7th Dec 2005 07:02
Stagecoach Group PLC07 December 2005 7 December 2005 Stagecoach Group plc Interim results for the six months ended 31 October 2005 Highlights • Bus operator of the year AND train operator of the year • Strong revenue growth in bus and rail operations in UK and North America • Increased operating profits* at UK Bus operations, despite increase of £9.2m in fuel costs • Expansion of UK Bus division with acquisition of Glenvale Transport Limited in Merseyside and joint venture with ComfortDelGro in Scotland • Further improvement in operating margins* in North American bus operations Revenue at UK Rail subsidiaries up 4.6% despite impact of London terroristincidents • Pre-qualification documentation submitted for South Western rail franchise • Disposal of Stagecoach New Zealand in November 2005 for NZ$250.5m (approximately £100m) enterprise value * excluding restructuring costs, intangible asset amortisation and exceptional items (refer to definition of exceptional items in note 3 of the interim financial information) + excluding acquisition of Glenvale Financial HighlightsFirst Stagecoach interim results to be reported under IFRS accounting policies: • 20.6% increase in earnings per share • 28.6% increase in earnings per share, excluding intangible asset amortisation and exceptional items • Interim dividend up 10.0% at 1.1pence Reported results Results excluding intangible asset amortisation and exceptional items 2005 2004 2005 2004Revenue from continuing 786.2 729.1 786.2 729.1operations, excluding Glenvaleacquisition (£m)Total operating profit (£m) 69.5 74.1 82.7 80.7Profit before taxation (£m) 54.9 59.3 72.1 70.6Earnings per share (pence) 4.1 3.4 5.4 4.2Interim dividend (pence) 1.1 1.0 1.1 1.0 Commenting on the results, Stagecoach Chief Executive, Brian Souter said: "Weare continuing to deliver on our strategy for organic growth in our bus and railoperations. Our focus on innovation, investment and targeted marketing isproducing further revenue growth in our bus operations and we will continue tobid for new rail franchises. We remain confident in the prospects for the restof the year and the opportunities to deliver further shareholder value." Enquiries to: Martin Griffiths, Stagecoach Group +44 (0) 1738 442111Steven Stewart, Stagecoach Group +44 (0) 1738 442111 or +44 (0) 7764 774680John Kiely, Smithfield +44 (0) 20 7360 4900 Note to Editors:High resolution photographs are available to the media free of charge atwww.newscast.co.uk (telephone +44 (0) 207 608 1000). Chairman's statement I am pleased to report that Stagecoach Group is continuing to deliver on ourstrategy for organic growth in our bus and rail operations in the UK and NorthAmerica. Strong management action, coupled with excellent operational performance,effective marketing, continuing innovation and investment in new vehicles, haveproduced further revenue growth across the Group. In July, many people lost their lives as a result of the terrorist attacks inLondon and these shocking events touched our Group directly. Stagecoach operatedboth of the buses that were involved in the attacks. Everyone at Stagecoach hasbeen deeply saddened and shocked by these events and our thoughts remain withthe victims and their families. I would like to thank our staff, whosecommitment and determination has been remarkable. Our customers can remainassured that the safety and security of our passengers and our people is a keypriority for the Group and is underpinned by a proactive safety culture. Whilethere was a short-term reduction in the number of passengers using publictransport in London in the immediate aftermath of the terrorist attacks, volumesare recovering. Revenue for the six months ended 31 October 2005 was £793.0m (2004: £735.7m).Excluding the impact of acquisitions and disposed businesses, revenue grew 7.8%from £729.1m to £786.2m. Total operating profit (before intangible assetamortisation and exceptional items) was £82.7m (2004: £80.7m). Earnings pershare before intangible asset amortisation and exceptional items were up 28.6%at 5.4p (2004: 4.2p). The Board has declared an interim dividend of 1.1p per share (2004: 1.0p), a10.0% increase, which reflects our continued confidence in the prospects for theGroup. The interim dividend is payable to shareholders on the register at 10February 2006 and will be paid on 8 March 2006. Based on continued strong cashflows and profits, we will look to continue to increase the dividend year onyear. We have made a good start to the second half of our financial year and currenttrading of the Group remains in line with our expectations. We recentlycompleted the disposal of our New Zealand operations, which will allow us tofocus on our strategy of organic growth in our core markets and explore thepotential for complementary acquisition opportunities in the UK and NorthAmerican bus markets. We believe that we submitted competitive bids for the Thameslink/Great Northernand Greater Western rail franchises. Final decisions are expected from theDepartment for Transport ("DfT") before Christmas. However, we are not in activediscussions with the DfT on these franchises at the current time. The Group will continue to innovate and invest in quality services to attractmore people to public transport. All of our employees are central to thatstrategy and I would like to pay tribute to their continued hard work andcommitment to first-class customer service. We will continue to bid for new rail franchises and we look forward tocapitalising on further opportunities for organic growth in our bus operations,both of which can deliver increased value to our shareholders. Robert SpeirsChairman7 December 2005 Chief Executive's review Overview Stagecoach Group has made a good start to the financial year ending 30 April2006. The strength of the Group lies in our ability to innovate, control costs,effectively market our products and deliver a consistent, high quality range oftransport services to our customers. Revenue by division is summarised below: REVENUE months 6 months 6 6 months 6 months Growth to 31 to 31 to 31 to 31 October October October October 2005 2004 2005 2004 £m £m Currency Local currency(m) % Continuing GroupoperationsUK Bus 381.1 351.1 £ 381.1 351.1 8.5North America 130.8 117.0 US$ 235.4 212.1 11.0New Zealand 28.7 26.2 NZ$ 73.7 73.4 0.4UK Rail 245.6 234.8 £ 245.6 234.8 4.6 786.2 729.1AcquisitionsUK Bus - Glenvale 6.8 Nil £ 6.8 Nil n/aDiscontinued GroupoperationsNorth America Nil 6.6 US$ Nil 12.0 (100.0) Total Group revenue 793.0 735.7 Operating profit by division is summarised below: OPERATING PROFIT 6 months to 31 6 months to 31 6 6 October 2005 October 2004 months months to 31 to 31 October October 2005 2004 £m % of £m % of Local currency revenue revenue Currency (m)Continuing Group operationsUK Bus 41.1 10.8 40.5 11.5 £ 41.1 40.5North America 15.7 12.0 14.6 11.8 US$ 28.3 26.5New Zealand 3.5 12.2 3.9 14.9 NZ$ 9.1 10.9UK Rail 24.4 9.9 22.5 9.6 £ 24.4 22.5Group overheads (5.0) (4.4) -Restructuring costs (0.7) (0.3) - 79.0 76.8AcquisitionsUK Bus - Glenvale (0.8) NilJoint ventures andassociatesVirgin Rail Group 4.5 4.1Other Nil (0.2)Total operating profit 82.7 80.7before intangible assetamortisation andexceptional itemsIntangible asset (13.2) (6.0)amortisationExceptional items Nil (0.6)Total operating profit 69.5 74.1 UK Bus Stagecoach operates around 7,000 buses in nearly 100 towns and cities across theUK, from the Highlands of Scotland to south-west England. We have substantialoperations in a number of key cities, including London, Manchester, Liverpool,Newcastle, Hull, Oxford and Cambridge. Revenue from our continuing UK Bus operations+ was up 8.5% to £381.1m, comparedto £351.1m in the prior year. Operating profit*+ was £41.1m (2004: £40.5m).Operating margin+ was 10.8%, compared to 11.5% in 2004, which reflects ongoingcost pressures, particularly in relation to fuel. Our UK Bus division has delivered further organic passenger growth in the firsthalf of the year with revenue outside London up 8.1% on the equivalent period inthe previous year. We have achieved encouraging results from our targetedtelemarketing programme, strong partnerships with local authorities and ourKickstart initiatives. Passenger volumes are continuing to grow in Walesfollowing the introduction of the concessionary fares scheme and we havesuccessfully bid for a number of Kickstart initiatives in Scotland supported bythe Scottish Executive. Our investment in improved services is seeing largenumbers of people return to the nation's buses and independently-auditedresearch compiled by the Confederation of Passenger Transport UK earlier thisyear shows that Stagecoach runs 11 of the 15 fastest growing bus networks in theUK. The integration of Glenvale Transport Limited, the Merseyside bus operations weacquired in an £11.2m deal in July 2005, is progressing. As we anticipated atthe time of acquisition, the business has incurred losses as we restructure theoperations. In the period from acquisition to 31 October 2005, revenue was £6.8mand an operating loss of £0.8m was recognised. We are excited by the prospects for our joint venture with ComfortDelGro tooperate inter-city coach services in Scotland, which we believe can competestrongly with existing rail services and attract car users to public transport.We are in discussions with the Office of Fair Trading as we demonstrate that thenew venture offers a credible competitor to current alternative transportservices. We have been pleased at the continuing growth in revenue at our innovativemegabus.com product, which offers low-cost inter-city travel between majorlocations in the UK. Megabus.com's financial performance continues to improve asaverage fares and load factors increase. In London, where we operate buses on behalf of Transport for London ("TfL"), wehave grown revenue by 9.7%. We were one of two operators chosen to operate TfL'snew Routemaster heritage tours and these services have now been launched. Stagecoach is continuing to invest heavily in its bus fleet. The first of 600vehicles for our UK operations in 2005-06, with a total value of more than £60m,have already entered service. Our investment includes 75 new vehicles for ourMerseyside operations and a £3.5m order for 25 new accessible coaches. Stagecoach was named Britain's best bus operator at the 2005 bus industryOscars. The Group's West Scotland operation, which runs around 400 busesstretching from Dumfries to Glasgow, took the headline Belmont International BusOperator of the Year Award and the award for Best Large Fleet operator. + excluding acquisition of Glenvale* References to the operating profit or loss of a particular division in the Chief Executive's review refer to operating profit or loss before restructuring costs, intangible asset amortisation and exceptional items. References to the operating margin of a particular division are on the same basis. Further details of the divisional split of operating profit can be found in Note 5 to the interim financial information contained in this announcement. North America We operate 2,750 vehicles in the United States, covering the states of New York,New Jersey, Pennsylvania, West Virginia, Ohio, Indiana, Illinois and Wisconsin.In Canada, we serve the provinces of Ontario and Quebec, running more than 500vehicles. North American trading continues to be encouraging, despite increased fuelcosts. Revenue for the six months to 31 October 2005 was US$235.4m (2004:US$224.1m). On a like for like basis, revenue was up by 9.6%. Operating profitwas US$28.3m (2004: US$26.5m), resulting in an operating margin of 12.0%,compared to 11.8% the previous year. Converted to sterling, revenue for the sixmonths to 31 October 2005 was £130.8m (2004: £123.6m). Operating profit for thesix months was £15.7m (2004: £14.6m). In the Northeast area, we continue to experience strong revenue growth in ourhighly successful New York Sightseeing business following the introduction ofnew double-decker buses and improved services, with passenger volumes up around14% year on year. There has been solid growth in our express, commuter and scheduled airportservices. We have been awarded a number of new contracts in our Chicago,Wisconsin and Pittsburgh businesses, while our Chicago sightseeing and touroperations have expanded services. Student transportation services in Wisconsin continue to grow, through contractawards and service efficiencies, and are performing extremely well, despite thecontinuing trend by state government to reduce overall school spending. In Canada, charter revenue remains strong and scheduled service operations haveperformed well. There has been a significant growth in sightseeing revenue, andwe were recently awarded a major new contract for airport employee and apronservices at Toronto Airport. New Zealand Stagecoach New Zealand operates around 1,000 buses in Auckland and Wellington,the country's largest metropolitan areas. Revenue from the New Zealand businesses was in line with our expectations atNZ$73.7m (2004: NZ$73.4m), while operating profit was NZ$9.1m (2004: NZ$10.9m).This represents an operating margin of 12.3% (2004: 14.9%). Converted tosterling, revenue was £28.7m (2004: £26.2m) and operating profit was £3.5m(2004: £3.9m). The New Zealand operations have been tremendously successful under ourownership, delivering excellent financial returns. However, the market in NewZealand was changing with the prospect of a more regulated environment and amove away from the current commercial operating model. In addition, the businessfaced increasing competition from rail services in Auckland. Following severalapproaches and, after assessing these issues and the prospects for the business,we decided it was in the best interests of shareholders to sell the business toInfratil Limited. Rail We operate two wholly owned UK heavy rail franchises - South West Trains andIsland Line - and Sheffield Supertram. Revenue from our UK Rail subsidiaries for the six months to 31 October 2005 wasup by 4.6% to £245.6m (2004: £234.8m). Operating profit increased to £24.4m(2004: £22.5m), with an operating margin of 9.9% (2004: 9.6%). Revenue wasimpacted in the aftermath of terrorist incidents in London in July 2005, butpassenger volumes are recovering. South West Trains was recently named Passenger Train Operator of the Year andits recent operational performance is amongst the best achieved by trainoperating companies in London and the South East, with punctuality now in excessof 90% (measured using the DfT's Public Performance Measure). The full fleet of state-of-the-art new Desiro trains is now in operation,bringing a step-change in passenger comfort, and we have achieved an impressiveimprovement in the reliability of our service. Our focus on providing a safe andsecure travelling environment has also resulted in significant cuts in crime onthe network. Strong management action has resulted in a significant increase in passengersatisfaction with our service at South West Trains, particularly in terms of theprovision of on-board information, improved cleanliness and the upkeep andrepair of our new fleet. We have submitted prequalification documentation for the new South Westernfranchise, which runs from February 2007. We believe that our record ofachievement at South West Trains will enhance the Group's bid for the new SouthWestern franchise. Last month, Stagecoach launched megatrain.com, a new budget train serviceoffering rail fares from just £1. The concept is being piloted at South WestTrains on some off-peak services on the Portsmouth-London and Southampton-Londonroutes. This is a further example of Stagecoach leading the way with innovativeideas to attract more people to public transport and we believe there ispotential to expand the concept elsewhere on the UK rail network. Stagecoach Group submitted competitive bids for the Thameslink/Great Northernand Greater Western franchises. We expect a decision on both franchises beforeChristmas. However, we are not in active discussions with the DfT on thesefranchises at the current time. All three remaining bids for the Greater Westernfranchise have been referred to the UK Competition Commission and we arecontinuing to assist the Commission with its review. The Group was disappointed that our bid with the Danish State Railways ("DSB")for the Integrated Kent franchise was not successful. We believe that wesubmitted a strong bid with an acceptable level of risk for our shareholders.The Group remains committed to bidding for further UK rail franchises and webelieve that our strong track-record, operational expertise and innovative ideasposition the Group well for these further bids. Virgin Rail Group Our joint venture with Virgin, Virgin Rail Group ("VRG"), in which Stagecoachhas a 49% share, operates the West Coast and CrossCountry rail franchises. Ourshare of VRG's profit after tax for the six-month period amounted to £4.5m(2004: £4.1m), which comprises a share of operating profit of £6.1m (2004:£5.5m), a share of finance income of £0.8m (2004: £0.8m) and a share of taxationcharges of £2.4m (2004: £2.2m). VRG has now re-started negotiations with the Government over new commercialterms for the West Coast franchise that extends through to 2012. VRG's objectiveis to secure an agreement which is sustainable and in the long-term interests ofpassengers, taxpayers and shareholders. Meanwhile, passenger volumes arecontinuing to grow on West Coast and performance of the new Pendolino trains hasimproved further. Passenger volumes have continued to increase: West Coastvolume is approximately 30% up and CrossCountry is approximately 3% up for VRG'sfinancial year to date, despite the severe impact of the London bombings onleisure travel in the summer. The Government announced in October 2005 that a new CrossCountry franchise wouldbe created by incorporating the current Central Trains inter-regional routesinto the existing CrossCountry network. As part of the re-mapping process, theDfT also announced its decision to re-let the CrossCountry franchise in autumn2007. There has been significant growth in passenger numbers and improvements inoperational performance in recent years and, based on that strong track record,we believe that VRG can submit an attractive bid for the new CrossCountryfranchise. In the short term, VRG's two rail franchises continue to operate on the basis ofan agreement entered into in July 2002 (the "Letter Agreement"). Under theLetter Agreement, the DfT sets an annual budget for each franchise thatdetermines the amount of financial support to be paid to the franchises. To theextent that the actual costs materially exceed those assumed in the DfT's budgetor the actual revenues are materially less than those assumed, the franchises(subject to certain conditions) are legally entitled to claim for additionalfinancial support. The DfT set very challenging budgets for VRG's financial yearto 4 March 2006. As a result, both franchises are claiming for additionalfinancial support. The Group's share of VRG's operating profit for the sixmonths ended 31 October 2005 is £6.1m (2004: £5.5m), which includes £29.8m(2004: £Nil) of income relating to claims for additional financial support thathave not yet been settled. Of the £29.8m income recognised, £7.6m relates toVRG's entitlement for additional financial support for periods prior to 1 May2005, which was fully provided against as at 30 April 2005. VRG is continuing todiscuss various aspects of the Letter Agreement with the DfT with a view toensuring it receives the financial support necessary for the franchises to earnthe level of profits envisaged. Depreciation and amortisation Earnings before interest, taxation, depreciation, intangible asset amortisationand exceptional items (pre-exceptional EBITDA) amounted to £117.0m (2004:£112.2m). Depreciation for the period increased from £31.5m to £34.3m.Amortisation of intangible assets increased from £6.0m to £13.2m. Thisprincipally reflects the increase in the goodwill charge for Virgin Rail Group,which totalled £10.6m (2004: £4.1m) for the six months. During the year ended 30April 2005, the Directors reviewed the period over which the goodwill in respectof Virgin Rail Group was being expensed, in light of the status of negotiationson Virgin Rail Group's franchises. As a result, it was decided that theexpensing of goodwill in respect of Virgin Rail Group should be accelerated.This has led to the increased charge for the six months. Rail bid costs Rail bid costs of £6.9m (2004: £1.5m) were expensed in the six month period inarriving at the UK Rail operating profit of £24.4m. These were principally inrelation to our bids on the Greater Western, Great Northern/Thameslink andIntegrated Kent franchises. Exceptional items Net exceptional charges before tax of £4.0m (2004: £5.3m) were reported. Thiscomprised a net loss in respect of previously disposed operations of £3.8m,principally in relation to the taxi businesses disposed of in previous years,and a loss on sale of properties of £0.2m. Interest Net finance charges increased from £10.1m to £10.6m. The ratio ofpre-exceptional EBITDA to net finance charges was 11.0 times for the six monthsended 31 October 2005 (2004: 11.1 times). At 31 October 2005, 67% of the Group's gross borrowings of £395.8m were coveredby fixed and capped/floored interest rates. Taxation Including the tax charge presented as a component of the share of profit fromjoint ventures, the tax charge for the interim period of £13.7m (2004: £18.2m)represents an effective tax rate of 23.9% (2004: 29.6%), with the effective taxrate before the amortisation of intangible assets and all exceptional itemsbeing 22.1% (2004: 27.5%). Earnings per share Overall, earnings per share before intangible asset amortisation and exceptionalitems increased 28.6% to 5.4p, from 4.2p in the prior year reflecting the strongperformance at each of our core divisions and the earnings enhancing effect ofthe return of capital that took place in September 2004. Basic earnings pershare increased 20.6% from 3.4p to 4.1p. Shares in issue The weighted average number of ordinary shares used to calculate basic earningsper share for the six months ended 31 October 2005 was 1,068.2m. The number ofordinary shares ranking for dividend at 31 October 2005 was 1,072.4m, with afurther 5.3m ordinary shares held by employee trusts and not ranking fordividend. Net assets Net assets at 31 October 2005 were £145.8m (30 April 2005: £121.4m) with theincrease principally reflecting the strong results for the six months. The reported net assets of £145.8m (30 April 2005: £121.4m) are after takingaccount of retirement benefit obligations of £220.2m (30 April 2005: £220.9m)and related deferred tax assets. Of the total retirement benefit obligations,£158.8m (30 April 2005: £160.3m) relates to the Stagecoach Group Pension Scheme("SGPS"). The triennial valuation of SGPS is due to be completed by April 2006and we will consider any implications of this valuation as part of our widerevaluation of the Group's capital structure. Net debt IFRS does not explicitly define net debt. The Group will therefore continue touse the definition of net debt contained under UK GAAP. Net debt decreased from £214.6m at 30 April 2005 to £208.9m at 31 October 2005.This reflects the benefit of ongoing cash generation from our core operationsoffset by the redemption of the remaining redeemable 'B' preference shares of£13.9m and the impact of acquisitions of £12.1m. Our net debt has further decreased since 31 October 2005 as a result of thedisposal of our New Zealand operations. We will continue to evaluate the capitalstructure of the Group taking account of all relevant factors, including thestatus of rail re-franchising, other investment opportunities and the Group'songoing funding requirements. The strong cash generative nature of the Group is once again highlighted by freecash flow for the six months of £106.2m (2004: £128.8m). The impact of purchases of property, plant and equipment for the six months onnet debt was £44.8m (2004: £59.4m). This primarily related to expenditure onpassenger service vehicles, and comprised cash outflows of £39.1m (2004: £35.6m)and new hire purchase debt of £5.7m (2004: £23.8m). Acquisitions and disposals The Group acquired the entire share capital of Glenvale Transport Limited("Glenvale") on 12 July 2005. The consideration paid for the shares was £3.4m incash and the Group assumed the net debt of Glenvale at acquisition totalling£7.8m. The fair value of the net liabilities acquired totalled £6.0m (includingthe £7.8m of assumed net debt) resulting in goodwill of £9.4m. In the periodfrom acquisition to 31 October 2005, Glenvale contributed £6.8m to revenue andmade an operating loss of £0.8m. On 12 September 2005, Stagecoach acquired 35% of the share capital of ScottishCitylink Limited ("Citylink") in return for transferring certain rights to theMotorvator and megabus.com operations in Scotland. In the period from creationto 31 October 2005, Citylink made no significant contribution to the Group'soperating profit. On 29 November 2005, the Group disposed of its entire New Zealand operations toInfratil Limited, a company listed on the New Zealand Exchange that is aspecialist investor in infrastructure and utility assets. The cash considerationreceived for the disposal was NZ$250.5m (approximately £100m). After transactioncosts and the impact of the Group's foreign exchange hedges, the disposal willresult in a net gain of approximately £20m. Fuel Hedging We currently use the equivalent of approximately 1.8m barrels per annum ofdiesel fuel in our bus operations. As a result, we are exposed to the movementin the underlying price of crude oil, which is the major driver of dieselprices. We manage the year on year volatility in our fuel costs by maintainingan ongoing fuel hedging programme where we use derivatives to effectively fix orcap the variable unit cost of a percentage of our current and future dieselvolumes. If we had no hedging in place a US$10 a barrel movement in theunderlying prices would affect our fuel costs by US$18m-US$19m per annum. For the six months ended 31 October 2005 we had hedged approximately 87% of ourfuel usage at a crude oil price of approximately US$46 per barrel. This comparesto the average price for the period of US$60. For the second half of the financial year to 30 April 2006, we have hedgedapproximately 90% of expected usage at a crude oil price equivalent to US$50 perbarrel compared to a crude oil price at the end of October 2005 of US$60. The full year variable fuel price is fixed or capped at an equivalent price ofapproximately US$48 a barrel (April 2005: US$35) and after taking account offoreign exchange rates and cap premiums gives an expected year on year increasein variable fuel costs of approximately £19m, which we have taken intoconsideration when setting fares and contract prices. For the financial year to 30 April 2007 we have presently hedged or cappedapproximately 15% of our variable fuel costs at a crude oil equivalent price ofUS$57 a barrel. Accounting policies The Group's interim results have been prepared using accounting policies basedon International Accounting Standards ("IAS") and International FinancialReporting Standards ("IFRS"), which we refer to collectively as IFRS. All of thecomparatives referred to in this document are restated for IFRS: further detailsof this were provided in our announcement on 29 September 2005. A copy of thisannouncement can be found on the Stagecoach Group plc website at http://www.stagecoach.com/scg/ir/finanalysis/reports/ These results have been prepared on the basis of IFRSs expected to be applicableat 30 April 2006. New standards and interpretations may be issued by theInternational Accounting Standards Board ("IASB") and/or endorsed by theEuropean Union ("EU") prior to the completion of our first full reporting periodunder IFRS on 30 April 2006. There are a number of new and revised standardsincluded within the body of Standards that comprise IFRS. There is not yet anysignificant established practice upon which to draw in forming opinionsregarding their interpretation and application. Accordingly practice iscontinuing to evolve. At this stage, therefore, the full financial effect ofreporting under IFRS, as it will be applied and reported on in the Group's firstIFRS financial statements, cannot be determined with certainty and may besubject to change. The financial information contained in this announcementrepresents our current view and may be impacted by changes in the business or toIFRS or the interpretation thereof. This announcement and the results includedwithin it are unaudited. Current Trading and Outlook We believe our strategy of focusing on core local transport operations withorganic growth potential and targeting new rail franchise opportunities candeliver further value to shareholders. Our key strengths of innovation, strongmarketing, partnership working and operational expertise are continuing toattract more people to the benefits of public transport. Stagecoach has a strong set of bus businesses in the UK. We are continuing toprogress with the integration of our Merseyside bus operations and we willconsider other acquisition opportunities in the provincial bus market. We areencouraged by the growth in passenger revenue in our existing rail businessesand we will seek to expand our rail portfolio as new franchises are put out tocompetition. In North America, trading remains encouraging and despite the high cost of fuelwe expect to see further revenue and profit growth. We have delivered a good performance in the first six months of the year and Iam pleased to report that current trading remains in line with our expectations.I remain confident that the Group's portfolio of businesses offers goodpotential for further growth and added value to our shareholders. Brian SouterChief Executive7 December 2005 CONSOLIDATED INCOME STATEMENT Unaudited 6 months to 31 October 2005 6 months to 31 October 2004 Performance Intangibles Results Performance Intangibles Results Year to pre and for the pre and for the 30 April intangibles exceptional period intangibles exceptional period* 2005* and items and items * exceptional exceptional items items * Notes £m £m £m £m £m £m £mRevenue 5 793.0 Nil 793.0 735.7 Nil 735.7 1,479.5Operating costs (818.9) (2.6) (821.5) (743.6) (2.5) (746.1) (1,508.5)Other operating income 4 104.1 Nil 104.1 84.7 Nil 84.7 175.0(net)Operating profit of Group 5 78.2 (2.6) 75.6 76.8 (2.5) 74.3 146.0companiesShare of profit/(loss) of 4.5 (10.6) (6.1) 4.1 (4.1) Nil (5.0)joint ventures - afterfinance charges andtaxationShare of profit/(loss) ofjoint ventures:Operating profit/(loss) 6.1 (10.6) (4.5) 5.5 (4.1) 1.4 (1.5)Finance income (net) 0.8 Nil 0.8 0.8 Nil 0.8 1.7Taxation (2.4) Nil (2.4) (2.2) Nil (2.2) (5.2) 4.5 (10.6) (6.1) 4.1 (4.1) Nil (5.0)Share of loss from Nil Nil Nil (0.2) Nil (0.2) (0.4)interest in associates -after finance charges andtaxationTotal operating profit: 5 82.7 (13.2) 69.5 80.7 (6.6) 74.1 140.6Group and share of jointventures and associates(Loss)/gain on sale of 3 Nil (0.2) (0.2) Nil 1.3 1.3 1.3propertiesLoss on disposed 3 Nil (3.8) (3.8) Nil (6.0) (6.0) (7.4)operationsProfit before interest 82.7 (17.2) 65.5 80.7 (11.3) 69.4 134.5and taxationFinance costs (13.5) Nil (13.5) (21.0) Nil (21.0) (35.2)Finance income 2.9 Nil 2.9 10.9 Nil 10.9 13.6Profit before taxation 72.1 (17.2) 54.9 70.6 (11.3) 59.3 112.9Taxation 6 (14.1) 2.8 (11.3) (17.8) 1.8 (16.0) (27.0)Profit for the period 58.0 (14.4) 43.6 52.8 (9.5) 43.3 85.9Profit attributable to 58.0 (14.4) 43.6 52.8 (9.5) 43.3 85.9equity shareholders ofthe parentEarnings per share- Adjusted/Basic 8 5.4p 4.1p 4.2p 3.4p 7.4p- Diluted 8 5.3p 4.0p 4.1p 3.4p 7.3pDividends per ordinary 7share- Interim 1.1p 1.0p 1.0p- Final - - 2.3p The accompanying notes form an integral part of this consolidated incomestatement. * Results are restated for the impact of the transition to International Financial Reporting Standards ("IFRS") and International Accounting Standards ("IAS"). CONSOLIDATED BALANCE SHEET Unaudited As at 31 As at 31 As at 30 April October 2005 October 2004* 2005* £m £m £mASSETSNon-current assetsGoodwill 109.4 96.9 93.6Other intangible assets 7.8 9.8 9.2Property, plant and equipment 711.6 689.9 694.2Investment in joint ventures 53.0 82.2 62.1Investment in associates 2.0 1.2 1.0Available for sale and other investments 5.0 2.2 1.8Deferred tax asset 4.3 Nil 4.1Trade and other receivables 5.1 10.1 6.7 898.2 892.3 872.7Current assetsInventories 14.1 12.2 12.5Trade and other receivables 181.4 162.3 169.2Derivative instruments at fair value 11.0 Nil NilCash and cash equivalents 157.7 363.1 140.0 364.2 537.6 321.7Assets held for sale Nil 3.5 NilTotal assets 1,262.4 1,433.4 1,194.4 LIABILITIESCurrent liabilitiesTrade and other payables 358.3 387.0 357.6Current tax liabilities 30.4 35.5 33.3Borrowings 135.8 282.7 126.5Derivative instruments at fair value 2.1 Nil NilDividends payable Nil 0.1 Nil 526.6 705.3 517.4Non-current liabilitiesTrade and other payables 8.2 9.1 8.1Borrowings 260.0 294.1 228.1Provisions 101.6 119.3 98.5Retirement benefit obligations 220.2 170.7 220.9 590.0 593.2 555.6Liabilities associated with assets held Nil 0.7 Nilfor saleTotal liabilities 1,116.6 1,299.2 1,073.0 Net assets 145.8 134.2 121.4 EQUITYOrdinary share capital 6.8 6.7 6.8Redeemable 'B' preference shares Nil 21.0 13.9Share premium account 166.7 154.1 163.4Retained earnings (283.0) (271.9) (288.4)Capital redemption reserve 243.0 222.1 229.1Own shares (6.1) (3.9) (6.8)Translation reserve 7.9 6.1 3.4Available for sale reserve 1.7 Nil NilCash flow hedging reserve 8.8 Nil NilTotal equity 145.8 134.2 121.4 *Results are restated for the impact of the transition to IFRS and IAS. The retained earnings deficit of £283.0m is the consolidated position. Theholding company's distributable reserves as at 31 October 2005 under UK GAAPwere £287.6m. CONSOLIDATED CASH FLOW STATEMENT Unaudited Notes 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Cash flows from operating activitiesCash generated from operations 10 120.2 141.4 200.7Tax paid (14.0) (12.6) (27.1)Net cash from operating activities 106.2 128.8 173.6("free cash flow")Investing activitiesAcquisition of subsidiaries, net of (2.0) (1.6) (5.9)cash acquiredDisposals of subsidiaries and other 4.0 14.4 14.7businessPurchases of property, plant and (39.1) (35.6) (73.5)equipmentDisposals of property, plant and 2.8 6.0 7.1equipmentPurchase of intangible assets (0.3) (0.9) (0.3)Purchase of other investments (1.5) (0.1) (0.2)Disposal of other investments 0.6 Nil 0.6Movement in loans to joint ventures Nil 6.7 6.7Net cash used in investing activities (35.5) (11.1) (50.8)Financing activitiesIssue of shares 3.3 3.5 5.3Redemption of 'B' shares (13.9) (220.4) (227.4)Expenses on issue of 'B' shares Nil (0.4) (0.4)Redemption of 'B' shares by employee Nil Nil 1.7ownership trustsInvestment in own ordinary shares by Nil Nil (1.9)employee share ownership trustsSale of own ordinary shares by employee 0.7 Nil 4.8share ownership trustsRepayments of hire purchase and lease (11.3) (12.8) (92.5)finance(Decrease)/increase in borrowings (3.3) 30.6 (110.1)Dividends paid (24.6) (26.6) (37.2)Sale of tokens 2.6 2.8 10.2Redemption of tokens (6.2) (5.7) (10.9)Decrease in collateral balances 0.4 1.7 3.0Net cash used in financing activities (52.3) (227.3) (455.4)Net increase/(decrease) in cash and 18.4 (109.6) (332.6)cash equivalentsCash and cash equivalents at the 104.2 439.2 439.2beginning of the periodExchange rate effects 0.8 (2.1) (2.4)Cash and cash equivalents at the end of 123.4 327.5 104.2period * Results are restated for the impact of the transition to IFRS and IAS. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Balances recognised on the adoption of IAS 32 6.2 Nil Niland IAS 39, net of taxationCash flow hedges, net of taxation- net fair value gains 10.9 Nil Nil- reclassified and reported in profit for the (9.4) Nil NilperiodNet fair value gains on available for sale 1.7 Nil NilinvestmentsExchange differences on translation of foreign 4.8 6.1 3.4operations (net of hedging)Actuarial losses on Group defined benefit Nil Nil (50.9)pension schemesTax effect of actuarial losses on Group Nil Nil 15.3defined benefit schemesActuarial losses on joint ventures' defined Nil Nil (9.1)benefit pension schemesTax effect of share of joint ventures' Nil Nil 2.7actuarial lossesNet income/(expense) not recognised in income 14.2 6.1 (38.6)statementProfit for the financial period attributable 43.6 43.3 85.9to equity shareholders of the parentTotal recognised income and expense for the 57.8 49.4 47.3periodattributable to equity shareholders of theparent * Results are restated for the impact of the transition to IFRS and IAS. RECONCILIATION OF MOVEMENTS IN CONSOLIDATED EQUITY Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Profit for the financial period 43.6 43.3 85.9Equity dividends (24.6) (26.6) (37.2)Non-equity dividends n/a+ (0.1) (0.4) 19.0 16.6 48.3Other recognised income and expense relatingto the period- Balances recognised on the adoption of IAS 6.2 Nil Nil32 and IAS 39, net of taxation- Cash flow hedges, net of taxation 1.5 Nil Nil- Net fair value gains on available for sale 1.7 Nil Nilinvestments- Exchange differences on translation of 4.8 6.1 3.4foreign operations (net of hedging)- Actuarial losses on Group defined benefit Nil Nil (50.9)pension schemes- Actuarial losses on joint ventures' defined Nil Nil (9.1)pension schemes- Tax on actuarial losses Nil Nil 18.0Share based payment expense 1.1 0.6 1.4Equity ordinary share capital issued less 3.3 3.5 12.8costsOwn ordinary shares purchased Nil Nil (5.4)Own ordinary shares sold 0.7 Nil 2.5Redemption of 'B' preference shares (13.9) (220.4) (227.4)Expenses on issue of 'B' shares set against Nil (0.4) (0.4)share premiumNet increase/(decrease) in equity 24.4 (194.0) (206.8)Equity at the start of the period 121.4 328.2 328.2Equity at the end of the period 145.8 134.2 121.4 * Results are restated for the impact of the transition to IFRS and IAS.+ Note on adoption of IAS 32 and IAS 39, non-equity dividends form part of finance costs. NOTES 1 BASIS OF PREPARATION Stagecoach Group plc ("the Group") previously prepared its primary consolidatedfinancial statements in accordance with UK Generally Accepted AccountingPractice ("UK GAAP") for periods up to and including 30 April 2005. From 1 May2005 onwards, the Group is required to prepare its consolidated financialstatements in accordance with International Financial Reporting Standards("IFRS") and International Accounting Standards ("IAS") as adopted by theEuropean Union ("EU"). The results for the six months ended 31 October 2005represent the Group's first interim financial statements prepared in accordancewith accounting policies based on IFRS. The comparatives for the six monthsended 31 October 2004 and the year ended 30 April 2005 have been restated.Detailed transitional UK GAAP to IFRS reconciliations for the comparatives wereissued on 29 September 2005 and can be found on the Group's website at: http://www.stagecoach.com/scg/ir/finanalysis/reports/ The Group's first IFRS AnnualReport and Accounts will be for the year ending 30 April 2006. The accounting policies, used in the interim results, are consistent with thestandards expected to be endorsed by the EU and applicable for the preparationof the financial statements for the year ending 30 April 2006. As permitted byIAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39'Financial Instruments: Recognition and Measurement', the Group has chosen notto restate its comparative information for the year ended 30 April 2005 forfinancial instruments. The Group has applied IAS 32 and IAS 39 with effect from1 May 2005. The financial information provided in this document has not been audited. As thecomparative financial information for the year ended 30 April 2005 has beenrestated from UK GAAP to IFRS, it does not reflect the information contained inthe Company's last annual accounts. The UK GAAP annual accounts received anunqualified audit report and have been filed with the Registrar of Companies. The Board of Directors approved this announcement on 7 December 2005. The interim report for the six months to 31 October 2005 will be published inthe Financial Times on 8 December 2005. The interim report, which is extractedfrom this announcement and which includes the independent review report by theauditors, has been prepared in accordance with the Listing Rules of theFinancial Services Authority. The full text of the interim report is included atthe end of this announcement released to the London Stock Exchange. 2 FOREIGN CURRENCIES The principal rates of exchange used to translate the results of foreignoperations are as follows: 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004 2005New Zealand DollarPeriod end rate 2.5295 2.6784 2.6088Average rate 2.5706 2.7985 2.7240US DollarPeriod end rate 1.7703 1.8323 1.9099Average rate 1.7989 1.8131 1.8530Canadian DollarPeriod end rate 2.0881 2.2350 2.3969Average rate 2.1836 2.4114 2.3621 3 EXCEPTIONAL ITEMS Unlike UK GAAP, there is no definition of "exceptional items" in IFRS. Whereapplicable, the Group intends to continue to highlight amounts before theamortisation of intangible assets and exceptional items as well as clearlyreporting the results in accordance with IFRS. This is intended to enable theusers of the accounts to determine more readily the impact of amortisation andexceptional items on the results of the Group. For this purpose, "exceptionalitems" are items which individually or, if of a similar type, in aggregate, needto be disclosed by virtue of their size or incidence if the accounts are topresent fairly the financial performance of the Group. The following items have been highlighted as being exceptional: Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Loss on disposed operations (3.8) (6.0) (7.4)Return of capital costs Nil (0.3) (0.3)Impairment of minority investment Nil (0.3) (0.3)Loss re flooding at Carlisle depot Nil Nil (0.8)(Loss)/gain on sale of properties (0.2) 1.3 1.3 (4.0) (5.3) (7.5)Tax effect of exceptional items 1.7 1.2 1.6 (2.3) (4.1) (5.9) The loss on disposed operations includes gains and losses arising on thedisposal and closure of operations and adjustments to the estimated insuranceprovisions relating to the Group's former US taxi operations. * Results are restated for the impact of the transition to IFRS and IAS. 4 OTHER OPERATING INCOME Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Miscellaneous revenue 26.5 21.3 48.3Losses on disposal of assets, other than (0.2) (1.3) (3.0)propertiesRail liquidated damages Nil Nil 2.6Rail franchise support, excluding incentive 56.4 49.1 91.8paymentsRail incentive payments 21.4 15.6 35.3 104.1 84.7 175.0 * Results are restated for the impact of the transition to IFRS and IAS. Miscellaneous revenue comprises revenue incidental to the Group's principalactivity. It includes advertising income, maintenance income and propertyincome. Rail franchise support is the gross amount of financial support receivable fromthe Department for Transport ("DfT"). Partly offsetting this, South West Trainsrecognised amounts payable to the DfT under revenue and profit share agreementstotalling £27.8m (2004: £20.5m). 5 SEGMENTAL ANALYSIS(A) REVENUE Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004 2005 £m £m £m Continuing operationsUK Bus - continuing 381.1 351.1 720.3- acquisitions - Glenvale 6.8 Nil NilNorth America 130.8 117.0 213.7New Zealand 28.7 26.2 59.0Total bus continuing operations 547.4 494.3 993.0UK Rail 245.6 234.8 479.4Total continuing operations 793.0 729.1 1,472.4Discontinued operationsNorth America Nil 6.6 7.1Total discontinued operations Nil 6.6 7.1Group revenue 793.0 735.7 1,479.5 5 SEGMENTAL ANALYSIS (CONTINUED)(B) OPERATING PROFIT Unaudited 6 months to 31 October 2005 6 months to 31 October 2004 Performance Intangibles Results Performance Intangibles Results Year pre and for the pre and for to intangibles exceptional period intangibles exceptional the 30 and items and items* period* April exceptional exceptional 2005* items items* £m £m £m £m £m £m £mContinuing operationsUK Bus - continuing 41.1 Nil 41.1 40.5 Nil 40.5 86.9- acquisitions - (0.8) Nil (0.8) Nil Nil Nil NilGlenvaleNorth America 15.7 Nil 15.7 14.6 Nil 14.6 15.5New Zealand 3.5 Nil 3.5 3.9 Nil 3.9 8.7Total bus continuing 59.5 Nil 59.5 59.0 Nil 59.0 111.1operationsUK Rail 24.4 Nil 24.4 22.5 Nil 22.5 50.0Total continuing 83.9 Nil 83.9 81.5 Nil 81.5 161.1operationsGroup overheads (5.0) Nil (5.0) (4.4) (0.6) (5.0) (9.6)Intangible Nil (2.6) (2.6) Nil (1.9) (1.9) (4.1)amortisationRedundancy/ (0.7) Nil (0.7) (0.3) Nil (0.3) (1.4)restructuring costsTotal operating profit 78.2 (2.6) 75.6 76.8 (2.5) 74.3 146.0of continuing GroupcompaniesShare of profit/(loss)of joint venturesafter finance chargesand taxationContinuing- Virgin Rail Group 4.5 Nil 4.5 4.1 Nil 4.1 9.7Operating profit 6.1 Nil 6.1 5.5 Nil 5.5 13.2Finance charges (net) 0.8 Nil 0.8 0.8 Nil 0.8 1.7Taxation (2.4) Nil (2.4) (2.2) Nil (2.2) (5.2) 4.5 Nil 4.5 4.1 Nil 4.1 9.7Goodwill charged on Nil (10.6) (10.6) Nil (4.1) (4.1) (14.7)investment incontinuing jointventuresShare of loss ofassociates afterfinance charges andtaxationContinuing - other Nil Nil Nil (0.2) Nil (0.2) (0.4)Total operating 82.7 (13.2) 69.5 80.7 (6.6) 74.1 140.6profit: Group andshare of jointventures andassociates * Results are restated for the impact of the transition to IFRS and IAS. The operating profit from the discontinued element of North America for theprior year is not separately shown because it is not clearly distinguishable dueto certain "shared" costs that relate to North America as a whole. However, thediscontinued element of North America's operating profit is not believed to bematerial in the context of the Group's annual operating profit as a whole. 6 TAXATION The taxation charge comprises: Unaudited 6 months to 31 October 2005 6 months to 31 October 2004 Performance Intangibles Results Performance Intangibles Results Year pre and for the pre and for the to 30 intangibles exceptional period intangibles exceptional period* April and items and items* 2005* exceptional exceptional items items* £m £m £m £m £m £m £m Group companies - UK 9.1 (0.4) 8.7 13.1 (0.5) 12.6 27.0- Overseas 5.0 (2.4) 2.6 4.7 (1.3) 3.4 Nil 14.1 (2.8) 11.3 17.8 (1.8) 16.0 27.0 * Restated for the impact of the transition to IFRS and IAS. 7 DIVIDENDS Unaudited 6 months 6 months Year to to to 30 April 31 October 31 October 2005* 2005 2004* £m £m £mAmounts recognised as distributions in the periodDividends on ordinary sharesFinal dividend paid of 2.0p per share for the year - 26.6 26.6ended 30 April 2004Interim dividend paid of 1.0p per share for the year - - 10.6ended 30 April 2005Final dividend paid of 2.3p per share for the year 24.6 - -ended 30 April 2005Amounts recognised as distributions to equity holders 24.6 26.6 37.2in the periodDividends on redeemable 'B' preference sharesAccrued for the period n/a 0.1 0.4 24.6 26.7 37.6 Dividends proposed but not paid or included asliabilities in the accountsDividends on ordinary sharesInterim dividend paid of 1.0p per share for the year - 10.7 -ended 30 April 2005Final dividend paid of 2.3p per share for the year - - 24.4ended 30 April 2005Interim dividend proposed of 1.1p per share for the 11.8 - -year ending 30 April 2006 11.8 10.7 24.4 The proposed interim ordinary dividend of 1.1p per ordinary share was approvedby the Board on 7 December 2005 and has not been included as a liability as at31 October 2005. It is payable on 8 March 2006 to shareholders on the registerat close of business of 10 February 2006. The dividends proposed and the actual dividends recognised as distributionsdiffer slightly due to the number of shares at the balance sheet date beingdifferent to that of the record date. 8 EARNINGS PER SHARE Earnings per ordinary share have been calculated by calculating the profit aftertaxation and non-equity dividends divided by the weighted average number ofordinary shares in issue during the period based on the following: Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* Basic weighted average ordinary share capital 1,068.2 1,252.2 1,154.5(number of shares, million)Dilutive ordinary shares- Executive Share Option Scheme 19.0 18.2 20.0- Employee SAYE Scheme 0.8 3.0 3.6Diluted weighted average ordinary share 1,088.0 1,273.4 1,178.1capital (number of shares, million) £m £m £m Profit after taxation and non-equity 43.6 43.2 85.5dividends(for basic EPS calculation)Amortisation of intangible assets 13.2 6.0 18.8Exceptional items (see note 3) 4.0 5.3 7.5Tax effect of amortisation of intangible (2.8) (1.8) (2.7)assets and exceptional itemsProfit for adjusted EPS calculation 58.0 52.7 109.1 Earning Earnings Earnings per share per share per share pence pence pence Basic 4.1 3.4 7.4Adjusted basic 5.4 4.2 9.4Diluted 4.0 3.4 7.3Adjusted diluted 5.3 4.1 9.3 * Restated for the impact of the transition to IFRS and IAS. 9 INVESTMENT IN JOINT VENTURES Unaudited 6 months to 31 October 2005 £m Cost at 1 May 2005* 73.4Additions 0.4Share of recognised profits 4.5At 31 October 2005 78.3 Amounts written off at 1 May 2005* (14.7)Goodwill charged during period (10.6)At 31 October 2005 (25.3) Net book value, 1 May 2005* 58.7Net book value, 31 October 2005 53.0 * Restated for the impact of the transition to IFRS and IAS. 10 RECONCILIATION OF OPERATING PROFIT TO NET CASHFLOW FROM OPERATING ACTIVITIES Unaudited 6 months to 6 months to Year to 31 October 31 October 30 April 2005 2004* 2005* £m £m £m Operating profit of Group companies 75.6 74.3 146.0Adjustments for:Depreciation 34.3 31.5 67.3Loss on disposal of property, plant and equipment 0.2 1.3 3.0Amortisation of intangible assets 2.6 1.9 4.1Share based payment expense 1.1 0.6 1.4Impairment of investment Nil 0.3 0.4Operating cashflows before working capital 113.8 109.9 222.2(Increase)/decrease in inventories (1.1) 0.1 (0.4)Increase in receivables (6.7) (8.5) (13.2)Increase in payables 30.7 29.1 4.7Decrease in provisions (4.0) (2.9) (14.8)Cash generated by operations 132.7 127.7 198.5Interest paid (13.7) (7.4) (26.2)Interest received 2.9 10.1 13.6Interest element of hire purchase contracts and (1.7) (3.7) (8.3)finance lease paymentsNon equity dividends paid Nil Nil (0.4)Dividends received from joint ventures and Nil 14.7 23.5associatedNet cash from operating activities 120.2 141.4 200.7 * Restated for the impact of the transition to IFRS and IAS. During the period, the Group entered into hire purchase arrangements in respectof new assets with a total capital value at the inception of the contracts of£6.0m (31 October 2004: £25.1m). After taking account of deposits paid up-front,new hire purchase liabilities of £5.7m (31 October 2004: £23.8m) wererecognised. 11 ANALYSIS OF NET DEBT IFRS does not explicitly define "net debt". The analysis provided belowtherefore shows analysis of net debt as UK GAAP defines it. The analysis belowfurther shows the other items classified as net borrowings in the consolidatedbalance sheet. Opening IAS 32 & Cashflows Cash New hire Foreign Acquisitions (Charged)/ IAS 39 collateral purchase exchange credited adoption movements to income statement Closing £m £m £m £m £m £m £m £m £m Cash 104.2 Nil 18.4 Nil Nil 0.8 Nil Nil 123.4Cash collateral 34.3 Nil (0.2) (0.2) Nil Nil Nil Nil 33.9Hire purchase (66.1) Nil 11.3 Nil (5.7) Nil Nil Nil (60.5)and financeleaseobligationsBank loans and (112.1) Nil 3.1 0.2 Nil (0.6) (10.1) Nil (119.5)loan stockBonds (174.9) Nil Nil Nil Nil (11.3) Nil Nil (186.2)UK GAAP Net Debt (214.6) Nil 32.6 Nil (5.7) (11.1) (10.1) Nil (208.9)Accrued interest n/a (6.9) 7.8 Nil Nil (0.4) Nil (8.0) (7.5)on bondsSeparate n/a 0.4 Nil Nil Nil Nil Nil (2.5) (2.1)recognition offoreign exchangeforward contractRedeemable 'B' n/a (13.9) 13.9 Nil Nil Nil Nil Nil NilsharesUnamortised gain n/a (23.5) Nil Nil Nil Nil Nil 3.9 (19.6)on earlysettlement ofinterest rateswapsNet borrowings (214.6) (43.9) 54.3 Nil (5.7) (11.5) (10.1) (6.6) (238.1) The net total of cash and cash collateral of £157.3m (30 April 2005: £138.5m) isclassified in the balance sheet as £157.7m (30 April 2005: £140.0m) cash andcash equivalents and £0.4m (30 April 2005: £1.5m) as bank overdrafts withinborrowings. The cash collateral balance as at 31 October 2005 of £33.9m (30April 2005: £34.3m) comprises balances held in trust in respect of loan notes of£33.3m (30 April 2005: £33.5m) and North America restricted cash balances of£0.6m (30 April 2005: £0.8m). In addition, cash includes train operating companycash of £92.2m (30 April 2005: £61.3m). Under the terms of the franchiseagreements, train operating companies can only distribute cash out of retainedprofits. APPENDIX 1 Stagecoach Group plc Interim Report for the six months ended 31 October 2005 (to be published in the Financial Times on 8 December 2005) Consolidated Unaudited Unaudited Unaudited Chairman's StatementIncome Statement 6 months 6 months Year to I am pleased to report that StagecoachFor the six to to 30 April Group is continuing to deliver on ourmonths to 31 31 Oct 31 Oct 2005* strategy for organic growth in our busOctober 2005 2005 2004* £m and rail operations in the UK and £m £m North America. Revenue 793.0 735.7 1,479.5 Strong management action, coupled with excellent operational performance,Operating costs (821.5) (746.1) (1,508.5) effective marketing, continuing innovation and investment in newOther operating 104.1 84.7 175.0 vehicles, have produced furtherincome (net) revenue growth across the Group. Operating profit 75.6 74.3 146.0 Revenue for the six months ended 31of Group October 2005 was £793.0m (2004:companies £735.7m). Excluding the impact of acquisitions and disposed businesses,Share of loss of (6.1) Nil (5.0) revenue grew 7.8% from £729.1m tojoint ventures £786.2m. Total operating profit (before intangible asset amortisationShare of loss Nil (0.2) (0.4) and exceptional items) was £82.7mfrom interest in (2004: £80.7m). Earnings per shareassociates before intangible asset amortisation and exceptional items were up 28.6% atTotal operating 69.5 74.1 140.6 5.4p (2004: 4.2p).profit: Group andshare of joint The Board has declared an interimventures and dividend of 1.1p per share (2004:associates 1.0p), a 10.0% increase, which reflects our continued confidence in(Loss)/gain on (0.2) 1.3 1.3 the prospects for the Group. Thesale of interim dividend is payable toproperties shareholders on the register at 10 February 2006 and will be paid on 8Loss on disposed (3.8) (6.0) (7.4) March 2006. Based on continued strongoperations cash flows and profits, we will look to continue to increase the dividendProfit before 65.5 69.4 134.5 year on year.interest andtaxation We believe that we submitted competitive bids for the Thameslink/Finance costs (13.5) (21.0) (35.2) Great Northern and Greater Western rail franchises. Final decisions areFinance income 2.9 10.9 13.6 expected from the Department for Transport ("DfT") before Christmas.Profit before 54.9 59.3 112.9 However, we are not in activetaxation discussions with the DfT on these franchises at the current time.Taxation (11.3) (16.0) (27.0) The Group will continue to innovateProfit for the 43.6 43.3 85.9 and invest in quality services toperiod attract more people to public transport. All of our employees areProfit 43.6 43.3 85.9 central to that strategy and I wouldattributable to like to pay tribute to their continuedequity hard work and commitment toshareholders of first-class customer service.the parent We will continue to bid for new railEarnings per franchises and we look forward toshare capitalising on further opportunities for organic growth in our bus- Basic 4.1p 3.4p 7.4p operations, both of which can deliver- Adjusted 5.4p 4.2p 9.4p increased value to our shareholders.- Diluted 4.0p 3.4p 7.3p Robert Speirs, ChairmanDividends perordinary share Basis of preparation - Interim 1.1p 1.0p 1.0p Stagecoach Group plc ("the Group") previously prepared its primary- Final - - 2.3p consolidated financial statements in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") for periods up to and including 30 AprilConsolidated Unaudited Unaudited Unaudited 2005. From 1 May 2005 onwards, theBalance Sheet 31 Oct 31 Oct 30 April Group is required to prepare itsAs at 31 October 2005 2004* 2005* consolidated financial statements in2005 £m £m £m accordance with International Financial Reporting Standards ("IFRS")ASSETS and International Accounting Standards ("IAS") as adopted by the EuropeanNon-current Union ("EU"). The results for the sixassets months ended 31 October 2005 represent the Group's first interim financialGoodwill 109.4 96.9 93.6 statements prepared in accordance with accounting policies based on IFRS. TheOther intangible 7.8 9.8 9.2 comparatives for the six months endedassets 31 October 2004 and the year ended 30 April 2005 have been restated.Property, plant 711.6 689.9 694.2 Detailed transitional UK GAAP to IFRSand equipment reconciliations for the comparatives were issued on 29 September 2005 andInvestment in 53.0 82.2 62.1 can be found on the Group's websitejoint ventures at: http://www.stagecoach.com/scg/ir/ finanalysis/reports/ The Group's firstInvestment in 2.0 1.2 1.0 IFRS Annual Report and Accounts willassociates be for the year ending 30 April 2006. Available for 5.0 2.2 1.8 The accounting policies, used in thesale and other interim results, are consistent withinvestments the standards expected to be endorsed by the EU and applicable for theDeferred tax 4.3 Nil 4.1 preparation of the financialasset statements for the year ending 30 April 2006. As permitted by IAS 32Trade and other 5.1 10.1 6.7 'Financial Instruments: Disclosure andreceivables Presentation' and IAS 39 'Financial Instruments: Recognition and 898.2 892.3 872.7 Measurement', the Group has chosen not to restate its comparative informationCurrent assets for the year ended 30 April 2005 for financial instruments. The Group hasInventories 14.1 12.2 12.5 applied IAS 32 and IAS 39 with effect from 1 May 2005.Trade and other 181.4 162.3 169.2receivables Independent review report to Stagecoach Group plcDerivative 11.0 Nil Nilinstruments at Introductionfair value We have been instructed by the companyCash and cash 157.7 363.1 140.0 to review the financial informationequivalents for the six months ended 31 October 2005 which comprises the consolidated 364.2 537.6 321.7 income statement, consolidated balance sheet, consolidated cash flowAssets held for Nil 3.5 Nil statement and reconciliation ofsale movements in consolidated equity. We have read the other informationTotal assets 1,262.4 1,433.4 1,194.4 contained in the interim report and considered whether it contains anyLIABILITIES apparent misstatements or material inconsistencies with the financialCurrent information.liabilities Directors' responsibilitiesTrade and other 358.3 387.0 357.6payables The interim report, including the financial information containedCurrent tax 30.4 35.5 33.3 therein, is the responsibility of, andliabilities has been approved by the directors. The directors are responsible forBorrowings 135.8 282.7 126.5 preparing the interim report in accordance with the Listing Rules ofDerivative 2.1 Nil Nil the Financial Services Authority.instruments atfair value As disclosed in the basis of preparation, the next annual financialDividends payable Nil 0.1 Nil statements of the Group will be prepared in accordance with accounting 526.6 705.3 517.4 standards adopted for use in the European Union. This interim reportNon-current has been prepared in accordance withliabilities the basis set out in the basis of preparation.Trade and other 8.2 9.1 8.1payables The accounting policies are consistent with those that the directors intendBorrowings 260.0 294.1 228.1 to use in the next annual financial statements. As explained in the basisProvisions 101.6 119.3 98.5 of preparation, there is, however, a possibility that the directors mayRetirement 220.2 170.7 220.9 determine that some changes arebenefit necessary when preparing the fullobligations annual financial statements for the first time in accordance with 590.0 593.2 555.6 accounting standards adopted for use in the European Union. The IFRSLiabilities Nil 0.7 Nil standards and IFRIC interpretationsassociated with that will be applicable and adoptedassets held for for use in the European Union at 30sale April 2006 are not known with certainty at the time of preparingTotal liabilities 1,116.6 1,299.2 1,073.0 this interim financial information. Net assets 145.8 134.2 121.4 Review work performed EQUITY We conducted our review in accordance with guidance contained in BulletinOrdinary share 6.8 6.7 6.8 1999/4 issued by the Auditingcapital Practices Board for use in the United Kingdom. A review consists principallyRedeemable 'B' Nil 21.0 13.9 of making enquiries of management andpreference shares applying analytical procedures to the financial information and underlyingShare premium 166.7 154.1 163.4 financial data and, based thereon,account assessing whether the disclosed accounting policies have been applied.Retained earnings (283.0) (271.9) (288.4) A review excludes audit procedures such as tests of controls andCapital 243.0 222.1 229.1 verification of assets, liabilitiesredemption and transactions. It is substantiallyreserve less in scope than an audit and therefore provides a lower level ofOwn shares (6.1) (3.9) (6.8) assurance. Accordingly we do not express an audit opinion on theTranslation 7.9 6.1 3.4 financial information. This report,reserve including the conclusion, has been prepared for and only for the companyAvailable for 1.7 Nil Nil for the purpose of the Listing Rulessale reserve of the Financial Services Authority and for no other purpose. We do not,Cash flow hedging 8.8 Nil Nil in producing this report, accept orreserve assume responsibility for any other purpose or to any other person to whomTotal equity 145.8 134.2 121.4 this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.Consolidated Cash Unaudited Unaudited UnauditedFlow Statement 6 months 6 months Year to Review conclusionFor the six to to 30 Aprilmonths to 31 31 Oct 31 Oct 2005* On the basis of our review we are notOctober 2005 2005 2004* aware of any material modifications that should be made to the financial £m £m £m information as presented for the six months ended 31 October 2005.Cash generated 120.2 141.4 200.7from operations PricewaterhouseCoopers LLP, Chartered Accountants, GlasgowTax paid (14.0) (12.6) (27.1) 7 December 2005 Net cash from 106.2 128.8 173.6operating * Results are restated for the impactactivities of the transition to IFRS and IAS Net cash used in (35.5) (11.1) (50.8)investingactivities Net cash used in (52.3) (227.3) (455.4)financingactivities Net increase/ 18.4 (109.6) (332.6)(decrease) incash and cashequivalents Cash and cash 104.2 439.2 439.2equivalents atthe beginning ofthe period Exchange rate 0.8 (2.1) (2.4)effects Cash and cash 123.4 327.5 104.2equivalents atthe end of theperiod Reconciliation of Unaudited Unaudited UnauditedMovements in 6 months 6 months Year toConsolidated to to 30 AprilEquity 31 Oct 31 Oct 2005*For the six 2005 2004*months to 31October 2005 £m £m £m Profit for the 43.6 43.3 85.9financial period Dividends (24.6) (26.7) (37.6) 19.0 16.6 48.3 Other recognised 14.2 6.1 (38.6)income andexpense relatingto the period Share based 1.1 0.6 1.4payment expense Equity ordinary 3.3 3.5 12.8share capitalissued less costs Own ordinary Nil Nil (5.4)sharesrepurchased Own ordinary 0.7 Nil 2.5shares sold Redemption of 'B' (13.9) (220.4) (227.4)preference shares Expenses on issue Nil (0.4) (0.4)of 'B' shares setagainst sharepremium Net increase/ 24.4 (194.0) (206.8)(decrease) inequity Equity at the 121.4 328.2 328.2start of theperiodEquity at the end 145.8 134.2 121.4of the period -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SGC.L