our services. Ourexperience demonstrates that bus priority improves customer satisfaction andalso attracts car users to bus services by providing an attractive alternativeto travelling by car.We have had constructive discussions with Metro, the West Yorkshire PassengerTransport Executive (PTE), on our Growth and Co-Investment proposal and lookforward to working with our partners in the region to take this initiativeforward. We are also supporting the DfT's £19.8m of funding for a Quality BusCorridor in Leeds which will provide a real alternative to car travel and helptackle traffic congestion by reducing bus journey times at peak periods.We are also supporting Greater Manchester PTE's plans to facilitate cross-citybus journeys through investment in three of the busiest corridors in the regionto improve reliability and end to end journey times.In Glasgow we continued to develop our network and are participating in a BusWorking Group chaired by Glasgow City Council with support from StrathclydePartnership for Transport to progress bus travel and modal shift in the city.We were delighted to win Public Transport Operator of the Year in the ScottishTransport Awards.Our long term partnership with the City and County of Swansea has delivered anumber of initiatives this year. In September 2009 we officially launched ourftrmetro project in Swansea. Together with the Council and the Welsh AssemblyGovernment we delivered a £14m package to improve public transport in Swanseaincluding dedicated infrastructure and new vehicles as well as upgrading theengineering and parking facilities at our depot. We are delighted that theftrmetro is delivering increased passenger journeys and believe that thesuccessful initiative demonstrates the benefits of working in partnership.
Working with Government
In early December the DfT announced the winners of the £30m Green Bus Fund. We are pleased that two of our submissions were successful and we will receive funding towards the cost of new `low carbon' buses in Leeds and Manchester.
In January 2010 the Office of Fair Trading referred the local bus servicemarket to the Competition Commission. We believe that there is intensecompetition both between bus operators and `for the road' between bus operatorsand other modes of transport, particularly the private car. We also believethat the Competition Commission should take into account the considerableeffect of the Local Transport Act 2008 on deregulated services, for example bythe greater use of voluntary partnerships.
UK RAIL
Results
Our UK Rail division delivered a strong performance ahead of our expectationswith a 2.3% increase in like-for-like passenger revenue for the year, despitethe reduction in regulated fares from January 2010. Revenue was £2,188.4m(2009: £2,121.5m) and operating profit was £92.6m (2009: £94.2m). This strongperformance was supported by the successful delivery of our programme to reduceaddressable costs which substantially offset the impact of lower volume growththroughout the year.During the year, as our customers faced recessionary pressures we experiencedstrong demand for advance purchase and other discounted tickets and a reducedtake up of First Class fares. Our portfolio of rail franchises, which includesLondon commuter, intercity and regional train services, provides a balanced mixof operations and mitigates reliance on any one specific market. All of ourfranchises are delivering growth, particularly First ScotRail and FirstTransPennine Express. In addition, the revenue support arrangements within ourfranchise agreements with the DfT continue to ensure significant insulationfrom passenger revenues that are lower than the target revenues in ourfranchise bids. First Capital Connect and First Great Western are receivingrevenue support at the 80% level.Overall, our operational performance has improved during the year and thePublic Performance Measure (PPM) on a moving annual average basis is over 90%at First Great Western, First ScotRail and First TransPennine Express. FirstCapital Connect's PPM is recovering after a period of significant disruption,caused by unofficial industrial action and damage to rolling stock as a resultof severe weather, which impacted performance.We were delighted with our success at the Rail Business Awards in February withfinalists in every category and a number of awards. First Capital Connect wonInternal Communication Excellence for its innovative one-stop employeeinformation shop and extranet and First TransPennine Express received theEnvironmental Innovation award for a unique Eco Drive and Driving FuelEfficiency programme to save fuel and money and to reduce carbon emissions onour Class 185 trains. First Great Western won Train Operator of the Year andFirstGroup won the Rail Business of the Year award, which recognised our marketleading position. We were also delighted that First ScotRail won PassengerOperator of the Year at the National Rail Awards in September, the only TrainOperating Company to receive the award for two consecutive years. FirstScotRail was also named Public Transport Operator of the Year at the NationalTransport Awards in July.We are the UK's largest rail operator and have established a track record ofprudent bidding and delivering profitable growth. As a long term player in therail market we are well positioned to continue to benefit from the excitingopportunities from future franchise competitions.
First ScotRail
Like-like-passenger revenue growth was 3.2% during the year. We celebrated thefifth anniversary of the First ScotRail franchise in October and, working withTransport Scotland and our other partners, we continue to invest in the futureof Scotland's railways. We were delighted to record an overall customersatisfaction score of 90% in the National Passenger Survey.In May 2009 we delivered a new summer timetable with extra East Coast commuterservices and improvements for our customers in Fife, the Highlands and on theWest Coast. In December 2009 we added a new hourly service between Glasgow andEdinburgh via Shotts as part of an ambitious package of improvements betweenGlasgow and Edinburgh, identified in the Scottish Government's StrategicTransport Projects Review. The new timetable also included a much improvedservice between Glasgow and Kilmarnock and better connections from Ayr andGourock into Glasgow and between Dumfries and Carlisle and North Berwick andEdinburgh for early morning services to London.During the year, we completed a series of investments across the business,including improvements to our rolling stock, new engineering equipment at ourdepots and upgrading stations and car parks to enhance reliability and customerservice. We continue to work on a range of projects to deliver furtherimprovements. We are trialling smartcard technology on the Edinburgh-Glasgowroute and will issue 10,000 smartcards later this year. Transport Scotland isalso funding the development of our Shields depot in preparation for thedelivery of a new fleet of 38 Class 380 electric trains to run between GlasgowCentral, Ayrshire, Inverclyde and Renfrewshire. The £200m investment byTransport Scotland will add some 7,500 seats to Scotland's rail network fromSeptember 2010. The new trains will allow other rolling stock to be released tothe £300m Airdrie-Bathgate line, which will open in December 2010.
First TransPennine Express
Like-for-like passenger revenues increased by 5.6% and operational performancehas continued to improve at First TransPennine Express throughout the year. Wedelivered our best ever levels of train punctuality and reliability improvingPPM, on a moving annual average basis, to over 92%, despite the poor winterweather this year.
We were pleased to achieve an overall customer satisfaction score of 89% in the National Passenger Survey, the best autumn result in the history of First TransPennine Express and a six point improvement year on year. Our areas of significant improvement included the frequency of trains, punctuality and reliability, connections and value for money.
Strong passenger revenue growth at First TransPennine Express has been drivenby the continued development of our services between Manchester Airport andScotland and by achieving volume growth through modal shift on journeys to andfrom the airport, despite a fall in the number of air passengers. In December2009 we increased the number of weekday services on this route which improvedour competitive position and allowed us to stimulate further the high passengerdemand that exists on this corridor.First TransPennine Express has stimulated passenger revenue growth through arange of successful marketing campaigns. With the Lake District and manyseaside resorts on our network we continue to target our marketing efforts onleisure promotions and special offers including `Kids go Free' and `Club 55'.In January 2010 we offered passengers a 25% discount on advance purchasetickets.
First Great Western
Like-for-like passenger revenue increased by 1.3% and operational performancehas consistently improved over the year. PPM, on a moving annual average basis,is over 92% and our National Passenger Survey results are also improving. TheAutumn 2009 survey highlighted that 82% of First Great Western customers aresatisfied with our service, an increase of two percentage points on last yearand an improvement of eight percentage points on 2007.We continue to invest in the franchise and have started an £8m programme toimprove our Class 16x fleet, which carry more than 36 million passengers a yearin the London and Thames Valley area. We are upgrading on board facilities andrefreshing the interior which will improve the environment for our customers.The first two vehicles were launched in April 2010 and the entire fleet will beupgraded by March 2012.We introduced WebCIS, our Customer Information System, to a number of smallerstations on our network including Hanborough, Ivybridge and Radley and tenstations on the Severn Beach Line in Bristol. Feedback from our customers hasbeen very positive and we are developing plans to roll out the system further.Following the success of Volo TV on our Sleeper services, we introduced the ondemand entertainment service to the back of seats in some Standard Classcarriages on our High Speed Services in November 2009. All of our High SpeedTrains will be fitted out with Volo TV by December 2010. We are also nearingcompletion of our programme to improve on board catering on High Speed Trainsby introducing 19 Express Caf©s. In addition, the refresh of ten First ClassBuffets will be complete by March 2010.In March 2010 we signed an agreement with the DfT to secure the long termfuture of 30 vehicles in our West fleet. These will replace the trainscurrently on short term lease from other Train Operating Companies which haveallowed us to deliver extra capacity on the Cardiff-Portsmouth route and travelto work services in the Exeter area.
First Capital Connect
Like-for-like passenger revenue growth was 2.6% during the year. As a result ofunofficial industrial action by our train drivers combined with damage torolling stock and infrastructure caused by extreme winter weather, FirstCapital Connect's customers on the Thameslink route experienced an unacceptablelevel of service from October to January. During this period, we operated areduced timetable with a high level of cancellations and a significant declinein PPM. This was reflected in an overall satisfaction score of 75% in the mostrecent National Passenger Survey. Operational performance has now improved withPPM on the Thameslink route at 92% in March and April 2010 and we will continueto work hard to restore customer confidence.In March 2010 First Capital Connect announced a programme of investment andcustomer benefits which, in total, are worth over £10m. The investment will bespread between improvements to the Customer Information Systems, a modificationand renewal package for Class 319 trains on the Thameslink route to resolvereliability issues and introduction of ticket barriers at stations on ournetwork. First Capital Connect also enhanced the discount scheme for Thameslinkcustomers.We have introduced a comprehensive driver recruitment and training programmeand are working with Network Rail through our Joint Performance ImprovementPlan to return the Thameslink route to more stable levels of performance. Thedelivery of the final Class 377/5 Electrostar in January 2010 allowed FirstCapital Connect to fully resource the `Key Output 0' timetable on theThameslink network and provide almost 5,000 additional seats at the busiesttimes of the day.Operational performance on the Great Northern route has been consistentlystrong, however peak time capacity remains a key issue for our customers. InMay 2009 we introduced `Seats for You', a major timetable change on the route,to reduce overcrowding. The new timetable, together with additional carriagesand upgraded infrastructure, allowed First Capital Connect to strengthen trainsto eight or 12 car formations and introduce additional services with an overall15% increase in peak seats.In March 2010 we reached an agreement with the DfT to implement furthercapacity enhancement schemes on the Great Northern route. The DfT has provided£27m of funding to secure 41 additional carriages which will create around6,500 extra seats on peak time services into London Kings Cross and LondonMoorgate. The improvements will be implemented in stages from December 2010
toDecember 2013.First Hull TrainsThe number of passenger journeys on First Hull Trains continued to growalthough the demand for first class fares was weaker as passengers sought valuefrom discounted fares. We were pleased to conclude negotiations with the Officeof Rail Regulation and Network Rail to extend our Track Access Contract to2016. We have now started a Refresh project of our Class 180 trains and arecurrently at the tendering stage of this important investment programme.
First GBRf
We are pleased with the continued development of our rail freight business.During the year, First GBRf signed new contracts with Network Rail, MSC, EDFand Lafarge. We also signed a ten year contract with Drax Power Limited tooperate four trains a day moving renewable biomass material by rail from thePort of Tyne to Drax Power Station in North Yorkshire. First GBRf is providinglocomotives, carriages and train crew for passenger services between Tauntonand Cardiff for First Great Western which is expected to continue until the
endof July 2010.GROUP OUTLOOK
Looking ahead we anticipate the new financial year will remain challenging.While we are encouraged by improving revenue trends in parts of our business,consistent with economic recovery, the global economic outlook remainsuncertain and we expect the pressure on public spending in North America tocontinue. Against this backdrop we expect moderate earnings growth. The Groupwill continue to benefit from a diverse portfolio of businesses providingstrength and resilience as they continue to trade robustly through the economiccycle.We have set out our clear priorities to increase net cash generation and reducenet debt. We have increased the Group's net cash generation target to £150m for2010/11. The continued strong cash generation supports our objectives oftargeted capital investment, accelerating our deleveraging plans and deliveringsustained real dividend growth for investors.Looking ahead the Board is confident of the inherent strength and resilience ofthe Group, an expected return to earnings growth and strong net cash generationsupports the Board's commitment to dividend growth of at least 7% per annumover the next three years.We have established leading positions and critical mass in all our core marketsand believe that each of our businesses has significant potential for long termgrowth. The actions we have taken have created a stronger, more efficient baseand will ensure that the Group is well placed to continue to deliver long termvalue for shareholders.Sir Moir LockheadChief Executive12 May 2010Finance Director's reviewOverviewThe Group has delivered a robust set of results against a challenging economicbackdrop, approximately £90m of increased hedged fuel costs and the impact ofsevere weather conditions across the UK and North America during Q4. Costreduction actions have delivered £228m of savings during the year to partiallymitigate these issues and deliver adjusted EPS of 39.5p per share, in line withour expectations.
The Group continues to prioritise improvements in cash performance and as a result generated net cash of £136.3m which was significantly ahead of our target. Next year's cash target has been raised to £150m. Strong cash generation underpins the Group's commitment to deliver sustained real growth in the dividend while also reducing net debt.
Further progress was made with debt financing during the year. Two long termsterling bonds were issued for a total of £550m to replace short term bankdebt, increasing average debt duration from 4.6 years to 6.3 years. Headroomunder committed revolver facilities at March 2010 was in excess of £1bn.
Results
Group revenue was £6,319.3m (2009: £6,187.3m), an increase of 2.1% and includes£176.3m of favourable foreign exchange movements, representing a reduction of0.7% at constant currencies. Operating profit was £453.9m (2009: £497.5m), areduction of 8.8% principally due to the impact of the recession, in particularon Greyhound revenues, and the higher hedged fuel costs across the Group ofapproximately £90m which were partly mitigated by cost reduction actions acrossall the divisions. Statutory operating profit was £368.5m (2009: £371.1m). Year to Year to 31 March 2010 31 March 2009 Divisional results Revenue Operating Operating Revenue Operating Operating £m Profit1 margin1 £m profit1 margin1 £m % £m % UK Bus 1,170.6 124.6 10.6 1,182.0 134.0 11.3 UK Rail 2,188.4 92.6 4.2 2,121.5 94.2 4.4 North America 2,333.7 233.9 10.0 2,224.1 246.1 11.1 Greyhound 603.3 23.9 4.0 642.4 48.5 7.5 Group2 23.3 (21.1) - 17.3 (25.3) - Total Group 6,319.3 453.9 7.2 6,187.3 497.5 8.0
1Before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties.
2Tram operations, German Bus, central management and other items.
North American contract business revenue was $3,704.8m or £2,333.7m (2009:$3,739.0m or £2,224.1m), an increase of 4.9% in Sterling terms but a reductionof 0.9% in US Dollar terms. Operating profit was $365.5m or £233.9m (2009:$391.8m or £246.1m), a decrease of 5.0% in Sterling terms and 6.7% in US Dollarterms. Revenue was marginally down on last year due to school board budgetarypressures resulting in lower levels of high margin charter work and contract"add ons". Operating profit was impacted by higher fuel costs and, during thefourth quarter, bad weather impacted results by $14m or £8.8m. In additionthere were a lower number of student operating days due to the timing of schoolholidays.Greyhound revenue was $963.4m or £603.3m (2009: $1,114.0m or £642.4m) andoperating profit was $39.6m or £23.9m (2009: $91.7m or £48.5m). Revenue fell asa result of the weak US economy and resultant increased unemployment.Encouragingly, revenue trends became positive in the final quarter of the yearand network management ensured that the revenue per mile run-rate is ahead ofprior year. Bus mileage was reduced by 11.3% during the year and there was anexcellent performance on costs with reductions in overheads and swift actionstaken on variable costs.UK Bus revenue was £1,170.6m (2009: £1,182.0m), a reduction of 1.0%.Like-for-like passenger revenue was up 1.9% on the preceding year. Operatingprofit was £124.6m (2009: £134.0m), a reduction of 7.0% principally due to theimpact of the recession on revenues, mileage reduction of 5% as serviceprovision was flexed in line with demand, together with significantly increasedhedged fuel costs and severe weather which impacted results by approximately £6m in the second half of the year. However, despite this tough tradingenvironment the actions we took to improve operating efficiencies and reduceoverheads delivered a good operating margin performance of 10.6% (2009: 11.3%).UK Rail revenue was £2,188.4m (2009: £2,121.5m), an increase of 3.2%. A changein the Control Period (CP4) charging arrangements with Network Rail meant a £59.0m reduction in both DfT grant revenue and Network Rail charges with noimpact on operating profit. Operating profit was £92.6m (2009: £94.2m), adecrease of 1.7%. Like-for-like passenger revenue growth across our railbusiness was 2.3%. Despite the clear impact of the weaker economy on the UK'srailways, we were substantially insulated from the full effects of therecession by revenue support receipts at FGW and FCC. Revenue trends in thefinal quarter of the year were encouraging with adjusted revenue growth of 3.7%despite the reduction in regulated fares of 0.4%. The cost base continues tobenefit from overhead cost reductions and other direct cost savings.
Non-recurring items and amortisation charges
2010 2009 £m £m
North America integration costs 15.5
70.1
North America restructuring costs 15.9
9.9 UK Bus restructuring costs 6.8 2.1 UK Rail restructuring costs 2.5 10.3 Fuel hedge ineffectiveness 4.8 23.1 Competition Commission costs 3.8 - European bid costs 0.3 3.5 Total non-recurring items 49.6 119.0 Amortisation charges 34.7 33.1 84.3 152.1 Loss/(profit) on disposal of properties 1.1
(25.7)
Hedge ineffectiveness on financial derivatives (1.0)
- 84.4 126.4
North America integration costs
2010 2009 £m £m
Redundancy and staff related costs 1.1
17.3 IT costs 5.9 15.3 Legal and professional costs 2.3 14.8 Safety expenses 0.1 9.0 Rebranding costs 0.1 3.1 Relocation of offices - 2.9 Other integration costs 6.0 7.7 15.5 70.1
These costs reflect the conclusion of the Laidlaw integration process and we do not anticipate any further such costs to be separately disclosed in future.
Restructuring costs
Restructuring costs were £25.2m (2009: £22.3m) and represent redundancy andrelated costs in respect of headcount reductions across all businesses as partof the cost reduction action plan.
Fuel hedge ineffectiveness
During the year a charge of £4.8m (2009: £23.1m) was made in respect of reduced2009/10 fuel volumes principally due to changes to the terms of certain FirstStudent and First Transit contracts whereby the Group has less "at risk" fuelthan it had when 2009/10 hedges were originally taken out.
Competition Commission costs
Costs of £3.8m (2009: £nil) have either already been incurred or are committedto be spent on the ongoing Competition Commission investigation into the localbus market in the UK.European bid costs
Bid costs of £0.3m (2009: £3.5m) represent the non-recurring costs of business development opportunities in mainland Europe.
Amortisation charges
Amortisation charges for the year were £34.7m (2009: £33.1m) with the increase due to the impact of foreign exchange movements.
Loss/(profit) on disposal of properties
A loss on disposal of properties of £1.1m (2009: profit of £25.7m) was recordedduring the year. Due to market conditions there were no significant disposalsof properties during the year either in the UK or North America. The principaldisposals in the prior year were the Southampton depot within UK Bus and aGreyhound site in Seattle.
Hedge ineffectiveness on financial derivatives
Due to the ineffective elements of the fair value movements on financial derivatives there was a £1.0m credit to the income statement during the year (2009: £nil).
Finance costs and investment income
The net finance cost was £188.9m (2009: £171.1m) with the increase principallydue to the issue of long term bonds in September 2008, April 2009 and September2009 and foreign exchange on US Dollar denominated interest costs.
Profit before tax
Adjusted profit before tax was lower than the prior year at £264.0m (2009: £326.4m) due principally to lower operating profit and higher net finance costs.Amortisation charges and net exceptional costs of £84.4m (2009: £126.4m)resulted in statutory profit before tax of £179.6m (2009: £200.0m).
Tax
The tax charge, on adjusted profit before tax, for the year was £59.1m (2009: £81.6m) and results in an effective rate of 22.4% (2009: 25.0%). The reductionin the effective rate is principally due to lower North American profits. Therewas a tax credit of £26.6m (2009: £38.6m) relating to amortisation charges andnon-recurring items. This resulted in a total tax charge of £32.5m (2009: £43.0m). Last year there was a one-off deferred tax charge due to an increase inthe UK deferred tax liability arising on the abolition of Industrial BuildingsAllowances.The actual tax paid during the year was £1.3m (2009: £8.9m). North Americancash tax remains low due to tax losses brought forward and tax depreciation inexcess of book depreciation. We expect the North American cash tax rate toremain low for the medium term. The UK cash tax for the year was low mainly dueto pension payments exceeding pension charges and interest payments. UK cashtax is likely to be higher in the year to March 2011.
Dividends
In line with our stated commitment the Board has proposed a final dividend,subject to approval by shareholders, of 14.0p, an increase of 10%, making afull year payment of 20.65p. It will be paid on 20 August 2010 to shareholderson the register at 16 July 2010. The dividend is covered 1.9 times by adjustedbasic EPS.EPS
The adjusted basic EPS was 39.5p (2009: 48.6 pence), a reduction of 18.7%. Basic EPS was 27.5p (2009: 30.2p), a reduction of 8.9%.
Cash flow
Net cash inflow was £136.3m (2009: £51.1m) during the year. This contributed toa net debt reduction of £222.0m (2009: increase of £342.5m) as detailed below: 2010 2009 £m £m Adjusted EBITDA 769.6 772.2 Non-recurring items (53.1) (67.6) Pension payments in excess of income statement charge (42.1) (50.7) Working capital outflow (76.0) (23.7)
Other non-cash income statement items 6.3
9.5 Operational cash flow 604.7 639.7 Capital expenditure and acquisitions (201.7) (358.9) Interest, tax and other (154.5) (135.8) Dividends (112.2) (93.9) Net cash inflow 136.3 51.1 Foreign exchange and other 85.7 (624.4) Proceeds of share issue - 230.8 Reduction/(increase) in net debt 222.0
(342.5)
EBITDA
Adjusted EBITDA by division is set out below:
Year to Year to 31 March 2010 31 March 2009 Revenue EBITDA1 EBITDA1 Revenue EBITDA1 EBITDA1 £m £m % £m £m % UK Bus 1,170.6 200.2 17.1 1,182.0 205.4 17.4 UK Rail 2,188.4 147.6 6.7 2,121.5 137.2 6.5 North America 2,333.7 386.4 16.6 2,224.1 374.2 16.8 Greyhound 603.3 52.6 8.7 642.4 76.6 11.9 Group 23.3 (17.2) - 17.3 (21.2) - Total Group 6,319.3 769.6 12.2 6,187.3 772.2 12.5
1Operating profit before amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties plus depreciation.
Operating Cash flow
Cash generated by operations reduced slightly to £604.7m (2009: £639.7m). Theprincipal reason for the reduction was the increased working capital outflowfrom £23.7m to £76.0m. The main reason for the increase was the timing ofpayments and cash receipts due to the change to the CP4 charging mechanism andthe increased level of revenue support. However, working capital outflow waslower than management expectations for the year.
Capital expenditure
Efficient network management and lower passenger demand during the year enableda reduction in fleet renewals. Accordingly capital expenditure was reducedacross the Group. Cash capital expenditure was £201.7m (2009: £358.9m) andcomprised UK Bus £32.5m (2009: £115.2m), UK Rail £36.3m (2009: £53.2m), NorthAmerica £99.8m (2009: £180.8m), Greyhound £30.0m (2009: £4.0m) and Group items£3.1m (2009: £5.7m).Funding and risk managementAt the year end, total bank borrowing facilities amounted to £2,110.0m (2009: £2,401.6m) of which £2,066.4m (2009: £2,328.2m) is committed. Of these committedfacilities, £1,053.1m (2009: £1,745.2m) were utilised at 31 March 2010 leavingcommitted headroom of £1,013.3m (2009: £583.0m). Largely due to seasonality inthe North American school bus business, committed headroom typically reducesduring the financial year up to October and increases thereafter. GroupTreasury policy requires a minimum of £175m of committed headroom at all times.During the year we continued our strategy to extend the maturity profile of ourdebt whilst reducing reliance on the bank market. In April 2009 we issued £350mof 12-year bonds and in September 2009 we issued £200m of 15-year bonds. Boththese issues were significantly oversubscribed. As a result of these actionsthe Group's average debt maturity has been increased to 6.3 years (2009: 4.6years). The Group's main revolving bank facilities expire in February 2012 andwe are planning to implement replacement facilities well in advance.As the Group is a net borrower, we minimise cash and bank deposits, which ariseprincipally in the UK Rail companies. The Group can only withdraw cash and bankdeposits from the UK Rail companies on a permanent basis to the lower ofretained profits or the amount determined by prescribed liquidity ratios.
The Group does not enter into speculative financial transactions and uses only authorised financial instruments for certain risk management purposes.
Interest rate risk
The Group reduces exposure by using a combination of fixed rate debt andinterest rate derivatives to achieve an overall fixed rate position over themedium term of between 75% and 100% of net debt. At 31 March 2010 100% (2009:94%) of net debt was fixed and in excess of 70% of net debt is fixed for thenext two years.Fuel price riskIn the UK, crude oil costs were hedged at an average rate of $111 per barrelduring the year. At the end of the year we have hedged 84% of our "at risk" UKcrude requirements for the year to 31 March 2011 (2.5m barrels p.a.) at $76 perbarrel and 31% of our requirements for the year to 31 March 2012 at $85 perbarrel.In North America crude oil costs were hedged at an average rate of $116 perbarrel during the year. At the end of the year we have hedged 88% of the "atrisk" volume for the year to 31 March 2011 (1.7m barrels p.a.) at $89 perbarrel. In addition we have hedged 38% of "at risk" volumes for the year to 31March 2012 at $101 per barrel.
Foreign currency risk
Group policies on foreign currency risk affecting cash flow, profits and netassets are maintained to minimise exposures to the Group by using a combinationof natural hedge positions and derivative instruments where appropriate.Translation risk relating to US Dollar earnings arising in the US is largelyoffset by US Dollar denominated costs incurred in the UK, principally UK fuelcosts, US Dollar interest and tax costs so that exposure to EPS on a year toyear basis is not significant.
With regard to balance sheet translation risk, the Group hedges part of its exposure to the impact of exchange rate movements on translation of foreign currency net assets by holding currency swaps and net borrowings in foreign currencies. At 31 March 2010 foreign currency net assets were 63% (2009: 81%) hedged.
Net debtThe Group's net debt at 31 March 2010 was £2,281.5m (2009: £2,503.5m) andcomprised: Fixed Variable Total 2009 £m £m £m £m Cash - (76.0) (76.0) (109.7) UK Rail ring-fenced cash and deposits - (234.2) (234.2)
(184.8)
Other ring-fenced cash and deposits - (24.8) (24.8) (28.0) Sterling bond (2013)1 297.5 - 297.5 296.9 Sterling bond (2018)2 350.7 - 350.7 364.9 Sterling bond (2019)2 - 294.2 294.2 305.9 Sterling bond (2021)2 341.3 - 341.3 - Sterling bond (2024)1 198.9 - 198.9 -
Sterling bank loans and overdrafts - 10.5 10.5
117.8
US Dollar bank loans and overdrafts3 - 699.0 699.0
1,350.4
Canadian Dollar bank loans and overdrafts - 156.3 156.3 122.9
Euro and other bank loans and overdrafts - 30.2 30.2
27.8
HP contracts and finance leases 116.7 110.7 227.4
228.9 Loan notes 8.7 1.8 10.5 10.5 Interest rate swaps 1,006.8 (1,006.8) - - Total 2,320.6 (39.1) 2,281.5 2,503.51 excludes accrued interest
2 stated excluding accrued interest, swapped or partially swapped to US Dollars and adjusted for movements on associated derivatives
3 includes £46.2m of Euro bank loans swapped into US Dollars
We are focused on reducing our leverage. At 31 March 2010 net debt to EBITDAwas 2.96 times (March 2009: 3.24 times) and it is expected that this ratio willcontinue to decrease in the year to 31 March 2011.
Shares in issue
As at 31 March 2010 there were 480.2m shares in issue (2009: 480.8m), excludingtreasury shares and own shares held in trust for employees of 1.9m (2009:1.3m). The weighted average number of shares in issue for the purpose of basicEPS calculations (excluding treasury shares and own shares held in trust foremployees) was 480.5m (2009: 474.8m).
Total equity
Total equity has increased by £106.2m since the start of the year. Theprincipal reasons for this are an increase in the hedging reserve of £238.8m,retained profits of £147.1m partly offset by actuarial losses on definedbenefit pension schemes, net of tax, of £150.7m, dividend payments of £112.2mand an unfavourable movement in the translation reserve of £18.8m.
Foreign exchange
The most significant exchange rates to Sterling for the Group, for Balance Sheet and Income Statement translation, were as follows:
Year to Year to 31 March 2010 31 March 2009 Closing Effective Closing Effective rate rate rate rate US Dollar 1.49 1.57 1.43 1.63 Canadian Dollar 1.53 1.60 1.78 1.95Pensions
The net pension deficit, before deferred tax, of £169m at the beginning of theyear has moved to a deficit of £331m at the end of the year principally due toa reduction in the discount rate from 6.75% to 5.60%, partly offset byimprovements in asset returns over the period.
The main factors that influence the net balance sheet deficit or surplus for pensions and the sensitivities to their movement are set out below:
Movement Impact Discount rate + 0.1% Reduce deficit by £32m Inflation + 0.1% Increase deficit by £25mSeasonality
The First Student business generates lower revenues and profits in the first half of our financial year than in the second half as the school summer holidays fall into the first half.
Going concern
The Group has established a strong balanced portfolio of businesses with approximately 50% of Group revenues secured under medium term contracts with government agencies and other large organisations in the UK and North America.
The Group has a diversified funding structure with an average life of 6.3 yearsat March 2010, and which is largely represented by medium term unsecuredsyndicated committed bank facilities and long term unsecured bond debt. TheGroup has £505m and $1,500m of committed revolving banking facilities of which£1,013m was undrawn at the year end. These facilities expire in February 2012and the Directors believe that there is every likelihood that they will bereplaced by similar financing arrangements.The Directors have carried out a detailed review of the Group's budget for theyear to 31 March 2011 and medium term plans, with due regard for the risks anduncertainties to which the Group is exposed, the uncertain economic climate andthe impact that this could have on trading performance.
Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis, and details of the going concern review are shown in the Directors' Report in the Group's Annual Report and Accounts.
Jeff CarrFinance Director12 May 2010
Consolidated income statement
Year ended 31 March 2010
Notes Adjusted Adjustments2 Total Adjusted Adjustments2 Total results1 results1 2010 2010 2009 2009 2009 2010 £m £m £m £m £m £m Revenue 6,319.3 - 6,319.3 6,187.3 - 6,187.3 Operating costs before (5,865.4) (84.3) (5,949.7) (5,689.8) (152.1) (5,841.9)(loss)/profit on disposal of properties Operating profit before 453.9 (84.3) 369.6 497.5 (152.1) 345.4(loss)/profit on disposal of properties Amortisation charges - (34.7) (34.7) - (33.1) (33.1) Non-recurring bid costs - (0.3) (0.3) - (3.5) (3.5) Other non-recurring - (49.3) (49.3) - (115.5) (115.5)items - (84.3) (84.3) - (152.1) (152.1) (Loss)/profit on - (1.1) (1.1) - 25.7 25.7disposal of properties Operating profit 453.9 (85.4) 368.5 497.5 (126.4) 371.1 Investment income 1.8 - 1.8 7.9 - 7.9 Finance costs (191.7) 1.0 (190.7) (179.0) - (179.0) Profit before tax 264.0 (84.4) 179.6 326.4 (126.4) 200.0 Tax (59.1) 26.6 (32.5) (81.6) 38.6 (43.0) Profit for the year 204.9 (57.8) 147.1 244.8 (87.8) 157.0 Attributable to: Equity holders of the 189.7 (57.6) 132.1 230.9 (87.6) 143.3parent Minority interests 15.2 (0.2) 15.0 13.9 (0.2) 13.7 204.9 (57.8) 147.1 244.8 (87.8) 157.0 Adjusted/basic earnings 3 39.5p (12.0)p 27.5p 48.6p (18.4)p 30.2pper share Adjusted/diluted 3 39.3p (12.0)p 27.3p 48.3p (18.3)p 30.0pearnings per share
All results relate to continuing operations.
Dividends of £93.1m (2009: £84.6m) were paid during the year. Dividends of £ 67.2m (2009: £61.1m) are proposed for approval in respect of the year.
1 Adjusted trading results before items noted in 2 below.
2 Amortisation charges, hedge ineffectiveness on financial derivatives, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties.
Consolidated statement of comprehensive income
Year ended 31 March 2010 2010 2009 restated1 £m £m Profit for the period 147.1 157.0 Other comprehensive income Derivative hedging instrument movements 339.2
(539.6)
Deferred tax on derivative hedging instrument movements (100.4) 137.1
Exchange differences on translation of foreign operations (18.5) 409.6
Unrealised losses on executive deferred compensation plans (0.5) (3.1)
Actuarial losses on defined benefit pension schemes (204.3)
(308.3)
Deferred tax on actuarial losses on defined benefit pension 53.6 102.2schemes Other comprehensive income for the period 69.1
(202.1)
Total comprehensive income for the period 216.2 (45.1) Attributable to: Equity holders of the parent 200.9 (60.7) Minority interests 15.3 15.6 216.2 (45.1)
1Amounts disclosed in the consolidated statement of recognised income and expense in 2009 have been restated to include foreign exchange movements on minority interests as explained in note 1.
Consolidated balance sheetAs at 31 March 2010 Notes 2010 2009 2008 £m restated1 restated1 £m £m Non-current assets Goodwill 4 1,754.9 1,820.0 1,310.1 Other intangible assets 5 415.9 456.7 367.5 Property, plant and equipment 6 2,284.1 2,398.1 1,919.8 Deferred tax assets 14 30.4 50.2 - Retirement benefit assets 3.1 111.5 186.2
Derivative financial instruments 13 33.0 24.8
45.4 Investments 4.8 5.1 4.0 4,526.2 4,866.4 3,833.0 Current assets Inventories 7 92.7 110.0 82.7 Trade and other receivables 8 602.5 610.3 590.2 Cash and cash equivalents 335.0 322.5 242.3 Assets held for sale 3.9 4.2 10.2
Derivative financial instruments 13 32.1 3.1
78.1 1,066.2 1,050.1 1,003.5 Total assets 5,592.4 5,916.5 4,836.5 Current liabilities Trade and other payables 9 1,120.0 1,124.7 1,035.8 Tax liabilities 36.1 47.2 46.8
Financial liabilities - bank overdrafts 10 - 210.7
26.4and loans - bonds 10 73.3 36.0 23.2
- obligations under HP contracts and
finance leases 11 34.6 34.3 32.4 - loan notes 12 0.8 - 4.6
Derivative financial instruments 13 85.2 304.5
36.9 1,350.0 1,757.4 1,206.1 Net current liabilities 283.8 707.3 202.6 Non-current liabilities Financial liabilities - bank loans 10 896.0 1,408.1 1,745.1 - bonds 10 1,414.1 870.2 545.9
- obligations under HP contracts and
finance leases 11 192.8 194.6 70.8 - loan notes 12 9.7 10.5 10.5
Derivative financial instruments 13 121.1 243.6
27.8
Retirement benefit liabilities 333.9 280.2
97.2 Deferred tax liabilities 14 63.9 20.6 159.9 Provisions 15 300.4 327.0 268.4 3,331.9 3,354.8 2,925.6 Total liabilities 4,681.9 5,112.2 4,131.7 Net assets 910.5 804.3 704.8 Equity Share capital 16 24.1 24.1 21.9 Share premium 676.4 676.4 447.8 Hedging reserve (114.0) (352.8) 49.7 Other reserves 4.6 4.6 4.6 Own shares (6.5) (3.4) (7.6) Translation reserve 318.6 337.4 (70.3) Retained earnings (8.4) 98.5 245.5
Equity attributable to equity holders of 894.8 784.8
691.6the parent Minority interests 15.7 19.5 13.2 Total equity 910.5 804.3 704.8
1Presentation of certain line items has been revised as explained in note 1. Consolidated statement of changes in equity
Share Share Hedging Other Own Trans-lation Retained
Total Minority Total
capital premium reserve reserves shares reserve earnings £m interests equity £m £m £m £m £m £m £m £m £m
Balance at 1 21.9 447.8 49.7 4.6 (7.6) (70.3) 245.5 691.6 13.2 704.8April 2008 Total - - (402.5) - - 407.7 (65.9) (60.7) 15.6 (45.1)comprehensive income for the period Issue of 2.2 228.6 - - - - - 230.8 - 230.8share capital Dividends - - - - - - (84.6) (84.6) (9.3) (93.9)paid Movement in - - - - 4.2 - (3.9) 0.3 - 0.3Employee Benefit Trust and treasury shares Share-based - - - - - - 6.3 6.3 - 6.3payments Deferred tax - - - - - - (1.7) (1.7) - (1.7)on share-based payments Current tax - - - - - - 0.1 0.1 - 0.1on share-based payments Current tax - - - - - - 2.7 2.7 - 2.7on foreign exchange movements
Balance at 31 24.1 676.4 (352.8) 4.6 (3.4) 337.4 98.5
784.8 19.5 804.3March 2009 Total - - 238.8 - - (18.8) (19.1) 200.9 15.3 216.2comprehensive income for the period Dividends - - - - - - (93.1) (93.1) (19.1) (112.2)paid Movement in - - - - (3.1) - (0.6) (3.7) - (3.7)Employee Benefit Trust and treasury shares Share-based - - - - - - 5.5 5.5 - 5.5payments Deferred tax - - - - - - 0.4 0.4 - 0.4on share-based payments
Balance at 31 24.1 676.4 (114.0) 4.6 (6.5) 318.6 (8.4)
894.8 15.7 910.5March 2010
Consolidated cash flow statement
Year ended 31 March 2010 Note 2010 2009 £m restated1 £m Net cash from operating activities 17 452.3 494.4 Investing activities Interest received 1.6 9.0
Proceeds of disposal of property, plant and 35.6
54.7equipment Purchases of property, plant and equipment (205.6) (320.2) Disposal of subsidiary 0.4 - Acquisition of businesses (0.1) (6.5) Net cash used in investing activities (168.1) (263.0) Financing activities
Shares purchased by Employee Benefit Trust (6.1)
-
Monies received on exercise of share options 2.4
0.5 Dividends paid (93.1) (84.6) Dividends paid to minority shareholders (19.1)
(9.3)
Repayments under HP contracts and finance leases (30.0) (43.3) Repayment of loan notes - (4.6) Fees for bank facility amendments and bond (5.0) (10.4)issues
Proceeds from sale and leaseback of buses -
70.3
Net proceeds from issue of share capital - 230.8 Repayment of bank debt (707.4) (1,062.4)
Proceeds from existing bank facilities 40.5
6.4
Proceeds from new bank facilities - 436.1 Proceeds from bond issues 550.0 300.0 Net cash flow from financing activities (267.8)
(170.5)
Net increase in cash and cash equivalents before 16.4
60.9foreign exchange movements Cash and cash equivalents at beginning of year 322.5 239.7 Foreign exchange movements (3.9) 21.9 Cash and cash equivalents at end of year 335.0
322.5
Cash and cash equivalents are all included within current assets on the consolidated balance sheet.
1 Restated to show proceeds of bond issues on a gross basis as explained in note 1.
Note to the consolidated cash flow statement - reconciliation of net cash flowsto movement in net debtYear ended 31 March 2010 2010 2009 £m £m
Increase in cash and cash equivalents in year before 16.4
60.9foreign exchange movements Decrease in debt and finance leases 146.9
369.8
Inception of new HP contracts and finance leases (32.0)
(155.9)
Debt assumed on acquisition of businesses and - (1.3)subsidiary undertakings
Fees capitalised against bank facilities and bond 5.0
8.4issues Other non-cash movements in relation to financial (4.6) (9.5)instruments Foreign exchange movements 90.3
(614.9)
Movement in net debt in year 222.0
(342.5)
Net debt at beginning of year (2,503.5) (2,161.0) Net debt at end of year (2,281.5) (2,503.5)1. General informationThe financial information set out above does not constitute the Company'sStatutory Accounts for the year ended 31 March 2010 or 2009, but is derivedfrom those accounts. Statutory Accounts for 2009 have been delivered to theRegistrar of Companies and those for 2010 will be delivered following theCompany's Annual General Meeting. The auditors have reported on both sets ofaccounts; their reports were unqualified and did not contain statements undersection 498 (2), (3) or (4) of the Companies Act 2006.Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with the recognition and measurement criteria ofInternational Financial Reporting Standards (IFRSs), this announcement does notin itself contain sufficient information to comply with IFRSs. The financialinformation has been prepared on the basis of the accounting policies as setout in the Statutory Accounts for 2009.The Directors have revised the balance sheet presentation of assets classifiedas held for sale to be shown within current assets and retirement benefitassets and deferred tax assets are now included as non-current assets. Prioryear balance sheets have also been revised. The Directors have revised theconsolidated cash flow statement for the year to 31 March 2009 to show proceedsfrom bond issues on a gross basis with an equal increase in fees for bond issuecosts. The Directors have also revised the presentation of minority interestsin the consolidated statement of comprehensive income to include foreignexchange gains and losses on translation of foreign minority interests. None ofthese revisions to the balance sheet have impacted the Group's net assets orthe minority interests in the Group.
Copies of the Statutory Accounts for the year ended 31 March 2010 will be available to all shareholders in early June and will also be available thereafter at the Registered Office of the Company at 395 King Street, Aberdeen, AB24 5RP.
2. Business segments
The segment results for the year to 31 March 2010 are as follows:
UK Bus UK Rail North Greyhound Group Total America items2 £m £m £m £m £m £m Revenue 1,170.6 2,188.4 2,333.7 603.3 23.3 6,319.3 EBITDA 200.2 147.6 386.4 52.6 (17.2) 769.6 Depreciation (75.6) (55.0) (152.5) (28.7) (3.9) (315.7) Segment results1 124.6 92.6 233.9 23.9 (21.1) 453.9 Amortisation charges - (7.1) (24.6) (3.0) - (34.7) Non-recurring bid costs - - - - (0.3) (0.3) Other non-recurring (6.8) (2.5) (28.1) (8.1) (3.8) (49.3)items (Loss)/profit on (1.3) - - 0.2 - (1.1)disposal of properties Operating profit 116.5 83.0 181.2 13.0 (25.2) 368.5 Investment income 1.8 Finance costs (191.7) Hedge ineffectiveness on 1.0financial derivatives Profit before tax 179.6 Tax (32.5) Profit for the year 147.1
1 Segment results are defined as operating profit before amortisation charges, non-recurring bid costs, other non-recurring items and (loss)/profit on disposal of properties.
2Group items comprise Tram operations, German Bus, central management and other items.
The segment results for the year to 31 March 2009 are as follows:
UK Bus UK Rail North Greyhound Group Total America items2 £m £m £m £m £m £m Revenue 1,182.0 2,121.5 2,224.1 642.4 17.3 6,187.3 EBITDA 205.4 137.2 374.2 76.6 (21.2) 772.2 Depreciation (71.4) (43.0) (128.1) (28.1) (4.1) (274.7) Segment results1 134.0 94.2 246.1 48.5 (25.3) 497.5 Amortisation charges - (7.1) (23.1) (2.9) - (33.1) Non-recurring bid costs - - - - (3.5) (3.5) Other non-recurring (9.5) (12.7) (70.1) (23.2) - (115.5)items Profit on disposal of 9.2 - 3.0 13.5 - 25.7properties Operating profit 133.7 74.4 155.9 35.9 (28.8) 371.1 Investment income 7.9 Finance costs (179.0) Profit before tax 200.0 Tax (43.0) Profit for the year 157.01 Segment results are defined as operating profit before amortisation charges,non-recurring bid costs, other non-recurring items and profit on disposal ofproperties.
2Group items comprise Tram operations, German Bus, central management and other items.
3. Earnings per share (EPS)EPS is calculated by dividing the profit attributable to equity shareholders of£132.1m (2009: £143.3m) by the weighted average number of ordinary shares of480.5m (2009: 474.8m). The numbers of ordinary shares used for the basic anddiluted calculations are shown in the table below.
The difference in the number of shares between the basic calculation and the diluted calculation represents the weighted average number of potentially dilutive ordinary share options.
2010 2009 No. No. m m Weighted average number of shares used in basic 480.5 474.8calculation SAYE share options 0.2 0.6 Executive share options 2.5 2.6 Weighted average number of shares used in diluted 483.2 478.0calculation Diluted EPS 2010 2009 pence pence Diluted EPS 27.3 30.0 Adjusted diluted EPS 39.3 48.3
3. Earnings per share (EPS) (continued)
The adjusted basic EPS and adjusted cash EPS are intended to highlight therecurring results of the Group before amortisation charges, non-recurring bidcosts, other non-recurring items and loss/(profit) on disposal of properties. Areconciliation of the earnings used in these bases is set out below: 2010 2009 £m Earnings £m Earnings per share per share (p) (p) Profit for basic EPS calculation 132.1 27.5 143.3 30.2 Amortisation charges1 34.5 7.2 32.9 6.9 Non-recurring bid costs 0.3 0.1 3.5 0.7 Other non-recurring items 49.3 10.3 115.5 24.3
Loss/(profit) on disposal of properties 1.1 0.2 (25.7) (5.4)
Hedge ineffectiveness on financial (1.0) (0.2) -
-derivatives Tax effect of adjustments (26.6) (5.6) (53.8) (11.3) Non-recurring tax charge 2 - - 15.2 3.2 Profit for adjusted basic EPS 189.7 39.5 230.9 48.6calculation Depreciation3 314.9 65.5 273.6 57.7 Profit for adjusted cash EPS 504.6 105.0 504.5 106.3calculation4
1 Amortisation charges of £34.7m per note 5 less £0.2m (2009: £33.1m less £ 0.2m) attributable to equity minority interests.
2 Tax charge in 2009 arising on abolition of Industrial Buildings Allowances in the UK.
3 Depreciation charge of £315.7m per note 6 less £0.8m (2009: £274.7m less £ 1.1m) attributable to equity minority interests.
4 Excludes working capital movements.
4. Goodwill 2010 2009 2008 £m £m £m Cost At 1 April 1,820.0 1,310.1 468.8 Additions - 6.5 829.0
Reclassifications (to)/from other intangible - (9.1)
3.0assets (note 5)
Foreign exchange movements (65.1) 512.5
9.3 At 31 March 1,754.9 1,820.0 1,310.1
Accumulated impairment losses
At 31 March - - - Carrying amount At 31 March 1,754.9 1,820.0 1,310.15. Other intangible assets Customer Greyhound brand Rail Total contracts and trade name franchise £m £m £m agreements £m Cost At 1 April 2009 412.1 65.9 56.3 534.3 Foreign exchange movements (4.5) 0.1 - (4.4) At 31 March 2010 407.6 66.0 56.3 529.9 Amortisation At 1 April 2009 44.6 5.0 28.0 77.6 Charge for year 24.6 3.0 7.1 34.7 Foreign exchange movements 1.4 0.3 - 1.7 At 31 March 2010 70.6 8.3 35.1 114.0 Carrying amount At 31 March 2010 337.0 57.7 21.2 415.9 Customer Greyhound brand Rail Total contracts and trade name franchise £m £m £m agreements £m Cost At 1 April 2008 297.4 49.2 56.3 402.9 Reclassifications to 9.1 - - 9.1goodwill1 Foreign exchange movements 105.6 16.7 - 122.3 At 31 March 2009 412.1 65.9 56.3 534.3 Amortisation At 1 April 2008 13.3 1.2 20.9 35.4 Charge for year 23.1 2.9 7.1 33.1 Foreign exchange movements 8.2 0.9 - 9.1 At 31 March 2009 44.6 5.0 28.0 77.6 Carrying amount At 31 March 2009 367.5 60.9 28.3 456.7 At 1 April 2008 284.1 48.0 35.4 367.51 The reclassification of contracts acquired shown above related toreassessments of provisional values within twelve months of acquisition duringthe year to 31 March 2009. These amounts have been reclassified from goodwill(note 4).
6. Property, plant and equipment
Land and Passenger Other Total buildings carrying plant and £m £m vehicle equipment fleet £m £m Cost At 1 April 2009 531.5 2,598.1 514.4 3,644.0 Additions in the year 24.7 161.6 65.4 251.7 Disposals (4.7) (86.4) (23.1) (114.2) Transfers 5.0 (1.5) (3.5) - Reclassified as held for - (23.6) - (23.6)sale Foreign exchange movements (1.3) (3.9) (3.3) (8.5) At 31 March 2010 555.2 2,644.3 549.9 3,749.4 Accumulated depreciation and impairment At 1 April 2009 51.6 974.7 219.6 1,245.9 Charge for year 13.9 231.5 70.3 315.7 Disposals (1.6) (59.2) (20.5) (81.3) Transfers 4.2 (1.4) (2.8) - Reclassified as held for - (20.1) - (20.1)sale Foreign exchange movements 0.4 5.4 (0.7) 5.1 At 31 March 2010 68.5 1,130.9 265.9 1,465.3 Carrying amount At 31 March 2010 486.7 1,513.4 284.0 2,284.1 Land and Passenger Other Total buildings carrying plant and £m £m vehicle equipment fleet £m £m Cost At 1 April 2008 417.9 1,981.7 413.0 2,812.6 Subsidiary undertakings and - 2.2 0.1 2.3businesses acquired Additions in the year 48.9 276.5 105.0 430.4 Disposals (13.7) (33.7) (36.7) (84.1) Reclassified as held for - (19.3) - (19.3)sale Foreign exchange movements 78.4 390.7 33.0 502.1 At 31 March 2009 531.5 2,598.1 514.4 3,644.0 Accumulated depreciation and impairment At 1 April 2008 35.3 700.8 156.7 892.8 Charge for year 14.3 201.3 59.1 274.7 Disposals (2.0) (32.6) (13.5) (48.1) Reclassified as held for - (14.9) - (14.9)sale Foreign exchange movements 4.0 120.1 17.3 141.4 At 31 March 2009 51.6 974.7 219.6 1,245.9 Carrying amount At 31 March 2009 479.9 1,623.4 294.8 2,398.1 At 1 April 2008 382.6 1,280.9 256.3 1,919.87. Inventories 2010 2009 2008 £m £m £m Spare parts and consumables 91.5 108.0 75.3
Property development work in progress 1.2 2.0
7.4 92.7 110.0 82.78. Trade and other receivables 2010 2009 2008 £m £m £m Amounts due within one year Trade receivables 462.2 461.8 429.8 Provision for doubtful receivables (6.5) (8.8) (5.0) Other receivables 57.3 67.2 95.1 Other prepayments and accrued income 89.5 90.1 70.3 602.5 610.3 590.29. Trade and other payables 2010 2009 2008 £m £m £m
Amounts falling due within one year
Trade payables 288.9 314.5 247.6 Other payables 145.1 129.2 115.7 Accruals and deferred income 627.5 623.0
616.3
Season ticket deferred income 58.5 58.0 56.2 1,120.0 1,124.7 1,035.8
10. Financial liabilities - borrowings
2010 2009 2008 £m £m £m
Current financial liabilities
Short-term bank loans - 210.7 23.8 Bank overdrafts - - 2.6 - 210.7 26.4
Bond 6.875% (repayable 2013) - accrued 20.2 20.2 20.2interest Bond 6.125% (repayable 2019) - accrued 3.0 3.0 3.0interest Bond 8.125% (repayable 2018) - accrued 12.8 12.8 -interest Bond 8.75% (repayable 2021) - accrued 30.1 - -interest Bond 6.875% (repayable 2024) - accrued 7.2 - -interest 73.3 36.0 23.2 HP contracts and finance leases (note 11) 34.6 34.3 32.4 Loan notes (note 12) 0.8 - 4.6 Total current financial liabilities 108.7 281.0 86.6 Non-current financial liabilities Syndicated and bilateral unsecured bank 896.0 1,406.6 1,742.3loans Other loans - 1.5 2.8 896.0 1,408.1 1,745.1 Bond 6.875% (repayable 2013) 297.4 296.9 296.6 Bond 6.125% (repayable 2019) 274.8 277.3 249.3 Bond 8.125% (repayable 2018) 296.2 296.0 - Bond 8.75% (repayable 2021) 346.8 - - Bond 6.875% (repayable 2024) 198.9 - - 1,414.1 870.2 545.9
HP contracts and finance leases (note 11) 192.8 194.6 70.8 Loan notes (note 12) 9.7 10.5 10.5 Total non-current financial liabilities 2,512.6 2,483.4 2,372.3 Total financial liabilities 2,621.3 2,764.4 2,458.9 Gross borrowings repayment profile
Within one year or on demand 108.7 281.0 86.6 Between one and two years 607.4 44.9 1,387.1 Between two and five years 720.4 1,798.3 438.3 Over five years 1,184.8 640.2 546.9 2,621.3 2,764.4 2,458.9
11. HP contracts and finance leases
The Group had the following obligations under HP contracts and finance leases as at the balance sheet dates:
2010 2010 2009 2009 2008 2008 Minimum PV of Minimum PV of Minimum PV of payments payments payments payments payments payments £m £m £m £m £m £m Maturing in less than one 40.2 34.6 39.0 34.3 34.8 32.4year
Maturing in more than one 42.7 37.8 37.0 33.1 19.8 18.9 year but not more than two
years Maturing in more than two 97.2 86.9 103.1 95.0 51.3 50.9years but not more than five years
Maturing in more than five 71.6 68.1 69.0 66.5 1.0
1.0years 251.7 227.4 248.1 228.9 106.9 103.2 Less future financing (24.3) - (19.2) - (3.7) -charges Present value of minimum 227.4 227.4 228.9 228.9 103.2 103.2lease payments 12. Loan notesThe Group had the following loan notes issued as at the balance sheet dates: 2010 2009 2008 £m £m £m Due in less than one year 0.8 -
4.6
Due in more than one year but not more than 9.7 10.5 10.5two years Total 10.5 10.5 15.1
13. Derivative financial instruments
2010 2009 2008 £m £m £m
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Cross currency swaps (net investment hedge) 13.3 - 23.9
Coupon swaps (fair value hedge) 15.7 19.9
1.5
Fuel derivatives (cash flow hedge) 4.0 3.1 20.0 33.0 23.0 45.4 Current assets
Cross currency swaps (net investment hedge) 3.6 0.9 10.5
Coupon swaps (fair value hedge) 10.6 2.1 - Fuel derivatives (cash flow hedge) 15.7 - 67.6 29.9 3.0 78.1 Current liabilities Interest rate swaps (cash flow hedge) 42.9 50.4
26.7
Cross currency swaps (net investment hedge) 2.9 2.0 -
Coupon swaps (fair value hedge) - -
7.4
Fuel derivatives (cash flow hedge) 39.4 252.1 - Currency forwards (cash flow hedge) - - 0.5 85.2 304.5 34.6 Non-current liabilities Interest rate swaps (cash flow hedge) 10.7 38.1
27.8
Cross currency swaps (net investment hedge) 91.9 123.6 -
Fuel derivatives (cash flow hedge) 18.5 81.9
- 121.1 243.6 27.8
Derivatives classified as held for trading
Non-current assets Cross currency swaps - 1.8 - Current assets Cross currency swaps 2.2 0.1 - Current liabilities Interest rate collars - - 2.3 Total non-current assets 33.0 24.8 45.4 Total current assets 32.1 3.1 78.1 Total assets 65.1 27.9 123.5 Total current liabilities 85.2 304.5 36.9 Total non-current liabilities 121.1 243.6 27.8 Total liabilities 206.3 548.1 64.714. Deferred taxThe major deferred tax liabilities and (assets) recognised by the Group andmovements thereon during the current and prior reporting periods are asfollows: Accelerated Other Tax Total temporary tax differences losses £m depreciation £m £m £m At 1 April 2008 248.9 70.8 (159.8) 159.9 Charge/(credit) to income 49.1 42.7 (56.1) 35.7 Credit to equity - (237.6) - (237.6) Foreign exchange movements 61.7 5.6 (54.9) 12.4 At 31 March 2009 359.7 (118.5) (270.8) (29.6) Charge/(credit) to income (39.9) 58.5 8.5 27.1 Charge to equity - 46.4 - 46.4 Foreign exchange movements (10.0) (2.5) 2.1 (10.4) At 31 March 2010 309.8 (16.1) (260.2) 33.5 Certain deferred tax (assets) and liabilities have been offset. The followingis the analysis of the deferred tax balances (after offset) and for financialreporting purposes. 2010 2009 2008 £m £m £m Deferred tax assets (30.4) (50.2) - Deferred tax liabilities 63.9 20.6 159.9 33.5 (29.6) 159.915. Provisions 2010 2009 2008 £m £m £m Insurance claims 243.9 262.0 208.1 Legal and other 51.4 59.5 54.4 Pensions 5.1 5.5 5.9 Non-current 300.4 327.0 268.4 Insurance Legal and Pensions Total other Claims £m £m £m £m At 1 April 2009 262.0 59.5 5.5 327.0 Provided in the year 133.7 3.6 - 137.3 Utilised in the year (161.4) (17.8) (0.4) (179.6) Transfer from current - 8.2 - 8.2liabilities Notional interest 17.5 - - 17.5 Foreign exchange movements (7.9) (2.1) - (10.0) At 31 March 2010 243.9 51.4 5.1 300.416. Called up share capital 2010 2009 2008 £m £m £m Authorised: 650m (2009: 650m; 2008: 4,600m) ordinary shares 32.5 32.5 230.0of 5p each
Allotted, called up and fully paid: 482.1m (2009: 482.1m; 2008: 438.3m) ordinary 24.1 24.1 21.9shares of 5p each No. £m m At 1 April 2008 438.3 21.9 At 31 March 2010 and 31 March 2009 482.1
24.1
17. Net cash from operating activities 2010 2009 £m £m Operating profit before profit on disposal of properties 369.6 345.4 Adjustments for: Depreciation charges 315.7 274.7 Amortisation charges 34.7 33.1 Share-based payments 5.5 6.3
Loss on disposal of plant and equipment 0.8
3.2
Operating cash flows before working capital 726.3
662.7
Decrease/(increase)in inventories 14.8
(17.2)
(Increase)/decrease in receivables (5.4) 114.7 Decrease in payables (54.8) (34.0) Decrease in provisions (34.1) (35.8) Defined benefit pension payments in excess of income (42.1) (50.7)statement charge Cash generated by operations 604.7 639.7 Corporation tax paid (1.3) (8.9) Interest paid (142.9) (129.0)
Interest element of HP contracts and finance leases (8.2) (7.4)
Net cash from operating activities 452.3
494.4
Responsibility Statement of the Directors on the Annual Report
The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 31 March 2010. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
* the Company and Group financial statements, prepared in accordance with UK
GAAP and IFRS respectively, give a true and fair view of the assets,
liabilities, financial position and profit of the Company and Group taken
as a whole; and
* the Directors Report contained in the Annual Report includes a fair review
of the development and performance of the business and the position of the
Company and the Group taken as a whole, together with a description of the
principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on 12 May 2010 and was signed on its behalf by:
Sir Moir Lockhead Jeff Carr
Chief Executive Finance Director
vendorRelated Shares:
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