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| Name | Symbol | Market | Type |
|---|---|---|---|
| Stagecoach.25 | LSE:34AI | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 108.312 | 0 | 00:00:00 |
TIDM34AI
6 December 2023
Stagecoach Group Limited
Interim results for the half-year ended 28 October 2023
Financial summary
Hot Features
Premium
"Adjusted" results
Results excluding separately
disclosed items* "Statutory" results
H1 2023
H1 2024 H1 2023 (restated) H1 2024 (restated)
------------------------- ---------------------
Revenue (GBPm) 773.2 669.6 773.2 669.6
------------------------- -------- --------------------- ------- -----------
Total operating profit
(GBPm) 43.3 46.9 51.1 33.1
Non-operating separately
disclosed items (GBPm) - - - 1.5
Net finance costs (GBPm) (2.1) (10.3) (3.5) (10.0)
------------------------- ---------------------
Profit before taxation
(GBPm) 41.2 36.6 47.6 24.6
------------------------- -------- --------------------- ------- -----------
*See definitions in note 21 to the condensed financial statements
Strategic and operational highlights
-- Implementation of simpler, leaner organisational structure completed
-- Appointment of Claire Miles as Chief Executive Officer effective
October 2023
-- Growth in regional passenger demand with a 5.3% increase in regional bus
passenger journeys in the half-year ended 28 October 2023 compared to the
equivalent prior year period
-- Supportive government policy continued through the GBP2 bus fare cap in
England underpinning the increase in regional passenger demand
-- Recruited and trained more than 2,300 new bus drivers to deliver our
services during the half-year ended 28 October 2023
Financial highlights
-- Good financial results reflecting business initiatives and continued
strength of regional bus operations
-- Revenue from regional bus operations grew by 15.1% to GBP584.7m in the
half-year ended 28 October 2023 compared to the comparative prior year
period
-- Net debt increased by GBP60.4m from GBP241.1m at 29 April 2023 to
GBP301.5m as at 28 October 2023 reflecting net capital expenditure of
GBP62.3m in the period, supporting the transition of our bus fleet to
zero emission vehicles
-- No change to our outlook for the year ending 27 April 2024
For further information, please contact:
Stagecoach Group Limited www.stagecoachgroup.com
Investors and analysts
Bruce Dingwall, Chief Financial Officer 07917 555293
Notes to editors
Stagecoach Group
-- Stagecoach is one of Britain's leading public transport businesses,
helping connect communities for over 40 years.
-- Stagecoach is Britain's biggest bus and coach operator, and it runs the
Supertram light rail network in Sheffield.
-- Our team of around 23,000 people and our c.8,300 buses, coaches and trams
are part of the fabric of daily life in England, Scotland and Wales.
-- We connect people with jobs, skills and training. We bring customers to
our high streets, link tourists with visitor attractions, and draw
families, friends and communities together.
-- Our impact is about far more than transport -- we support the economy,
help cut congestion on our roads, protect our environment and air quality,
boost safety on our roads, and contribute to a healthier nation.
Interim management report
The Directors of Stagecoach Group Limited are pleased to present their report on the Company for the half-year ended 28 October 2023.
Description of the business
Stagecoach Group Limited is a private limited company, limited by shares. It is incorporated, domiciled and has its registered office in Scotland. The Company is a wholly owned subsidiary of Inframobility UK Bidco Limited, which is indirectly owned by an international infrastructure fund managed and advised by DWS Infrastructure. Throughout this document, we refer to Stagecoach Group Limited as "the Company" and we refer to the group headed by it as "Stagecoach" or "the Group".
Overview
Introduction
We have delivered a positive set of financial results for the half-year ended 28 October 2023 as we work in partnership with national and local government to maximise the opportunities from public transport for consumers and the country while navigating the current economic environment.
There has been a further recovery in demand for our public transport services, with growth in regional bus passenger journeys of 5.3% compared to the equivalent prior year period.
UK Bus (regional operations)
Bus services continue to benefit from a supportive policy environment from national and local government. In England, recovery funding expired at the end of July 2023 and has been replaced by an enhanced operating grant, with forward visibility until the end of March 2025. Further funding has also been allocated to local authorities to support commercial and tendered bus services over the same period. Since its launch in January 2023, the GBP2 bus fare cap scheme has driven an increase in bus patronage, particularly from existing bus users, and the scheme has now been extended until December 2024. In Scotland, the under-22 concessionary scheme continues to support increased patronage, offsetting suppressed demand within the old age and disabled concessionary scheme. In Wales, emergency COVID support ended in July 2023, with ongoing transitionary funding confirmed in place until March 2024.
The Department of Transport and Scottish Government have allocated significant funding for bus transformation projects in England and Scotland, including the delivery of bus priority schemes. These projects are expected to deliver significant customer benefits in future years through improved punctuality and reliability.
The Department for Transport has launched the second phase of the Zero Emission Bus Regional Areas ("ZEBRA2") programme in England, with up to GBP129m of funding available to support the introduction of zero emission buses, and we are supporting local authority bids for this scheme. The Scottish Government launched the second phase of the Scottish Zero Emission Bus Challenge Fund ("ScotZEB2") earlier this year, and we were disappointed to be recently informed that those bids, in their current form, were unsuccessful.
We are pleased with the professional and constructive manner in which we managed the demobilisation of our Wigan depot prior to the commencement of Transport for Greater Manchester's new franchising system. Our plans are well advanced for the mobilisation of the services we will operate on behalf of Transport for Greater Manchester from the Middleton, Oldham and Queens Road depots from March 2024.
UK Bus (London)
Similar to the experience of other operators, trading in our London bus operations has been challenging with the losses incurred in the period reflecting the impact of upward wage pressure and elevated levels of staff turnover and staff shortages. The impact of lost mileage has resulted in significant contractual penalties and lost quality incentive income. Road works and traffic congestion are a continuing challenge for operators in the London market, which is adversely affecting service delivery. Engagement is ongoing with Transport for London on these issues. However, we expect profitability to improve as we address labour market challenges, benefit from lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered.
Macro-economic factors
We are actively managing the current inflationary environment by taking a balanced approach to protecting our customers and employees from the cost-of-living pressures as far as possible, while ensuring we maintain properly funded and sustainable bus networks.
Ensuring we recruit and retain sufficient staff to provide a reliable level of service for customers remains an overriding priority for this business. During the half-year ended 28 October 2023, we have recruited and trained more than 2,300 new bus drivers to deliver our services. The business has delivered a net increase of more than 500 drivers compared to the start of the year. We remain grateful for the huge commitment and professionalism of our people who are delivering services safely in our communities day in, day out.
Operational structure
Following the acquisition of the Group in May 2022, a detailed review of the Group's structure and operations was undertaken. We have simplified our leadership organisational structure, providing greater clarity on decision-making and more focused support to enhance lines of communication and collaboration. We were delighted to appoint Claire Miles as our Chief Executive Officer effective October 2023.
Financial results
In the half-year to 28 October 2023, revenue grew to GBP773.2m (H1 2023: GBP669.6m) and adjusted total operating profit fell slightly to GBP43.3m (H1 2023: GBP46.9m). Revenue excludes COVID-19 grant income from government, which is reported as other operating income. The growth in revenue reflects a continuation of recovering passenger demand across our regional bus and tram services, impact of favourable pricing and the effect of the new London businesses acquired in the prior year. The modest reduction in adjusted total operating profit in the period is principally attributable to the higher losses in London, which stem from the elevated levels of staff shortages in that part of the business. Unadjusted operating profit was GBP51.1m (H1 2023: restated GBP33.1m), with the increase due to non-recurring separately disclosed gains in the current year and significant transaction costs reported in the prior year period related to the two offers to acquire the Company.
During the half-year, net debt increased from GBP241.1m to GBP301.5m, reflecting increased capital investment and loan to shareholders, partly
offset by underlying cash generation. We expect our net capital expenditure for the year ending 27 April 2024 to be in excess of GBP250m, which reflects our continued commitment to invest in the future of the business, supporting the transition of our bus fleet to zero emission vehicles.
Outlook
We remain positive on the long-term outlook for the Group. Public transport delivers the sustainable connectivity people need to access work, education, healthcare, shopping, leisure, and meeting family and friends. As we transition towards a post-pandemic world, we are focused on further rebuilding profitability and adapting our services to meet new and emerging travel patterns.
Whilst the next General Election may lead to some change in the detail of transport policy, there is broad cross-party support for the role that buses play in delivering government objectives on social equity and inclusion, economic development and levelling-up, and in transport decarbonisation. We have worked closely with local and national government in maintaining bus services through the pandemic and into recovery. We anticipate that this close partnership will be a continuing feature of transport policy, including through an expansion of bus service franchising, and we are engaging closely with national and local policy-makers to maximise the opportunities that this will offer.
While there remains some uncertainty around the wider economic environment, there is no change to our expected outlook for the year ending 27 April 2024.
Summary of financial results
Revenue, split by segment, is summarised below:
REVENUE H1 2024 H1 2023 Growth
GBPm GBPm %
UK Bus (regional operations) 584.7 508.1 15.1%
UK Bus (London) 179.8 154.4 16.5%
UK Rail 8.7 7.1 22.5%
Group revenue 773.2 669.6
------- -------
Operating profit, split by segment, is summarised below:
OPERATING PROFIT H1 2024 H1 2023
GBPm % margin GBPm % margin
UK Bus (regional operations) 52.3 8.9% 50.4 9.9%
UK Bus (London) (5.8) (3.2)% (1.5) (1.0)%
UK Rail (1.5) (0.5)
Group overheads (4.5) (5.0)
Restructuring costs - (0.1)
Operating profit before joint ventures
and separately disclosed items 40.5 43.3
Joint ventures -- share of profit
after tax
WCT Group - 0.1
Citylink 2.4 2.9
Crown Sightseeing 0.4 0.6
Total operating profit before separately
disclosed items 43.3 46.9
Separately disclosed items 7.8 (13.8)
Total operating profit: Group operating
profit and share of joint ventures'
profit after taxation 51.1 33.1
----- -------- ------ --------
Financial Review
UK Bus (regional operations)
Summary
-----------------------------------------------------------
-- Good growth in revenue and operating profit
reflecting continued recovery in passenger demand
-- Supportive government funding to maintain continuing
bus services
-----------------------------------------------------------
Financial performance
The financial performance of UK Bus (regional operations) for the half-year ended 28 October 2023 is summarised below:
H1 2024 H1 2023
GBPm GBPm Change
Revenue 584.7 508.1 15.1%
Like-for-like
revenue 584.2 497.0 17.5%
Operating profit 52.3 50.4 3.8%
Operating margin 8.9% 9.9% (100)bp
----------------- ------- ------- -------
We have been pleased with the recovery in passenger demand for our services, which has contributed to the rise in operating profit from the prior year. The growth in passenger demand has been underpinned by supportive government initiatives, notably the GBP2 fare cap schemes and under-22 free bus travel in Scotland. The rise in revenue also reflects the impact of having selectively increased fares to reflect increased staff costs, as we continue to focus on recruiting and retaining sufficient staff to deliver a reliable service across the country.
The operating profit for the year includes GBP24.2m of COVID-related bus support scheme grant income from governments (H1 2023: GBP45.9m), reflecting the moderation of the funding of these schemes during the period.
Like-for-like vehicle miles operated in the year were 0.2% lower than the equivalent prior year period, reflecting adjustments to our network to take account of customer demand and staff shortages. Like-for-like revenue per vehicle mile increased 17.8% and like-for-like revenue per journey increased by 11.7%.
Like-for-like revenue was built up as follows:
H1 2024 H1 2023
GBPm GBPm Change
Commercial on
and off bus revenue 307.9 281.1 9.5%
Concessionary
revenue 165.5 121.9 35.8%
Commercial and
concessionary
revenue 473.4 403.0 17.5%
Tendered and
school revenue 75.3 56.7 32.8%
Contract and
other revenue 35.5 37.3 (4.8)%
Like-for-like
revenue 584.2 497.0 17.5%
--------------------- ------- ------- ------
The year-on-year recovery in passenger demand for our bus services is reflected in the growth in commercial revenue.
The vast majority of the rise in concessionary revenue during the period reflects the revenue received from the Department for Transport and combined authorities in respect of GBP2 fare cap schemes, in addition to the continued growth in the under-22 free bus travel scheme in Scotland, all of which are encouraging more people to travel by bus.
The substantial increase in tendered and school revenue reflects some previously commercial services being converted to tendered services, supported by additional central government funding provided to local authorities for these services.
As expected, contract and other revenue has reduced from the prior year due to the non-recurring work undertaken for the 2022 Commonwealth Games.
Outlook
Although we see ongoing forecasting uncertainty in relation to passenger demand and cost inflation, we currently forecast continued good regional bus profitability for the second half of the year ending 27 April 2024. We are looking forward to commencing the new franchised contracts that we will operate on behalf of Transport for Greater Manchester from the Middleton, Oldham and Queens Road depots from March 2024, with our mobilisation plans well underway.
We continue to see positive long-term prospects for the business, and believe the current economic environment is helping to demonstrate the good value of our public transport services and encourage modal shift away from the car.
UK Bus (London)
Summary
------------------------------------------------------------
-- Operationally challenging period with adverse traffic
conditions
-- Disappointing financial performance arising from
continued impact of staff shortages
------------------------------------------------------------
Financial performance
The financial performance of UK Bus (London) for the half-year ended 28 October 2023 is summarised below:
H1 2024 H1 2023
GBPm GBPm Change
Revenue 179.8 154.4 16.5%
Like-for-like
revenue 143.5 137.0 4.7%
Operating loss (5.8) (1.5)
----------------- ------- ------- -------
Operating margin (3.2)% (1.0)% (220)bp
----------------- ------- ------- -------
The financial performance of our London business in the period was disappointing. The losses incurred in the period reflect the impact of upward wage pressure and increased staff turnover and staff shortages. The impact of lost mileage has resulted in significant contractual penalties and lost quality incentive income. Road works and traffic congestion are a continuing challenge for operators in the London market, which is adversely affecting service delivery. Engagement is ongoing with Transport for London on these issues. We expect profitability to improve as we address labour market challenges, benefit from lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered.
We are pleased with our tender results in the period, and we continuously review our bid models, contract pricing and cost efficiency to identify opportunities to further improve our performance on tenders for Transport for London contracts. We plan to continue to bid for new contract opportunities at prices we believe would deliver appropriate rates of return.
Outlook
We currently expect our operating losses to moderate in the second half of the financial year, as we continue to focus our efforts on recruiting and retaining sufficient bus drivers to reliably provide the contracted bus services. We believe the business will recover its profitability over the medium-term, and we see good prospects for growth with our expanded garage footprint following last year's acquisitions.
UK Rail
Summary
-------------------------------------------------------
-- Strong growth in passenger demand and revenue at
Sheffield Supertram
-------------------------------------------------------
Financial performance
The financial performance of UK Rail for the half-year ended 28 October 2023 is summarised below:
H1 2024 H1 2023
GBPm GBPm Change
Revenue 8.7 7.1 22.5%
Like-for-like
revenue 8.7 6.7 29.9%
Operating loss (1.5) (0.5)
--------------- ------- ------- ------
The like-for-like revenue is in respect of the ongoing Sheffield Supertram business. We are pleased with the performance of the business during the period, where a continued strong recovery in passenger demand, combined with good cost control, has moderated the underlying trading losses, as we continue to fulfil our obligations under the contract.
Outlook
In October 2022, South Yorkshire Mayoral Combined Authority decided to transition the Supertram system in Sheffield to a publicly owned operator when the Group's concession ends in 2024. We are proud of the service we have delivered over our period of operation and will continue to work hard to deliver a safe, high quality and professional service to our customers, meet our obligation and ensure a smooth transition to the new operator. We continue to hold an onerous contract provision for the estimated net costs of fulfilling our contractual obligation. The level of provision has reduced from 29 April 2023, reflecting the moderation in operating losses arising from the strong performance in the first half of this year.
Adjusted EBITDA, depreciation and intangible asset amortisation
Earnings before interest, taxation, depreciation, software amortisation and separately disclosed items ("adjusted EBITDA") increased to GBP97.9m (H1 2023 restated: GBP100.5m). Adjusted EBITDA can be reconciled to the financial statements as follows:
Year
to
H1 2023 28 Oct
H1 2024 GBPm 2023
GBPm Restated GBPm
Total operating
profit 51.1 33.1 65.5
Separately disclosed
items (7.8) 13.8 8.7
Software amortisation 0.5 0.5 1.0
Depreciation 53.3 52.3 107.9
Impairment losses - - 3.3
Add back joint
venture tax 0.8 0.8 1.3
Adjusted EBITDA 97.9 100.5 187.7
---------------------- -------- --------- -------
The year-on-year increase in adjusted EBITDA principally reflects the recovery in passenger demand for public transport in response to the easing of COVID-19 restrictions.
Depreciation and software amortisation of GBP53.8m is higher than the GBP52.8m for the equivalent prior year period, and principally reflects our recommencement of capital expenditure following constraint during the COVID-19 pandemic.
Separately disclosed items
The Directors believe that there are certain items that we should separately disclose to help explain the consolidated results. We summarise those "separately disclosed items" in note 4 to the condensed financial statements and further explain them below.
Non-software intangible asset amortisation
Non-software intangible asset amortisation of GBP0.6m (H1 2023: GBP0.4m) was recorded in the half-year ended 28 October 2023 in relation to intangible assets arising from the two London bus acquisitions made in the year to 29 April 2023.
Reassessment of onerous contract provision
As at 29 April 2023, an onerous contract provision of GBP8.9m was held in respect of the Sheffield Supertram concession. We have recalculated the onerous contract provision, reflecting our latest forecast for the business, and recorded a separately disclosed credit for Sheffield Supertram of GBP4.4m (H1 2023: GBP0.3m charge) in the half-year ended 28 October 2023.
Restructuring and associated costs
Following the acquisition of the Group in the year ended 29 April 2023, a detailed review of the Group's structure and operations was undertaken. This included the use of an external consultancy agency along with the management experience of the new owner. The Group expects to implement the remaining actions arising from that review during the remainder of this year. In the half-year ended 28 October 2023 the Group incurred redundancy and related costs of GBP2.3m (H1 2023: GBPNil).
Expired rail franchises
As part of concluding matters in relation to its former involvement in the UK train operating market, the Group has recorded a separately disclosed gain of GBP1.4m (H1 2023: GBPNil). The gain is presented as a separately disclosed item as it relates to costs that were previously recorded as separately disclosed items.
Property disposal
Following the demobilisation of our Wigan depot prior to the commencement of Transport for Greater Manchester's new franchising system the depot was sold generating a gain on its disposal of GBP4.9m.
Changes in the fair value of Deferred Payment Instrument
We received a Deferred Payment Instrument as deferred consideration for the sale of the North American business. The instrument, which is accounted for at fair value through profit or loss, has a maturity date of October 2024 and due to the credit and other recoverability risks associated with the instrument, it carrying value is at a discount to its face value. The Group's exposure to the purchaser of the North American business ranks behind the secured lenders. The carrying value of the instrument was GBP3.5m as at 29 April 2023. We estimated the carrying value of the instrument to be GBP2.1m as at 28 October 2023, resulting in a loss of GBP1.4m (H1 2023: gain of GBP0.3m) recognised in finance costs (H1 2023: finance income) in the half-year ended 28 October 2023.
Tax
The separately disclosed taxation charge of GBP1.6m (H1 2023: credit of GBP0.8m) is in relation to the taxation effect of the pre-tax separately disclosed items.
Net finance costs
Net finance costs, excluding separately disclosed items, for the half-year ended 28 October 2023 were GBP2.1m (H1 2023 restated: GBP10.3m) and are further analysed below. The decrease in net finance costs is principally due to the higher pensions finance income arising from the prior year reduction in the pension deficit, in addition to higher interest received on surplus cash balances.
H1 2023
H1 2024 (restated)
GBPm GBPm
Finance costs
Interest payable and
facility costs on
bank loans, overdrafts
and trade finance 0.5 0.7
Lease interest payable 1.9 1.7
Interest payable and
other finance costs
on bonds 8.4 8.4
Effect of interest
rate swaps 2.1 0.8
Unwinding of discount
on provisions 1.1 0.5
14.0 12.1
---------------------------- ------- -----------
Finance income
Interest receivable
on cash and money
market deposits (3.7) (1.6)
Interest receivable
on parent company
loans (0.9) -
Interest income on
defined benefit pension
schemes (7.3) (0.2)
(11.9) (1.8)
Net finance costs,
excluding separately
disclosed items ("adjusted
net finance costs") 2.1 10.3
---------------------------- ------- -----------
Taxation
The tax charge for the half-year to 28 October 2023 has been calculated on the basis of the estimated annual effective rate for the year ending 27 April 2024.
The tax charge on profit can be analysed as follows:
Pre-tax profit Tax Rate
Half-year to 28 October 2023 GBPm GBPm %
----------------------------------------- ---------------- -------- -------
Excluding separately disclosed items 42.0 (9.0) 21.4%
Separately disclosed items 6.4 (1.6)
----------------------------------------- ---------------- -------- -------
With joint venture taxation gross 48.4 (10.6)
Reclassify joint venture taxation for
reporting purposes (0.8) 0.8
----------------------------------------- ---------------- -------- -------
Reported in income statement 47.6 (9.8)
----------------------------------------- ---------------- -------- -------
The effective tax rate, excluding separately disclosed items, of 21.4% is lower than the standard rate of tax of 25% for the year to 27 April 2024, principally due to tax relief on additional pension contributions in respect of defined benefit schemes which are in surplus.
The cash tax paid in the half-year ended 28 October 2023 of GBPNil (H1 2023: GBP16.8m) compares to the tax charge for Group companies of GBP9.8m (H1 2023: GBP5.1m). The difference reflects the availability of capital allowances (given the high level of capital investment in the year coupled with the availability of full expensing) which impacts cash tax but not effective tax rate.
The separately disclosed tax charge of GBP1.6m (H1 2023: credit of GBP0.8m) is explained earlier in the section headed "Separately disclosed items".
Cash flows and net debt
The Group has continued to maintain strong available liquidity. During the half-year ended 28 October 2023, net debt increased by GBP60.4m from GBP241.1m to GBP301.5m and net debt plus net train operating company liabilities increased by GBP59.9m from GBP265.8m to GBP325.7m. We recognise that the increase in net debt largely reflects the loans to shareholders and an increase in capital expenditure that was constrained during the COVID-19 period. Our capital expenditure is weighted to the second half of the year ending 27 April 2024, partly reflecting further investment in the transition to zero-emission vehicles.
By the half-year end date of 29 October 2022, all of the major rail franchises previously operated by Group subsidiaries had ended. However, the settlement of the train operating company assets, liabilities and contractual positions continues for some time following the end of the relevant franchises. As at 28 October 2023, the consolidated net assets included net liabilities (excluding cash) of GBP24.2m (29 April 2023: GBP24.7m) in respect of such items. Accordingly, if all items were settled at their 28 October 2023 carrying values, consolidated net debt would increase by that amount. Consolidated net debt plus outstanding train operating company net liabilities as at 28 October 2023 was GBP325.7m (29 April 2023: GBP265.8m).
Net cash from operating activities before tax for the half-year ended 28 October 2023 was GBP62.2m (H1 2023 restated: GBP103.5m) and can be further analysed as follows:
H1 2023
H1 2024 (restated)
GBPm GBPm
EBITDA of Group
companies before
separately disclosed
items 94.3 96.1
Cash effect of current
period separately
disclosed items 4.5 (8.2)
Loss/(gain) on disposal
of property, plant
and equipment 0.4 (1.0)
Capital grant amortisation (2.4) (1.2)
Share based payment
movements, excluding
separately disclosed
items - 0.2
Working capital
movements (15.9) 33.7
Net interest paid (19.0) (17.9)
Dividends received
from joint ventures 0.3 1.8
Net cash flows from
operating activities
before taxation 62.2 103.5
--------------------------- ------- -----------
Net debt (as analysed in note 16 to the condensed financial statements) increased from GBP241.1m as at 29 April 2023 to GBP301.5m as at 28 October 2023. The movement in net debt was:
Half-year to 28 October 2023 GBPm Net cash flows from operating activities before taxation 62.2 Tax paid - Investing activities (72.2) Financing activities (50.0) Other (0.4) Movement in net debt in the half-year (60.4) Opening net debt (241.1) Closing net debt (301.5) ------------------------------ -------
Net cash flows from operating activities were lower than the equivalent prior period, principally due to a GBP15.9m working capital outflow in the half-year ended 28 October 2023 relating to a decrease in provisions following the settlement of certain insurance claims and a slight increase in receivables. In comparison, there was a favourable working capital inflow of GBP33.7m in the half-year ended 29 October 2022 which included inflows of approximately GBP12.3m in relation to COVID-19 related payments from governments and inflows of approximately GBP11.1m in relation to a refund from the Teesside Local Government Pension Scheme, following the cessation of the Group's participation in the prior year. The inflow of COVID-19 related payments was a timing difference which reversed in the second half of the year ended 29 April 2023.
The net impact on net debt of purchases and disposals of property, plant and equipment, split by segment, was:
H1 2024 H1 2023
GBPm GBPm
UK Bus (regional
operations) 40.4 17.7
UK Bus (London) 21.9 4.4
Net capital expenditure 62.3 22.1
------------------------ ------- -------
Net capital expenditure reconciles to the condensed financial statements as follows:
H1 2024 H1 2023
GBPm GBPm
Cash flow from:
- Purchase of property,
plant and equipment 74.4 26.5
- Disposal of property,
plant and equipment
(including separately
disclosed items) (8.6) (3.5)
- Capital grants
received (12.8) (6.6)
Decrease in net
debt from negotiated
early termination
of lease - (0.3)
Increase in net
debt from new leases
in period 9.3 6.0
62.3 22.1
-------------------------- ------- -------
In addition to the amounts shown in the table above, the impact of purchases of intangible assets was GBP0.9m (H1 2023: GBP1.0m).
Financial position and liquidity
The Group maintains a good financial position, as evidenced by:
-- We have available liquidity of over GBP400m.
-- We have comfortably complied with all applicable debt covenants for the
year ended 28 October 2023.
The ratio of net debt as at 28 October 2023 to adjusted EBITDA for the year ended 28 October 2023 was 1.6 times (year ended 29 October 2022: 1.0 times).
Adjusted EBITDA for the half-year ended 28 October 2023 was 46.6 times (H1 2023: restated 9.8 times) adjusted net finance charges.
Two major credit rating agencies -- S&P and Moody's -- continue to assign investment grade credit ratings to the Group's GBP400m bonds.
Financial position of the Group
Net assets
Net assets at 28 October 2023 were GBP519.7m (29 April 2023: GBP497.8m). The increase in the net assets principally reflects the profit for the half-year ended 28 October 2023.
Retirement benefits
The reported net assets of GBP519.7m (29 April 2023: GBP497.8m), that are shown on the consolidated balance sheet are after taking account of net pre-tax retirement benefit assets, net of withholding tax payable on surpluses, of GBP175.5m (29 April 2023: GBP195.9m net retirement benefit liabilities) and associated deferred tax assets of GBP3.2m (29 April 2023: GBP3.5m).
The Group recognised pre-tax actuarial losses of GBP30.7m, net of withholding tax, in the half-year ended 28 October 2023 (H1 2023: GBP191.4m gain) on Group defined benefit schemes.
The discount rate used to determine pension scheme liabilities as at 28 October 2023 was 5.7%, compared to 4.9% as at 29 April 2023.
The Stagecoach Group Pension Scheme is the Group's largest defined benefit pension scheme exposure. The Scheme's latest formal valuation was as at 31 October 2022 and showed a surplus on a scheme funding basis of GBP87.3m. As a result of the improved funding position, the Scheme Trustees and employers agreed amendments to the long term Funding Agreement providing for the employers to make deficit payments to the Scheme of GBP4.4m spread over 12 months from 1 May 2023. Further to this, the employers have agreed in principle to make payments into an escrow account of GBP4.1m for each of the years to 3 May 2025 and 2 May 2026, to be used underpin the funding position of the Scheme through to April 2031, when the escrow funds may be released back to the employers or paid into the scheme depending on the funding position of the Scheme.
Principal risks and uncertainties
Like most businesses, there is a range of risks and uncertainties facing the Group. A brief summary is given below of those specific risks and uncertainties that the Directors believe could have the most significant impact on the Group's financial position and/or future financial performance. Pages 9 to 15 of the Group's 2023 Annual Report set out specific risks and uncertainties in more detail.
The matters summarised below are not intended to represent an exhaustive list of all possible risks and uncertainties. The focus below is on those specific risks and uncertainties that the Directors believe could have the most significant impact on the Group's position or performance.
-- Major event such as a serious accident -- there is a risk that the Group
is involved (directly or indirectly) in a major operational incident.
-- Economy -- the economic environment in the geographic areas in which the
Group operates affects the demand for the Group's services, the
availability of suitable staff and the Group's costs. A weaker economy
may also increase the risk of the Group's contingent liabilities,
particularly those in relation to its former North American business,
crystallising.
-- Terrorism -- there is a risk that the demand for the Group's services
could be adversely affected by a significant terrorist incident.
-- Changing customer habits -- There is a risk that changes in people's
working patterns, shopping habits and/or other preferences affect demand
for the Group's transport services, which could in turn affect the
Group's financial performance and/or financial position. We see trends of
increased home working, home shopping, telemedicine and home schooling.
To the extent the effects of that on travel patterns are not offset by
modal shift to bus/tram, there will be a longer term adverse effect on
the Group's revenue and potentially its financial performance and/or
financial position.
-- Pension scheme funding -- the Group participates in a number of defined
benefit pension schemes, and there is a risk that the cash contributions
required increase or decrease due to changes in factors such as
regulatory approach, investment performance, discount rates and life
expectancies. There remains a risk of further significant market
movements that could result in significant changes in the amount of our
net retirement benefit assets reported in the financial statements.
-- Insurance and claims environment -- there is a risk that the cost to the
Group of settling claims against it is significantly higher or lower than
expected.
-- Climate change -- we see public transport as a critical part of the
battle against climate change. At the same time, we recognise that
climate change presents a number of risks to the Group.
-- Regulatory changes and availability of public funding -- there is a risk
that changes to the regulatory environment or changes to the availability
of public funding could affect the Group's prospects. The extent to
which payments from government continue to support public transport
services will affect the Group's future profitability and cash flow.
-- People and culture -- There is a risk that the Group is unable to attract,
develop and retain an appropriately skilled, diverse and responsible
workforce and leadership team, and maintain a healthy business culture
which encourages and supports ethical behaviours and decision making.
-- Disease -- there is a risk that demand for the Group's services could be
adversely affected by a significant outbreak of disease. This was
identified by the Board as a principal risk some years ago, but the
COVID-19 situation is a clear and substantial crystallisation of the
risk.
-- Information security -- there is a risk that potential malicious attacks
on our systems lead to a loss of data or disruption to operations.
-- Information technology -- there is a risk that technology failures or
interruptions could adversely affect the Group, including a risk that the
Group's capability to make sales digitally either fails or cannot meet
levels of demand.
-- Competition -- in certain of the markets we operate in, there is a risk
of increased competitive pressures from existing competitors and new
entrants.
-- Treasury risks -- the Group is affected by changes in fuel prices,
interest rates and exchange rates.
Use of non-GAAP measures
Our reported interim financial information is prepared in accordance with UK-adopted International Accounting Standard 34, Interim Financial Reporting. In measuring our financial performance and position, the financial measures that we use include those that we have derived from our reported results in order to eliminate factors that distort period-on-period comparisons and/or provide useful information to stakeholders. These are non-GAAP financial measures and include measures such as like-for-like revenue, adjusted EBITDA and net debt. We believe this information, along with comparable GAAP measurements, is useful to shareholders and analysts in providing a basis for measuring our financial performance and position. Note 21 to the condensed financial statements provides further information on these non-GAAP financial measures.
Going concern
On the basis of current financial projections and the facilities available, the Directors are satisfied that the Group has adequate resources to continue for the foreseeable future and, accordingly, consider it appropriate to adopt the going concern basis in preparing the condensed financial statements for the half-year ended 28 October 2023. We have not identified a material uncertainty regarding the Group's ability to continue as a going concern for a period of not less than 12 months. Further detail of our going concern assessment is explained in note 1(c) to the condensed financial statements.
Ray O'Toole
Executive Chairman
6 December 2023
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed consolidated interim financial information contained in this document has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted in the UK;
(b) the interim management report contained in this document includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules ("DTR") 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) as the Company does not issue listed shares, DTR 4.2.8R in respect of related party transactions has not been applied.
By order of and on behalf of the Board
Ray O'Toole Bruce Dingwall Executive Chairman Chief Financial Officer 6 December 2023 6 December 2023
Cautionary statement
The preceding interim management report has been prepared for the
shareholder of the Company, as a body, and for no other persons. Its purpose is to assist the shareholder of the Company to assess the strategies adopted by the Company and the potential for those strategies to succeed and for no other purpose. The interim management report contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic, regulatory policy and business circumstances occurring from time to time in the sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a wide range of variables that could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation. Nothing in the interim management report should be considered or construed as a profit forecast for the Group. Except as required by law, the Group has no obligation to update forward-looking statements or to correct any inaccuracies therein.
CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited
Half-year to 28 October Half-year to 29 October
2023 2022 (Restated)
Performance Separately Performance Separately
excluding disclosed excluding disclosed
separately items Results separately items Results
disclosed (note for the disclosed (note for the
items 4) period items 4) period
Notes GBPm GBPm GBPm GBPm GBPm GBPm
CONTINUING OPERATIONS
------------------------------
Revenue 3(a) 773.2 - 773.2 669.6 - 669.6
Operating costs and other
operating income (732.7) 7.8 (724.9) (626.3) (13.8) (640.1)
Operating profit of Group
companies 3(b) 40.5 7.8 48.3 43.3 (13.8) 29.5
Share of profit of joint
ventures after taxation 3(c) 2.8 - 2.8 3.6 - 3.6
Total operating profit:
Group operating profit
and share of joint ventures'
profit after taxation 3(b) 43.3 7.8 51.1 46.9 (13.8) 33.1
Non-operating separately
disclosed item 4 - - - - 1.5 1.5
Profit before interest
and taxation 43.3 7.8 51.1 46.9 (12.3) 34.6
Finance costs (14.0) (1.4) (15.4) (12.1) - (12.1)
Finance income 11.9 - 11.9 1.8 0.3 2.1
Profit before taxation 41.2 6.4 47.6 36.6 (12.0) 24.6
Taxation (8.2) (1.6) (9.8) (5.9) 0.8 (5.1)
Profit for the period,
all attributable to equity
holders of the parent 33.0 4.8 37.8 30.7 (11.2) 19.5
------------------------------
The accompanying notes form an integral part of this consolidated income statement.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Half-year Half-year
to to
28 October 29 October
2023 2022 (Restated)
GBPm GBPm
Profit for the period 37.8 19.5
Items that may be reclassified to profit or loss
Cash flow hedges:
- Net fair value gains on cash flow hedges 33.9 30.0
- Reclassified and reported in profit for the
period (13.7) (43.7)
- Tax effect of cash flow hedges (5.1) 2.7
Total items that may be reclassified to profit
or loss 15.1 (11.0)
-------------------------------------------------- ----------- ----------------
Items that will not be reclassified to profit
or loss
Actuarial gains on Group defined benefit pension
schemes, excluding withholding tax (30.7) 191.4
Tax effect of actuarial gains on Group defined
benefit pension schemes (0.3) (18.5)
Total items that will not be reclassified to
profit or loss (31.0) 172.9
-------------------------------------------------- ----------- ----------------
Other comprehensive income for the period (15.9) 161.9
-------------------------------------------------- ----------- ----------------
Total comprehensive income for the period, all
attributable to equity holders of the parent 21.9 181.4
-------------------------------------------------- ----------- ----------------
CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
Unaudited Audited
As at As at
28 October 2023 29 April 2023
Notes GBPm GBPm
---------------- --------------
ASSETS
Non-current assets
Goodwill 7 92.5 92.1
Other intangible assets 8 7.1 7.1
Property, plant and equipment: 9 734.2 711.3
Right-of-use assets 9 76.3 80.2
Interests in joint ventures 10 14.5 12.0
Derivative instruments at fair
value 11.7 11.5
Retirement benefit assets -- net
of withholding tax payable 12 178.8 199.4
Other receivables 12.7 15.4
1,127.8 1,129.0
--------------------------------- ------ ---------------- --------------
Current assets
Inventories 14.0 12.3
Trade and other receivables 193.6 112.1
Derivative instruments at fair
value 22.8 13.9
Current tax recoverable - 0.4
Cash and cash equivalents 180.5 245.6
Assets classed as held for sale 1.7 3.4
412.6 387.7
--------------------------------- ------ ---------------- --------------
Total assets 3(d) 1,540.4 1,516.7
--------------------------------- ------ ---------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 262.9 248.3
Current tax liabilities 0.5 -
Borrowings:
- Lease liabilities 22.1 25.0
- Other borrowings - 1.8
Derivative instruments at fair
value 0.5 9.1
Provisions 18 45.9 56.4
331.9 340.6
--------------------------------- ------ ---------------- --------------
Non-current liabilities
Other payables 62.0 51.7
Borrowings:
- Lease liabilities 59.9 60.3
- Other borrowings 401.4 407.1
Derivative instruments at fair
value 4.6 12.4
Deferred tax liabilities 74.9 59.8
Provisions 18 82.7 83.5
Retirement benefit obligations 12 3.3 3.5
688.8 678.3
--------------------------------- ------ ---------------- --------------
Total liabilities 3(d) 1,020.7 1,018.9
--------------------------------- ------ ---------------- --------------
Net assets 3(d) 519.7 497.8
--------------------------------- ------ ---------------- --------------
EQUITY
Ordinary share capital 13 3.2 3.2
Share premium account 8.4 8.4
Retained earnings 133.6 126.8
Capital redemption reserve 422.8 422.8
Own shares (69.6) (69.6)
Cash flow hedging reserve 21.2 6.1
Total equity, all attributable
to the parent 519.6 497.7
Non-controlling interest 0.1 0.1
Total equity 519.7 497.8
--------------------------------- ------ ---------------- --------------
The accompanying notes form an integral part of this consolidated balance sheet.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total
Capital Cash flow Equity
Ordinary Share premium Retained redemption hedging attributable Non-controlling
share capital account earnings reserve Own shares reserve to parent interest Total equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 29 April 2023 3.2 8.4 126.8 422.8 (69.6) 6.1 497.7 0.1 497.8
Profit for the period - - 37.8 - - - 37.8 - 37.8
Other comprehensive income/(loss),
net of tax - - (31.0) - - 15.1 (15.9) - (15.9)
Total comprehensive income - - 6.8 - - 15.1 21.9 - 21.9
---------------------------------------- -------------- ------------- --------- ----------- ---------- --------- ------------- --------------- ------------
Balance at 28 October 2023 3.2 8.4 133.6 422.8 (69.6) 21.2 519.6 0.1 519.7
---------------------------------------- -------------- ------------- --------- ----------- ---------- --------- ------------- --------------- ------------
Balance at 30 April 2022 (restated) 3.2 8.4 (38.2) 422.8 (69.6) 75.4 402.0 0.1 402.1
---------------------------------------- -------------- ------------- --------- ----------- ---------- --------- ------------- --------------- ------------
Profit for the period - - 19.5 - - - 19.5 - 19.5
Other comprehensive income/(loss),
net of tax - - 172.9 - - (11.0) 161.9 - 161.9
Total comprehensive income/(loss) - - 192.4 - - (11.0) 181.4 - 181.4
---------------------------------------- -------------- ------------- --------- ----------- ---------- --------- ------------- --------------- ------------
Credit in relation to equity-settled
share based payments - - 3.9 - - - 3.9 - 3.9
Effect of tax deduction on share
based payments in excess of cumulative
income statement expense - - 0.4 - - - 0.4 - 0.4 Balance at 29 October 2022 (restated) 3.2 8.4 158.5 422.8 (69.6) 64.4 587.7 0.1 587.8 ---------------------------------------- -------------- ------------- --------- ----------- ---------- --------- ------------- --------------- ------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
Half-year Half-year
to to
28 October 29 October
2023 2022 (Restated)
Notes GBPm GBPm
Cash flows from operating activities
Cash generated by operations 14 80.9 119.5
Interest paid (23.6) (19.4)
Interest received 4.6 1.6
Dividends received from joint ventures 0.3 1.8
Net cash flows from operating activities
before tax 62.2 103.5
Tax paid - (16.8)
Net cash from operating activities after
tax 62.2 86.7
----------------------------------------- ----- ----------- ----------------
Cash flows from investing activities
Acquisition of subsidiaries 6 (1.9) (13.6)
Purchase of property, plant and equipment (74.4) (26.5)
Disposal of property, plant and equipment 1.5 3.5
Receipt of capital grants 12.8 6.6
Purchase of intangible assets (0.9) (1.0)
Net cash outflow from investing
activities (62.9) (31.0)
----------------------------------------- ----- ----------- ----------------
Cash flows from financing activities
Loan to parent company (50.0) -
Payments of principal portion of lease
liabilities (12.6) (14.4)
Net cash flow from financing activities (62.6) (14.4)
----------------------------------------- ----- ----------- ----------------
Net (decrease)/increase in cash and cash
equivalents (63.3) 41.3
Cash and cash equivalents at beginning
of period 243.8 248.9
Cash and cash equivalents at end of
period 180.5 290.2
----------------------------------------- ----- ----------- ----------------
The accompanying notes form an integral part of this consolidated statement of cash flows.
NOTES
1 BASIS OF PREPARATION
(a) Basis of preparation
The condensed consolidated interim financial information for the half-year ended 28 October 2023 has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and UK-adopted International Accounting Standard 34, Interim Financial Reporting. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 29 April 2023, which have been prepared in accordance with UK-adopted International Accounting Standards. The accounting policies and methods of computation applied in the consolidated interim financial information are the same as those of the annual financial statements for the year ended 29 April 2023, as described on pages 64 to 78 of the Group's 2023 Annual Report which can be found on the Stagecoach Group website at http://www.stagecoachgroup.com/investors/financial-analysis/reports/.
The figures for this half-year include the results for all segments for the 26 weeks to 28 October 2023. The comparative figures for the half-year ended 29 October 2022 include the results for all segments for the 26 weeks ended 29 October 2022.
This condensed consolidated interim financial information for the half-year ended 28 October 2023 has not been audited or reviewed by the auditors. The comparative financial information presented in this announcement for the year ended 29 April 2023 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and does not reflect all of the information contained in the Company's annual financial statements. The annual financial statements for the year ended 29 April 2023 were approved by the Board of Directors on 29
June 2023. They received an unqualified audit report from the auditors, did not contain an emphasis of matter paragraph, did not contain a statement under section 498 of the Companies Act 2006 and have been filed with the Registrar of Companies.
The Board of Directors approved this announcement, including the condensed consolidated interim financial information, on 6 December 2023. This announcement will be available on the Group's website at
http://www.stagecoachgroup.com/investors/financial-analysis/reports/.
Change in the accounting policy for the treatment of Battery Contracts
As disclosed in the annual report for the year ended 30 April 2022 the Group leases electric buses. In some cases, the Group enters into separate agreements for the provisions of batteries to power the buses (the "Battery Contracts"). Some judgement is involved in determining whether each Battery Contract is, or contains, a lease.
The Battery Contracts are separate legal agreements from any leases of buses and contain separate terms and conditions. In the years ended 1 May 2021 and 30 April 2022, the Directors had formed the view that the Battery Contracts did not meet the IFRS definition of leases as in the Directors' view the battery provider had control of the battery assets and had substantive rights of substitution for the batteries. This matter was disclosed as a critical accounting judgement in both of those years.
On 29 November 2022, the IFRS Interpretations Committee ("IFRIC") met and discussed the definition of a lease. Following the publication of the decision of IFRIC, the Group reviewed its accounting treatment of the Battery Contracts. In light of the IFRIC decision, the Group has decided that it would be more appropriate for the Group to treat the Battery Contracts as leases.
The Group has restated its results for the half-year ended 29 October 2022 to reflect this change in accounting policy. A summary of the impact of the change in policy is summarised in the tables on pages 18 and 19.
Change in accounting for the Group's participation in Local Government Pension Schemes ("LGPSs")
Certain of the Company's subsidiaries participate in LGPSs, which are all closed to new members from the Group. Where a private sector employer ceases to have any employees who are active members in a LGPS, that automatically triggers the employer's exit from the LGPS except where the employer agrees alternative arrangements with the relevant LGPS. When an exit from an LGPS is triggered, an amount may be payable or receivable by the employer to or from the administering authority of the relevant scheme.
In prior years, the Group had accounted for its participation in LGPSs in the same way as its other pension arrangements, by:
-- measuring the relevant assets in respect of LGPS participations at fair
value;
-- measuring the obligations to pay pensions through to the expected deaths
of the relevant members/their dependents at discounted present value;
-- where applicable, restricting the net asset recognised (i.e. the gross
assets less the gross obligations) to the present value of economic
benefits available in the form of any future refunds from the scheme or
reductions in future contributions to the scheme.
In the year ended 30 April 2022, the Directors were of the view, having taken independent expert advice on the accounting, that the Group's accounting was appropriate and was consistent with other major groups with UK public transport operations that have LGPS participations.
1 BASIS OF PREPARATION (CONTINUED)
The Group's auditors, Ernst & Young, reached a different conclusion to the Directors on the basis of accounting for the Group's participation in LGPSs that are closed to new members from the Group. In particular that:
-- the measurement of the defined benefit obligation should reflect the
expected cash flows payable under the scheme rules through to the
expected exit by the employer (for example, on the retirement of the last
active member) and including any expected exit payment or credit; and
-- there should be no additional IFRIC 14 restriction to the LGPS net asset,
given the right of the Group to receive a refund from the scheme is
limited only to the extent of the actuarially determined surplus at the
point of exit or any discretion applied by the administering authority.
Notwithstanding the different interpretation of the Group's auditors, the Directors had concluded that the Group's accounting for its participation in LGPSs remained appropriate and was a reasonable interpretation of the relevant standards. Accordingly, the Group's auditors qualified their audit opinion in relation to the accounting for the Group's participation in Local Government Pension Schemes that are closed to new members.
Subsequent to the acquisition of the Group by Inframobility UK Bidco Limited, the Directors have reassessed the Group's approach to the accounting in this area in the year ended 29 April 2023.
The policy applied by the Group has been revised such that where a section of the LGPS is closed to new members, the defined benefit obligation is calculated taking into consideration the specific rules set out in The Local Government Pension Scheme Regulations 2013 ("the Regulations") and reflects the estimated cash flows required to eliminate the Company's obligations from these schemes, including the estimated cash flows arising on an exit. No additional IFRIC 14 restriction is applied to any LGPS net asset, given the right of the Group to receive a refund from the scheme is limited only to the extent of the actuarially determined surplus at the point of exit or any discretion applied by the administering authority.
Comparative amounts have been restated accordingly. The effect of the restatement, together with the effect of the change in policy with respect to the treatment of battery contracts, is set out below.
Unaudited half-year to 29 October
2022
Effect Effect
As of LGPS of battery
CONSOLIDATED INCOME STATEMENT reported accounting contracts Restated
GBPm GBPm GBPm GBPm
Operating costs and other operating
income excluding separately disclosed
items (626.4) - 0.1 (626.3)
Operating costs and other operating
income (640.2) - 0.1 (640.1)
Profit before interest and taxation 34.5 - 0.1 34.6
Finance costs (12.0) - (0.1) (12.1)
Finance income 1.9 0.2 - 2.1
Profit before taxation 24.4 0.2 - 24.6
Taxation (5.1) - - (5.1)
Profit for the period 19.3 0.2 - 19.5
----------------------------------------
Effect Effect
CONSOLIDATED STATEMENT OF COMPREHENSIVE As of LGPS of battery
INCOME reported accounting contracts Restated
GBPm GBPm GBPm GBPm
Profit for the year 19.3 0.2 - 19.5
Total items that may be reclassified
to profit or loss (11.0) - - (11.0)
Items that will not be reclassified
to profit or loss 172.9 - - 172.9
Total comprehensive income for
the period 181.2 0.2 - 181.4
Effect Effect
CONSOLIDATED STATEMENT OF CASH As of LGPS of battery
FLOWS reported accounting contracts Restated
GBPm GBPm GBPm GBPm
Cash generated by operations 118.7 - 0.8 119.5
Net cash flows from operating
activities before tax -- interest
paid (19.3) - (0.1) (19.4)
Net cash flows from operating
activities before tax 102.8 - 0.7 103.5
Net cash flows from operating
activities after tax 86.0 - 0.7 86.7
Cash flows from financing activities
-- Payments of principal portion of
lease liabilities (13.7) - (0.7) (14.4)
Net cash outflow from financing
activities (13.7) - (0.7) (14.4)
1 BASIS OF PREPARATION (CONTINUED)
Audited -- as at 30 April 2022
Effect Effect
As of LGPS of battery
CONSOLIDATED BALANCE SHEET reported accounting contracts Restated
GBPm GBPm GBPm GBPm
Non-current assets
Property, plant and equipment
-- Right-of-use assets 68.6 - 6.3 74.9
Retirement benefit assets 45.3 10.5 - 55.8
Non-current assets 966.0 10.5 6.3 982.8
------------------------------- --------- ----------- ----------- ---------
Total assets 1,424.3 10.5 6.3 1,441.1
------------------------------- --------- ----------- ----------- ---------
Current liabilities
Lease liabilities (22.1) - (1.4) (23.5)
Current liabilities (347.7) - (1.4) (349.1)
------------------------------- --------- ----------- ----------- ---------
Non-current liabilities
Lease liabilities (52.3) - (5.1) (57.4)
Retirement benefit obligations (75.1) 0.3 - (74.8)
Non-current liabilities (685.1) 0.3 (5.1) (689.9)
------------------------------- --------- ----------- ----------- ---------
Total liabilities (1,032.8) 0.3 (6.5) (1,039.0)
------------------------------- --------- ----------- ----------- ---------
Net assets 391.5 10.8 (0.2) 402.1
------------------------------- --------- ----------- ----------- ---------
Retained earnings (48.8) 10.8 (0.2) (38.2)
------------------------------- --------- ----------- ----------- ---------
Total equity attributable to
parent 391.5 10.8 (0.2) 402.1
------------------------------- --------- ----------- ----------- ---------
(b) New accounting standards adopted during the period
From 30 April 2023, the following standards and amendments are effective in the Group's consolidated financial statements:
-- IAS 12 Income Taxes -- International Tax Reform -- Pillar Two Model Rules
-- IFRS 17 Insurance Contracts
-- Amendments to IAS 12 Income Taxes -- Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
-- Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Making Materiality Judgements -- Disclosure of
Accounting Policies
-- Amendments to IAS 8 Accounting Policy, Changes in Accounting Estimates
and Errors -- Definition of Accounting Estimates
The application of these amendments has not had any material impact on the disclosures or net assets of the Group.
(c) Going concern
(i) Going concern assessment
During the half-year ended 28 October 2023, we have delivered another positive set of financial results and made progress on delivering our key objectives. We have seen a continued recovery in passenger demand, as we work in partnership with national and local government to maximise the opportunities from public transport for consumers and the country while navigating the current economic environment.
The Board considered the liquidity position and covenant headroom in the Group's financial forecasts which cover the period of 12 months from the date of this announcement ("the going concern period"), recognising the challenges around reliably estimating and forecasting the effects of the wider economic environment on our business.
The key areas of forecasting uncertainty include:
-- The timing and extent of the recovery in demand for regional bus
journeys;
-- Availability and cost of staff; and
-- The nature and extent of payments from government for continuing regional
bus services, including available funding to support the GBP2 fare cap
scheme in England.
Our base case forecast assumes that regional bus commercial revenue returns to 98% of pre-COVID levels for the year ending 3 May 2025, reflecting consistent patronage with that achieved in the year ended 29 April 2023 along with inflationary fare increases already implemented. Concessionary revenue for the year ending 27 April 2024 is forecast at 100% of pre-COVID levels, increasing to 102% pre-COVID levels for the year ending 3 May 2025.
Our base case forecast reflects the two-year funding settlement for bus operators in England, which included GBP300m of further funding for the wider bus sector to protect bus services until 2025, in addition to further funding for the GBP2 fare cap to 31 December 2024.
1 BASIS OF PREPARATION (CONTINUED)
(c) Going concern (continued)
(i) Going concern assessment (continued)
Our severe and plausible downside scenarios contemplate lower regional bus commercial revenue over the forecast period, in addition to more cautious assumptions around our levels of cost increases and government funding support. The downside scenario considered in the going concern period was:
-- passenger numbers at 75%-76% of pre-COVID levels in the going concern
period;
-- commercial revenue at 90%-91% of pre-COVID levels in the going concern
period;
-- concessionary revenue at 91% of pre-COVID levels for the remainder of the
going concern period;
-- no additional government funding of zero emission buses, beyond awards
already made; and
-- failure to win the majority of its bus franchise bids resulting in the
loss of services in a number of its depots.
(ii) Mitigating actions
To the extent any severe downside scenarios materialised, we consider that the Group would have sufficient controllable, mitigating actions to avoid a breach of the covenant tests in our committed bank facilities.
Having constrained the Group's capital expenditure during the period of COVID, our base case forecast assumes we increase our investment in capital expenditure, as we progress our plans to transition to a zero emission bus fleet. Accordingly, reducing or deferring this capital expenditure would be the key mitigation available. In addition, we would be able to further reduce the Group's cost base, in particular reducing vehicle mileage to better match customer demand, which would result in variable cost savings. These mitigations are within the Group's control and do not have any associated penalties.
(iii) Covenant headroom
Under the base case and downside scenarios, the Group remains in compliance with the covenant tests in our committed core bank facilities which expire in March 2026. In the reverse stress test scenario, headroom against the covenant tests exists throughout the going concern period, after taking account of controllable, mitigating actions.
(iv) Going concern conclusion
Accordingly, the condensed consolidated interim financial information for the half-year ended 28 October 2023 has been prepared on a going concern basis. Taking account of the economic background in the UK, and other relevant factors, the Directors concluded that it remained appropriate to adopt the going concern basis of accounting in preparing the consolidated interim financial information, with no material uncertainties identified. The Directors have a reasonable expectation that the Group will continue to operate as a going concern for at least a period of 12 months from the date of approval of this announcement.
2 SEASONALITY
We do not expect significant seasonal demand fluctuations to affect the phasing of the Group's revenue and profit for the year ending 27 April 2024.
3 SEGMENTAL ANALYSIS
The Group is managed, and reports internally, on a basis consistent with its three continuing operating segments, being UK Bus (regional
operations), UK Bus (London), and UK Rail. The Group's accounting policies are applied consistently, where appropriate, to each segment.
The segmental information provided in this note is on the basis of those three operating segments as follows:
Segment name Service operated Countries of operation
UK Bus (regional Coach and bus operations United Kingdom
operations)
UK Bus (London) Bus operations United Kingdom
UK Rail Rail operations and business United Kingdom
development
The basis of segmentation and the basis on which segment profit/(loss) is measured are consistent with the Group's last annual financial statements for the year ended 29 April 2023.
The Group has interests in three joint ventures: WCT Group that operates in UK Rail, Citylink that operates in UK Bus (regional operations) and
Crown Sightseeing that operates in UK Bus (London). The results of these joint ventures are shown separately in note 3(c). 3 SEGMENTAL ANALYSIS (CONTINUED)
(a) Revenue
Due to the nature of the Group's business, the origin and destination of
revenue (the United Kingdom) is the same in almost all cases. As the Group predominately sells bus and rail services to individuals, it has few customers that are individually "major". Its major customers are typically public bodies that subsidise or procure transport services -- such customers include local authorities, transport authorities and the UK Department for Transport.
The vast majority of the UK Bus (London) revenue is from Transport for London.
Revenue split by class and segment, was as follows:
Unaudited
Half-year to 28 October 2023
-----------------------------------------------------
Commercial Tendered Contract
passenger Concessionary & school & other
revenue revenue revenue revenue Total
GBPm GBPm GBPm GBPm GBPm
UK Bus (regional
operations) 307.9 165.5 75.8 35.5 584.7
UK Bus (London) - - - 179.8 179.8
Total bus operations 307.9 165.5 75.8 215.3 764.5
UK Rail 7.9 - - 0.8 8.7
Reported Group
revenue 315.8 165.5 75.8 216.1 773.2
--------------------- ---------- ------------- --------- -------- -----
Unaudited
Half-year to 29 October 2022
-----------------------------------------------------
Commercial Tendered Contract
passenger Concessionary & school & other
revenue revenue revenue revenue Total
GBPm GBPm GBPm GBPm GBPm
UK Bus (regional
operations) 292.2 121.9 56.7 37.3 508.1
UK Bus (London) - - - 154.4 154.4
Total bus operations 292.2 121.9 56.7 191.7 662.5
UK Rail 6.8 - - 0.3 7.1
Reported Group
revenue 299.0 121.9 56.7 192.0 669.6
--------------------- ---------- ------------- --------- -------- -----
(b) Operating profit
Operating profit split by segment, was as follows:
Unaudited Unaudited
Half-year to 29 October
Half-year to 28 October 2023 2022 (Restated)
--------------------------------- ---------------------------------
Performance Performance
excluding Separately excluding Separately
separately disclosed Results separately disclosed Results
disclosed items for the disclosed items for the
items (note 4) period items (note 4) period
GBPm GBPm GBPm GBPm GBPm GBPm
UK Bus (regional
operations) 52.3 2.6 54.9 50.4 (2.5) 47.9
UK Bus (London) (5.8) (0.6) (6.4) (1.5) (0.8) (2.3)
Total bus operations 46.5 2.0 48.5 48.9 (3.3) 45.6
UK Rail (1.5) 5.8 4.3 (0.5) (0.8) (1.3)
45.0 7.8 52.8 48.4 (4.1) 44.3
Group overheads (4.5) - (4.5) (5.0) (9.7) (14.7)
Restructuring costs - - - (0.1) - (0.1)
Total operating
profit of Group
companies 40.5 7.8 48.3 43.3 (13.8) 29.5
Share of joint ventures'
profit after taxation 2.8 - 2.8 3.6 - 3.6
Total operating
profit: Group operating
profit and share
of joint ventures'
profit after taxation 43.3 7.8 51.1 46.9 (13.8) 33.1
------------------------- ----------- ---------- -------- ----------- ---------- --------
(c) Joint ventures
The share of profit from joint ventures was further split as follows:
Unaudited Unaudited
Half-year to Half-year to 29
28 October 2023 October 2022
GBPm GBPm
WCT Group (UK Rail)
Operating profit - 0.1
Citylink (UK Bus, regional
operations)
Operating profit 3.0 3.6
Finance income 0.1
Taxation (0.7) (0.7)
2.4 2.9
----------------------------------- ---------------- ----------------
Crown Sightseeing (UK Bus, London)
Operating profit 0.5 0.7
Taxation (0.1) (0.1)
0.4 0.6
----------------------------------- ---------------- ---------------- Share of profit of joint ventures after taxation 2.8 3.6 ----------------------------------- ---------------- ---------------- 3 SEGMENTAL ANALYSIS (CONTINUED)
(d) Gross assets and liabilities
Assets and liabilities split by segment were as follows:
Unaudited Audited
As at 28 October 2023 As at 29 April 2023
Net Net
Gross Gross assets/ Gross Gross assets/
assets liabilities (liabilities) assets liabilities (liabilities)
GBPm GBPm GBPm GBPm GBPm GBPm
UK Bus (regional
operations) 1,050.0 (309.0) 741.0 1,029.5 (303.1) 726.4
UK Bus (London) 200.3 (88.2) 112.1 192.7 (80.1) 112.6
UK Rail 8.2 (33.3) (25.1) 6.8 (38.9) (32.1)
1,258.5 (430.5) 828.0 1,229.0 (422.1) 806.9
Central functions 86.9 (31.4) 55.5 29.7 (42.7) (13.0)
Joint ventures 14.5 - 14.5 12.0 - 12.0
Borrowings and cash
equivalents 180.5 (483.4) (302.9) 245.6 (494.3) (248.7)
Taxation - (75.4) (75.4) 0.4 (59.8) (59.4)
Total 1,540.4 (1,020.7) 519.7 1,516.7 (1,018.9) 497.8
---------------------- ------- ----------- -------------- ------- ----------- --------------
The UK Rail net liabilities of GBP25.1m (29 April 2023: GBP32.1m) shown above include GBP24.2m (29 April 2023: GBP24.7m) of train operating company net liabilities in relation to major rail franchises previously operated by the Group.
Central assets and liabilities include interest payable and receivable and other net assets of the holding company and other head office companies. Segment assets and liabilities are determined by identifying the assets and liabilities that relate to the business of each segment but excluding intra-Group balances, cash, cash equivalents, borrowings, taxation, interest payable and interest receivable.
4 SEPARATELY DISCLOSED ITEMS
(a) Summary of separately disclosed items
The Group highlights amounts before certain "separately disclosed items" as defined in note 21.
The items shown in the columns headed "separately disclosed items" on the face of the consolidated income statement can be further analysed as follows:
Unaudited Unaudited
Half-year to Half-year to
28 October 2023 29 October 2022
GBPm GBPm
Operating costs and other operating
income
Non-software intangible asset
amortisation (0.6) (0.4)
Reassessment of onerous contract
provision 4.4 (0.3)
Restructuring and associated costs (2.3) -
Expired rail franchises 1.4 -
Property disposal 4.9 -
Transaction costs - (12.9)
Acquisition costs - (0.2)
7.8 (13.8)
--------------------------------------- ---------------- ----------------
Non-operating separately disclosed
item
Disposal of Megabus retail and
Falcon - 1.5
Finance (costs) / income
Change in fair value of Deferred
Payment Instrument (1.4) 0.3
Separately disclosed items before
taxation 6.4 (12.0)
Taxation effect (1.6) 0.8
Separately disclosed items after
taxation 4.8 (11.2)
---------------------------------------- ---------------- ----------------
(b) Reassessment of onerous contract provision
As at 29 April 2023, an onerous contract provision of GBP8.9m was held in respect of the Sheffield Supertram. We have recalculated the Sheffield Supertram onerous contract provision, reflecting our latest forecast for the business. That re-assessment resulted in a GBP4.8m decrease (H1 2023: GBP0.4m increase) in the level of the provision, with the increase, net of the GBP0.4m (H1 2023: GBP0.1m) of Sheffield Supertram's other operating loss (H1 2022: profit) in the half-year, charged (H1 2023: credited) to the consolidated income statement for the half-year ended 29 October 2023 and presented as a separately disclosed item.
4 SEPARATELY DISCLOSED ITEMS (CONTINUED)
(b) Reassessment of onerous contract provision (continued)
The estimate of the Supertram onerous contract provision involves estimation uncertainty, particularly in relation to forecast passenger revenue, albeit the level of estimation uncertainty is reducing as we approach the contract expiry date of March 2024. Underlying passenger revenue has been normalised to take account of changes in the timing of infrastructure work on the tram system.
No specific assumptions have been made regarding climate change in estimating the Supertram onerous contract provision. Taking account of the remaining term of the Supertram concession being less than a year and that the trams are electrically (rather than diesel) powered, we do not consider that climate change considerations materially affect the estimate of the provision as at 28 October 2023.
(c) Restructuring and associated costs
Following the acquisition of the Group in the year to 29 April 2023, a detailed review of the Group's structure and operations was undertaken. This included the use of an external consultancy agency along with the management experience of the new owner. In the half-year ended 28 October 2023, the Group incurred redundancy and related costs of GBP2.3m (H1 2023: GBPNil).
(d) Expired rail franchises
As part of concluding matters in relation to its former involvement in the UK train operating market, the Group has recorded a separately disclosed gain of GBP1.4m in the half-year ended 28 October 2023 (H1 2023: GBPNil). The gain is presented as a separately disclosed item as it relates to costs that were previously recorded as separately disclosed items.
(e) Property disposal
Following the demobilisation of our Wigan depot, prior to the commencement of Transport for Greater Manchester's new franchising system, the depot was sold, generating a gain on its disposal of GBP4.9m. Due to the size of the profit on the disposal this has been presented as a separately disclosed item.
(f) Transaction costs
No transaction costs were incurred in the half-year ended 28 October 2023.
In the half year to 29 October 2022 the Group recorded expenses of GBP12.9m, predominantly professional fees, accelerated shared based payment expenses (see below) and accelerated management incentives, in relation to the offer from DWS Infrastructure and the lapsed all-share combination with National Express Group plc. Due to the non-recurring nature of the expenses, the Directors consider that it is helpful for understanding the Group's financial performance to disclose separately the expenses incurred.
The change of control triggered the early vesting of certain share based awards. As a result, share based payment expenses that were previously expected to arise in future periods were immediately expensed and are classified within separately disclosed items for the half-year ended 29 October 2022.
(g) Acquisition costs
No acquisition costs were incurred in the half-year ended 28 October 2023. GBP0.2m of costs incurred in connection with the acquisition of two London bus businesses in the half-year ended 29 October 2022 have been presented as a separately disclosed item, because the costs are not related to the ongoing trading of the Group and due to the irregularity of business acquisitions.
(h) Disposal of megabus retail and Falcon
In August 2022, the Group disposed of the following businesses to its joint venture, Scottish Citylink Coaches Limited:
-- the megabus retail platform and customer-service business, which sells
and markets inter-city coach services in England and Wales
-- Falcon South-West, which retails tickets for the coach route between
Plymouth and Bristol Airport.
We have assessed the assets transferred to Scottish Citylink Coaches and consider them to constitute a business as defined in International Financial Reporting Standard 3 ("IFRS 3"), Business Combinations. The carrying value of the Group's interest in Scottish Citylink has been increased by the cost of the additional investment, being the estimated fair value of the business transferred to Scottish Citylink. The gain resulting from the sale of the business to Scottish Citylink has been recognised in full in the half-year ended 29 October 2022 and has not been restricted to the extent of the other investor's interest in the joint venture.
4 SEPARATELY DISCLOSED ITEMS (CONTINUED)
(h) Disposal of megabus retail and Falcon (continued)
The consideration received in respect of the disposal was an increase in the Group's share of Scottish Citylink Coaches Limited, from 35% to 37.5%, which has resulted in a gain on disposal of GBP1.5m being recognised during the half-year ended 29 October 2022. Due to the irregular occurrence of business disposals, the Directors consider that it is helpful for understanding the Group's financial performance to disclose separately the gain realised in respect of the business disposal.
(i) Change in fair value of Deferred Payment Instrument
The Group received a Deferred Payment Instrument as deferred consideration for the sale of the North American business in April 2019. The instrument, which is accounted for as fair value through profit or loss, has a maturity date of October 2024 and due to credit and other recoverability risks associated with the instrument, it carrying value is at a discount to its face value. The Group's exposure to the purchaser of the North American business ranks behind all of the secured lenders. The carrying value of the instrument was GBP3.5m as at 29 April 2023. We estimated the carrying value of the instrument to be GBP2.1m as at 28 October 2023, resulting in a loss of GBP1.4m (H1 2023: gain of GBP0.3m) recognised in finance costs (H1 2023: finance income) in the half-year ended 28 October 2023.
Changes in the fair value of the Deferred Payment Instrument may occur in several consecutive financial years until the issuer of the instrument discharges it in full. The Deferred Payment Instrument is part of the consideration received for the sale of a business and it does not relate to the ongoing operating activities of the Group. The Directors therefore consider that it is helpful for understanding the Group's financial performance to disclose separately changes in the fair value of the Deferred Payment Instrument.
(j) Taxation effect
The separately disclosed taxation charge of GBP1.6m (H1 2023: credit of GBP0.8m) is in relation to the taxation effect of the pre-tax separately disclosed items.
5 DIVIDS
No dividends have been paid during, or declared in respect of, the half-year ended 28 October 2023 or in respect of the half-year ended 29 October 2022.
6 BUSINESS COMBINATIONS AND DISPOSALS
No material business combinations or business disposals were completed by the Group in the half-year to 28 October 2023.
Details of acquisitions and disposals completed in earlier periods are given in the Group's annual reports for the relevant periods.
7 GOODWILL
The movements in goodwill were as follows:
Unaudited Unaudited Audited
-----------
Half-year Half-year
to to Year to
28 October 29 October 29 April
2023 2022 2023
GBPm GBPm GBPm
-----------
Net book value at beginning of period 92.1 51.9 51.9
Goodwill arising through acquisitions
of businesses 0.4 35.1 40.2
Net book value at end of period 92.5 87.0 92.1
-------------------------------------- ----------- ----------- ---------
8 OTHER INTANGIBLE ASSETS
The movements in other intangible assets were as follows:
Unaudited Unaudited Audited
-----------
Half-year Half-year
to to Year to
28 October 29 October 29 April
2023 2022 2023
GBPm GBPm GBPm
-----------
Cost at beginning of period 36.0 33.2 33.2
Acquired through business combinations 0.2 3.5 2.2
Additions 0.9 1.0 2.9
Disposals - (1.4) (2.3)
Cost at end of period 37.1 36.3 36.0
----------------------------------------- ----------- ----------- ---------
Accumulated amortisation at beginning
of period (28.9) (28.9) (28.9)
Amortisation charged to income statement (1.1) (0.9) (1.9)
Impairment charged to income statement - - (0.3)
Disposals - 1.4 2.2
-----------
Accumulated amortisation at end of period 30.0 (28.4) (28.9)
----------------------------------------- ----------- ----------- ---------
Net book value at beginning of period 7.1 4.3 4.3
----------------------------------------- ----------- ----------- ---------
Net book value at end of period 7.1 7.9 7.1
----------------------------------------- ----------- ----------- ---------
PROPERTY, PLANT AND EQUIPMENT
9
(a) Owned assets
The movements in property, plant and equipment were as follows:
Unaudited Unaudited Audited
-----------
Half-year Half-year
to to Year to
28 October 29 October 29 April
2023 2022 2023
GBPm GBPm GBPm
-----------
Cost at beginning of period 1,574.5 1,582.6 1,582.6
Additions 65.0 8.8 66.5
Acquired through business combinations 0.4 1.0 0.8
Transfers from right-of-use assets - - 0.1
Transferred to assets held for sale (0.8) (0.1) (2.4)
Disposals (35.9) (17.8) (73.1)
Cost at end of period 1,603.2 1,574.5 1,574.5
----------------------------------------- ----------- ----------- ---------
Depreciation at beginning of period (863.2) (850.5) (850.5)
Depreciation charged to income statement (40.2) (38.5) (78.2)
Impairment charged to income statement - - (3.0)
Transfers from right-of-use assets - - (0.1)
Transferred to assets held for sale 0.3 - 0.1
Disposals 34.1 16.4 68.5
Depreciation at end of period (869.0) (872.6) (863.2)
----------------------------------------- ----------- ----------- ---------
Net book value at beginning of period 711.3 732.1 732.1
----------------------------------------- ----------- ----------- ---------
Net book value at end of period 734.2 701.9 711.3
----------------------------------------- ----------- ----------- ---------
(b) Movements in right-of-use assets
The movements in right-of-use assets were as follows:
Unaudited Unaudited Audited
----------------
Half-year Half-year
to to Year to
28 October 29 October 29 April
2023 2022 (Restated) 2023
GBPm GBPm GBPm
----------------
Cost at beginning of period 148.0 126.7 126.7
Additions 9.3 6.0 13.5
Acquired through business combinations - 20.8 20.8
Transfers to owned property, plant and
equipment - - (0.1)
Disposals (14.9) (5.8) (12.9)
Cost at end of period 142.4 147.7 148.0
---------------------------------------- ----------- ---------------- ---------
Depreciation at beginning of period (67.8) (51.8) (51.8)
Depreciation charged to income statement (13.1) (13.8) (28.7)
Transfers to owned property, plant and
equipment - - 0.1
Disposals 14.8 5.5 12.6
Depreciation at end of period (66.1) (60.1) (67.8)
---------------------------------------- ----------- ---------------- ---------
Net book value at beginning of period 80.2 74.9 74.9
---------------------------------------- ----------- ---------------- ---------
Net book value at end of period 76.3 87.1 80.2
---------------------------------------- ----------- ---------------- ---------
INTERESTS IN JOINT VENTURES
10
The movements in the carrying values of interests in joint ventures were as follows:
Unaudited Unaudited Audited
-----------
Half-year Half-year
to to Year to
28 October 29 October 29 April
2023 2022 2023
GBPm GBPm GBPm
-----------
Net book value at beginning of period 12.0 7.2 7.2
Increase in investment (see note 4(h)) - 1.7 5.6
Share of recognised profit 2.8 3.6 1.7
Dividends received in cash (0.3) (1.8) (2.5)
Net book value at end of period 14.5 10.7 12.0
--------------------------------------- ----------- ----------- ---------
A loan payable to joint venture, Scottish Citylink Coaches Limited, of GBP7.8m (29 April 2023: GBP7.8m) is included within current liabilities under the caption "Trade and other payables".
11 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group is exposed to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.
These condensed financial statements do not include all financial risk management information and disclosures required in the annual financial
statements. They should be read in conjunction with the Group's consolidated financial statements for the year ended 29 April 2023. There have been no material changes in any of the Group's significant financial risk management policies since 29 April 2023.
Liquidity risk
There have been no material changes since 29 April 2023 in the contractual undiscounted cash outflows for financial liabilities.
Fair value estimation
Financial instruments that are measured in the balance sheet at fair value are disclosed by level of the following fair value measurement hierarchy.
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3 Inputs for the assets or liabilities that are not based on observable market data (that is, unobservable inputs)
The following table represents the Group's financial assets and liabilities that are measured at fair value within the hierarchy at 28 October 2023.
Unaudited
--------- ----------- --------
Level 2 Level 3 Total
GBPm GBPm GBPm
-------------------------------------------- --------- ----------- --------
Assets
Deferred Payment Instrument from disposal
of subsidiaries - 2.1 2.1
Financial derivatives 34.5 - 34.5
-------------------------------------------- --------- ----------- --------
Total assets 34.5 2.1 36.6
-------------------------------------------- --------- ----------- --------
Liabilities
Deferred consideration for acquisition
of businesses - (7.2) (7.2)
Financial derivatives (5.1) - (5.1)
-------------------------------------------- --------- ----------- --------
Total liabilities (5.1) (7.2) (12.3)
-------------------------------------------- --------- ----------- --------
The following table represents the Group's financial assets and liabilities that are measured at fair value within the hierarchy at 29 April 2023.
Audited
-------- --------- --------
Level
2 Level 3 Total
GBPm GBPm GBPm
--------------------------------------------- -------- --------- --------
Assets
Deferred Payment Instrument from disposal
of subsidiaries - 3.5 3.5
Financial derivatives 25.4 - 25.4
Total assets 25.4 3.5 28.9
--------------------------------------------- -------- --------- --------
Liabilities
Deferred consideration for acquisition
of businesses - (9.6) (9.6)
Financial derivatives (21.5) - (21.5)
--------------------------------------------- -------- --------- --------
Total liabilities (21.5) (9.6) (31.1)
--------------------------------------------- -------- --------- --------
11 FINANCIAL INSTRUMENTS AND
FINANCIAL RISK MANAGEMENT
(CONTINUED)
Fair value estimation (continued)
There were no transfers between levels during the half-year ended 28 October 2023.
The Level 2 assets shown in the above tables comprise financial
derivatives. The fair value of each financial derivative is determined by the third-party financial institution with which the Group holds the instrument, in line with the market value of similar financial instruments.
The Group applies relevant hedge accounting to all financial derivatives outstanding as at 28 October 2023 and 29 April 2023. All designated hedge relationships were effective under International Financial Reporting Standard 9 ("IFRS 9"), Financial Instruments.
The consideration for the sale of the North American business in April 2019 included a Deferred Payment Instrument of US$65m. The Deferred Payment Instrument carries a term of 66 months and a compounding payment in kind interest rate of 6% per annum. It falls due for payment only on (a) 16 October 2024 or (b) in part, after distributions of US$30m have been made to the purchaser and is secured by a pledge of shares held in the underlying investment vehicle. Early repayment provisions apply in the event that the purchaser sells all of its shareholding, albeit still subject to the US$30m shareholder distribution priority and in such circumstances, all or part of the Deferred Payment Instrument may never be repaid. If the purchaser sells down below 50% but retains some shares, the whole outstanding amount becomes immediately payable. The instrument is accounted for as fair value through profit or loss and due to credit and other recoverability risks associated with the instrument, its carrying value is at a discount to its face value. The Group's exposure to the purchaser of the North American business ranks behind all of the secured lenders. As a result, the discount rate applied to the Group's exposure on this instrument is higher than the cost of the Group's secured funding. The cost of second lien/mezzanine debt has been considered a more approximate estimate for the credit risk of the instrument. This has led to the carrying value of the instrument being estimated to be GBP2.1m as at 28 October 2023 (29 April 2023: GBP3.5m).
The North America business continues to operate a variety of different types of transportation services over a wide area of North America. The Group has no control or significant influence over the North America business following its disposal on 16 April 2019.
The financial performance of the North America business is influenced by various different factors, many of which are specific to the individual markets and locations in which it operates. Factors that can affect financial performance include the extent and timing of how demand recovers from the COVID-19 situation; changes in local economies, local competition, fuel prices, working patterns, shopping patterns, traffic conditions; cost pressures including the availability of sufficient staff; and regulatory change. The performance of the North America business has a direct impact on the purchaser's ability to settle the instrument. The initial contractual value of the instrument was for US$65m and the range of values that the Group could recover over the 66 months of its term varies from US$Nil up to US$65m plus interest.
No specific assumptions have been made regarding climate change in valuing the Deferred Payment Instrument. While climate change does present both opportunities and risks to the North America business, we do not consider that climate change considerations materially affect the fair value of the instrument as at 28 October 2023, taking account of the approximate remaining one-year term of the instrument.
11 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value estimation (continued)
The carrying amounts of financial assets and financial liabilities and their respective fair values were:
Carrying value Fair value
--------------------
28 October 29 April 28 October 29 April
2023 2023 2023 2023
Unaudited Audited Unaudited Audited
GBPm GBPm GBPm GBPm
--------
Financial assets
Financial assets measured
at fair value through profit
or loss
-- Non-current assets
-- Other receivables - Deferred
Payment Instrument - 3.5 - 3.5
-- Current assets
-- Other receivables - Deferred
Payment Instrument 2.1 - 2.1 -
Financial assets measured
at amortised cost
-- Non-current assets
-- Insurance claim receivables 10.6 8.9 10.6 8.9
-- Other receivables - -
-- Current assets
-- Accrued income 44.4 29.9 44.4 29.9
-- Trade receivables, net
of impairment 35.4 29.2 35.4 29.2
-- Other receivables 51.4 2.7 51.4 2.7
-- Cash and cash equivalents 180.5 245.6 180.5 245.6
----------------------------------------------- --------
Total financial assets 324.4 319.8 324.4 319.8
-------- ---------- --------
Financial liabilities
Financial liabilities measured
at amortised cost
-- Non-current liabilities
-- Borrowings (461.3) (467.4) (440.6) (445.3)
-- Deferred consideration
for business combinations (5.5) (8.0) (5.5) (8.0)
-- Current liabilities
-- Trade payables (33.1) (37.0) (33.1) (37.0)
-- Deferred consideration
for business combinations (1.7) (1.6) (1.7) (1.6)
-- Payables for purchase
of property, plant and equipment (3.5) (9.3) (3.5) (9.3)
-- Interest payable (0.1) (0.4) (0.1) (0.4)
-- Accruals (144.8) (135.3) (144.8) (135.3)
-- Loan from joint venture (7.8) (7.8) (7.8) (7.8)
-- Borrowings (22.1) (26.8) (22.1) (26.8)
----------------------------------------------- --------
Total financial liabilities (679.9) (693.6) (659.2) (671.5)
----------------------------------------------- ---------- -------- ---------- --------
Net financial liabilities (355.5) (373.8) (334.8) (351.7)
--------
Financial derivatives with bank counterparties are not shown in the above table.
The fair values of financial assets and financial liabilities shown in the table are determined as follows:
-- The determination of the fair value of the Deferred Payment Instrument is
described earlier in this note 11.
-- The carrying value of cash and cash equivalents, accrued income, trade
receivables, insurance claim receivables and other receivables is
considered to be a reasonable approximation of fair value. Given the
short average time to maturity, no specific assumptions on discount rates
have been made. The effect of credit losses not already reflected in the
carrying value as impairment losses is assumed to be immaterial.
-- The fair value of contingent consideration payable in respect of business
combinations is estimated with reference to the applicable contractual
terms and the expected outcomes on the contingent elements, then
discounted to present value.
-- The carrying value of trade payables, payables for purchase of property,
plant and equipment, interest payable, accruals and loans to/from joint
ventures is considered a reasonable approximation of fair value. Given
the relatively short average time to maturity, no specific assumptions on
discount rates have been made.
-- The fair value of fixed-rate notes (included in borrowings) that are
quoted on a recognised stock exchange is determined with reference to the
"bid" price at the balance sheet date.
-- The fair value of leases is presented above as being equal to their
carrying value as International Financial Reporting Standard 7 ("IFRS 7"),
Financial Instruments: Disclosure, does not require the disclosure of
fair values for leases.
12 RETIREMENT BENEFITS
(a) Overview
The Group contributes to a number of pension schemes. The principal defined benefit pension schemes are as follows:
The Stagecoach Group Pension Scheme ("SPS"); and
Two UK Local Government Pension Schemes ("LGPS").
In addition, the Group contributes to a number of defined contribution schemes.
(b) Presentation in consolidated balance sheet
Where a scheme has a net asset (i.e. gross assets exceeds gross liabilities and any asset ceiling) at the balance sheet date, the net asset is shown within retirement benefit assets on the consolidated
balance sheet. Where a scheme has a net liability, that is shown within retirement benefit obligations on the consolidated balance sheet. The amounts presented are:
Unaudited Audited
As at As at
28 October 2023 29 April 2023
GBPm GBPm
Retirement benefit assets 178.8 199.4
Retirement benefit obligations (3.3) (3.5)
175.5 195.9
------------------------------- ---------------- --------------
(c) Gross pension scheme assets and obligations
The gross pension scheme assets and the present value of obligations as at 28 October 2023 were as follows:
Unaudited
Funded schemes
SPS LGPS Other Unfunded plans Total
GBPm GBPm GBPm GBPm GBPm
Fair value of scheme
assets 1,277.7 143.9 16.0 - 1,437.6
Present value of
obligations (1,047.4) (121.3) (9.5) (3.3) (1,181.5)
Pension
asset/(liability)
before withholding
tax 230.3 22.6 6.5 (3.3) 256.1
Withholding tax
payable on surplus (80.6) - - - (80.6)
Net asset/(liability) 149.7 22.6 6.5 (3.3) 175.5
---------------------- --------- ------- ----- -------------- ---------
(d) Movements in net pre-tax retirement benefit liabilities
The movements for the half-year ended 28 October 2023 in the net pre-tax retirement benefit assets/liabilities (excluding withholding tax on surpluses) recognised in the balance sheet were as follows:
SPS LGPS Other Unfunded plans Total
Unaudited GBPm GBPm GBPm GBPm GBPm
Asset/(liability) at beginning of period 162.9 29.7 6.8 (3.5) 195.9
Current service cost (1.4) (0.1) - - (1.5)
Administration costs (0.4) - - - (0.4)
Net interest income 6.0 0.7 0.6 - 7.3
Employers' contributions 4.3 0.2 0.1 0.2 4.8
Recognised in the consolidated statement of comprehensive
income (21.8) (7.9) (1.0) - (30.7)
Asset/(liability) at end of period 149.7 22.6 6.5 (3.3) 175.5
---------------------------------------------------------- ------ ----- ----- -------------- ------
12 RETIREMENT BENEFITS (CONTINUED)
(e) Scheme valuations
The Stagecoach Group Pension Scheme ("SPS") is the Group's largest defined benefit scheme exposure comprising almost 90% of the total retirement benefit obligations. In the prior year, the Trustees took advantage of the exceptional rise in gilt yields to transition from its equity and multi-asset led growth strategy to a liability-driven investment ("LDI") strategy, locking in an overall funding surplus with hedging ratios achieved of 96-97% of interest and inflation liabilities.
To update and to align to its new investment and funding strategies, the Scheme undertook an out-of-cycle valuation as at 31 October 2022. This showed a funding surplus of GBP87.3m, being a further improvement on the 30 September 2021 out-of-cycle valuation surplus of GBP48.7m. At 28 October 2023, taking the various sections in aggregate, the Scheme was fully funded at around 109% against its long term self-sufficiency target using a gilts plus 0.5% discount rate.
The latest actuarial valuations of the relevant LGPS schemes were completed as at 31 March 2022. The combined surplus across those schemes on the funding basis agreed by each of the Administering Authorities was GBP0.3m, comprising scheme assets of GBP197.8m less benefit obligations of GBP197.5m.
13 ORDINARY SHARE CAPITAL
At 28 October 2023, there were 576,099,960 ordinary shares in issue (29
April 2023: 576,099,960). This figure includes 14,143,274 (29 April 2023: 14,143,274) ordinary shares held in treasury, which are treated as
a deduction from equity in the Group's financial statements. The shares held in treasury do not qualify for dividends.
14 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY
OPERATIONS
The operating profit of Group companies reconciles to cash generated by operations as follows:
Unaudited Unaudited
Half-year Half-year
to to
28 October 29 October
2023 2022 (Restated)
GBPm GBPm
Operating profit of Group companies 48.3 29.5
Separately disclosed items (7.8) 13.8
Depreciation 53.3 52.3
Software amortisation 0.5 0.5
EBITDA of Group companies before separately
disclosed items ("Adjusted EBITDA from Group
companies") 94.3 96.1
Cash effect of current period separately disclosed
items 4.5 (8.2)
Loss/(gain) on disposal of property, plant
and equipment 0.4 (1.0)
Capital grant amortisation (2.4) (1.2)
Share based payment movements (excluding separately
disclosed items) - 0.2
Operating cashflows before working capital
movements 96.8 85.9
Increase in inventories (1.7) (0.6)
(Increase)/decrease in receivables (25.8) 12.2
Increase in payables 22.8 31.2
Decrease in provisions (8.2) (3.4)
Differences between employer contributions
and pension expense in operating profit (3.0) (5.8)
Cash generated by operations 80.9 119.5
---------------------------------------------------- ----------- ----------------
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
The movement in cash and cash equivalents reconciles to the movement in net debt as follows:
Unaudited Unaudited
Half-year to Half-year to
28 October 29 October
2023 2022
Notes GBPm GBPm
(Decrease)/increase in cash and cash
equivalents (63.3) 41.3
Cash flow from movement in borrowings 12.6 13.7
(50.7) 55.0
New leases in period (9.3) (6.0)
Lease additions from business combinations - (20.8)
Negotiated early termination of lease - 0.3
Other movements (0.4) (0.4)
(Increase)/decrease in net debt (60.4) 28.1
Net debt at beginning of period 16 (241.1) (224.3)
Net debt at end of period 16 (301.5) (196.2)
------------------------------------------- ----- ------------ ------------
NET DEBT AND CHANGES IN LIABILITIES ARISING FROM FINANCING
16 ACTIVITIES
Changes in net debt (as defined in note 21) are summarised below:
Unaudited
Half-year to 28 October 2023
Opening Cashflows New leases Charged to income statement Closing
GBPm GBPm GBPm GBPm GBPm
------- --------- ---------- --------------------------- -------
Cash and
cash
equivalents 243.8 (63.3) - - 180.5
Gross debt
-- see
split in
following
table (484.9) 12.6 (9.3) (0.4) (482.0)
Net debt (241.1) (50.7) (9.3) (0.4) (301.5)
------------ ------- --------- ---------- --------------------------- -------
Liabilities arising from financing activities include all liabilities that give rise to cash flows that are classified as financing activities in the consolidated statement of cash flows. They include borrowings (excluding bank overdrafts) and loans from joint ventures. They also include certain interest rate derivatives that are hedging instruments of liabilities that give rise to financing cash flows.
The liabilities arising from financing activities presented in the consolidated balance sheet are as follows:
Unaudited Audited
As at 28 October 2023 As at 29 April 2023
GBPm GBPm
Current liabilities: borrowings (22.1) (26.8)
-- Less bank overdrafts shown in cash and cash
equivalents in this note - 1.8
Non-current liabilities: borrowings (461.3) (467.4)
Current liabilities: interest rate derivatives included
in financial derivatives - (4.7)
Current liabilities: loan from joint venture (7.8) (7.8)
Total liabilities arising from financing activities (491.2) (504.9)
-------------------------------------------------------- --------------------- -------------------
NET DEBT AND CHANGES IN LIABILITIES ARISING FROM FINANCING
16 ACTIVITIES (CONTINUED)
Changes in liabilities from financing activities are presented in the table below.
Unaudited
Half-year to 28 October 2023
Opening Cashflows New leases Fair value movements on hedge Charged to income statement Closing
GBPm GBPm GBPm GBPm GBPm GBPm
Lease liabilities (85.3) 12.6 (9.3) - - (82.0)
Bonds
- Principal (400.0) - - - - (400.0)
- Unamortised costs & discounts on issue 0.4 - - - (0.4) -
Gross debt (484.9) 12.6 (9.3) - (0.4) (482.0)
Loan from joint venture (7.8) - - - - (7.8)
Accrued interest on bonds (9.4) 16.0 - - (8.0) (1.4)
Effect of fair value hedges on carrying value of
borrowings 1.9 - - (1.9) - -
Interest rate derivatives that hedge liabilities from
financing activities (4.7) 4.9 - 1.9 (2.1) -
Total liabilities arising from financial activities (504.9) 33.5 (9.3) - (10.5) (491.2)
------------------------------------------------------ ------- --------- ---------- ----------------------------- --------------------------- -------
17 NON-CASH TRANSACTION
As explained in note 4(h), the Group disposed of businesses in the half-year ended 29 October 2022 in exchange for non-cash consideration in the form of shares in its joint venture, Scottish Citylink Coaches Limited. The estimated fair value of the shares received by the Group was GBP1.7m.
18 PROVISIONS
The Group's provisions at each of 29 April 2023 and 28 October 2023 principally relate to claims provisions for estimated liabilities on incurred incidents up to the balance sheet date.
The total claims provisions of GBP99.7m (29 April 2023: GBP100.6m) have decreased during the half-year, reflecting the latest assessment of the
required provision for claims on major incidents. These provisions contain GBP11.6m (29 April 2023: GBP8.9m) which is recoverable from
insurance companies and is included within other receivables. The Group engages with third party actuarial professionals to assist in the calculation of these provisions.
19 COMMITMENTS AND CONTINGENCIES
(i) Capital commitments
Capital commitments contracted for the purchase of property,
plant and equipment but not provided for at 28 October 2023
were GBP181.4m (29 April 2023: GBP42.6m) and primarily relate
to the commitment to purchase zero emission electric buses.
The figure of GBP181.4m excludes the benefit of any government
funding expected to be received in respect of these committed
purchases.
(ii) Legal actions
On 27 February 2019, an application for a collective proceedings
order (a form of class action) was filed with the UK Competition
Appeal Tribunal ("CAT") against Stagecoach South Western Trains
Limited ("SSWT"), a subsidiary of the Company that formerly
operated train services under franchise. Equivalent claims have
been brought against First MTR South Western Trains Limited,
which succeeded SSWT as the operator of the South Western franchised
train services, and London & South Eastern Railway Limited (the
"Defendants"). It is alleged that SSWT and the other Defendants
breached their obligations under competition law, by (i) failing
to make sufficiently available, or (ii) restricting the practical
availability of, boundary fares for Transport for London ("TfL")
Travelcard holders wishing to travel outside the TfL fare zones
in which the Travelcard was valid. The claim seeks compensation
for all those who have allegedly been affected by the train
operating companies' allegedly anti-competitive behaviour. The
total sought from SSWT is estimated at around GBP38m (excluding
interest).
In October 2021, the CAT granted the collective proceedings
order ("CPO") sought by the proposed class representative. The
proceedings have been split into three trials, the first two
of which have been set for June 2024 and June 2025 respectively,
with no date currently set for the final trial.
The claim is disputed in respect of its technical merits. No
provision is held as at 28 October 2023 (29 April 2023: GBPNil)
for any damages or settlement payable in respect of this matter
The Group and the Company are from time to time party to other
legal actions arising in the ordinary course of business. Liabilities
have been recognised in the financial statements for the best
estimate of the expenditure required to settle obligations arising
under such legal actions. As at 28 October 2023, the liabilities
in the consolidated financial statements for such matters total
GBP0.5m (29 April 2023: GBP0.6m) in addition to those covered
by the claims provisions.
19 COMMITMENTS AND CONTINGENCIES (CONTINUED)
(iii) Contingent liabilities re former North America Division
As explained in note 28(iii) to the Group's consolidated financial
statements for the year ended 29 April 2023, the Group has certain
contingent liabilities in respect of claims from third parties
against its former North American business. The estimated amount
of those contingent liabilities has reduced from GBP19.1m as
at 29 April 2023 to GBP14.4m as at 28 October 2023.
20 RELATED PARTY TRANSACTIONS
During the half-year ended 28 October 2023 the Group made a loan of GBP50.0m to its immediate parent, Inframobility UK Bidco Limited. The loan is interest bearing with an interest rate of 7.4% and is repayable in May 2024. At 28 October 2023 the loan of GBP50.0m is outstanding along with related interest receivable of GBP1.1m.
21 DEFINITIONS
(a) Alternative performance measures
The Group uses a number of alternative performance measures in this document to help explain the financial performance and financial
position of the Group. More information on the definition of these alternative performance measures and how they are calculated is provided below. All of the alternative performance measures explained below have been calculated consistently for the half-year ended 28 October 2023 and for comparative amounts shown in this document for prior periods.
Like-for-like amounts
Like-for-like amounts are derived by comparing the relevant year-to-date amount with the equivalent prior year amount for those businesses and individual operating units that have been part of the Group throughout both periods.
Like-for-like revenue growth for the half-year ended 28 October 2023 is calculated by comparing the revenue for the current and comparative
periods, each adjusted as described above. The revenue of each segment
is shown in note 3(a) to the condensed financial statements. Where applicable, the reconciliation to the adjusted revenue figures for the purposes of calculating like-for-like revenue growth is shown below:
Unaudited
Half-year to 28 October 2023
Exclude
expired
Reported rail Like-for-like
revenue Exclude effect of acquisitions Exclude effect of disposals franchises revenue
-------- ------------------------------- ---------------------------- ---------- -------------
UK Bus (regional
operations) GBPm 584.7 (0.5) - - 584.2
UK Bus (London) GBPm 179.8 (36.3) - - 143.5
UK Rail GBPm 8.7 - - - 8.7
Unaudited
Half-year to 29 October 2022
Exclude
expired
Reported rail Like-for-like
revenue Exclude effect of acquisitions Exclude effect of disposals franchises revenue
-------- ------------------------------- ---------------------------- ---------- -------------
UK Bus (regional
operations) GBPm 508.1 - (11.1) - 497.0
UK Bus (London) GBPm 154.4 (17.4) - - 137.0
UK Rail GBPm 7.1 - - (0.4) 6.7
Liquidity
References to liquidity mean the aggregate amount of cash and cash equivalents (net of bank overdrafts in bank offset arrangements), money market deposits and undrawn committed headroom under bank facilities, adjusted to exclude: (i) foreign currency bank and cash balances, (ii) petty cash balances, (iii) cash in transit and (iv) cash pledged as collateral in respect of liabilities for loan notes.
Operating profit
Operating profit for the Group as a whole is profit before non-operating separately disclosed items, finance costs, finance income, taxation and non-controlling interest. Operating profit of Group companies is operating profit on that basis, excluding the Group's share of joint ventures' profit/loss after taxation. Both total operating profit and operating profit of Group companies are shown on the face of the consolidated income statement.
Operating profit (or loss) for a particular business unit or segment within the Group refers to profit (or loss) before net finance income/costs, taxation and non-controlling interest, separately
disclosed items and restructuring costs. The operating profit (or loss) for each segment is directly identifiable from note 3(b) to the condensed financial statements. 21 DEFINITIONS (CONTINUED)
(a) Alternative performance measures (continued)
Adjusted operating profit
Adjusted operating profit for the Group as a whole is operating profit before all separately disclosed items as shown on the face of the consolidated income statement.
Operating margin
Operating margin for a particular business unit or segment within the
Group means operating profit (or loss) as a percentage of revenue. The revenue and operating profit (or loss) for each segment is directly identifiable from the financial statements -- see notes 3(a) and 3(b) to the condensed financial statements. The revenue, operating profit (or loss) and operating margin for each segment are also shown on page 4 of this document.
Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxation, depreciation, software amortisation and separately disclosed items.
A reconciliation of adjusted EBITDA for the half-year ended 28 October 2023, and the comparative prior year period, to the condensed financial statements is shown on page 6 of this document.
Adjusted EBITDA is also presented for the year to 28 October 2023. That, and the constituent elements of the reconciliation for that year, are determined by adding the amounts for the half-year ended 28 October 2023 to the amounts for the year ended 29 April 2023, and deducting the amounts for the half-year ended 29 October 2022.
Adjusted EBITDA from Group companies
Adjusted EBITDA from Group companies is earnings before interest, taxation, depreciation, software amortisation and separately disclosed items from Group companies (i.e. the parent company and all of its subsidiaries consolidated but excluding share of profit/loss from joint ventures).
Adjusted EBITDA from Group companies is directly identifiable from the condensed financial statements -- see note 14 to the condensed financial statements.
Net finance costs
Net finance costs are finance costs less finance income, each as shown on the face of the consolidated income statement.
Adjusted net finance costs
Adjusted net finance costs are net finance costs (see above) excluding separately disclosed items.
Gross debt
Gross debt is borrowings as reported on the consolidated balance sheet, adjusted to exclude bank overdrafts, accrued interest on bonds and the effect of fair value hedges on the carrying value of borrowings.
The components of gross debt are shown in note 16 to the condensed financial statements.
Net debt
Net debt (or net funds) is the net of cash/cash equivalents, bank overdrafts and gross debt (see above).
The components of net debt are shown in note 16 to the condensed financial statements.
Net capital expenditure
Net capital expenditure is the impact of purchases, new leases, lease disposals and sales of property, plant and equipment, and the impact of
capital grants received, on net debt. Its reconciliation to the condensed financial statements is explained on page 8 of this document.
Net debt plus train operating company liabilities
Net debt plus train operating company liabilities is the aggregate of net debt (see above) and net liabilities (excluding cash) in relation to major rail franchises previously operated by the Group. The reconciliation to the consolidated financial statements is shown below:
As at As at
28 October 29 April
2023 2023
GBPm GBPm
-------------------------------------------------- ------------- -----------
Net debt as shown in note 16 301.5 241.1
Net train operating company liabilities
as shown in note 3(d) 24.2 24.7
-------------------------------------------------- ------------- -----------
Net debt plus train operating company
liabilities 325.7 265.8
-------------------------------------------------- ------------- -----------
21 DEFINITIONS (CONTINUED)
(b) Other definition
The following other definition is also used in this document:
Separately disclosed items
Separately disclosed items means:
-- Non-software intangible asset amortisation;
-- Items which individually or, if of a similar type, in aggregate need to
be separately disclosed by virtue of their nature, size or incidence in
order to allow a proper understanding of the underlying financial
performance of the Group; and
-- Changes in the fair value of the Deferred Payment Instrument received in
relation to the sale of the North America Division in April 2019 (see
note 4(i)).
Changes in the fair value of the Deferred Payment Instrument may occur in several consecutive financial years until the issuer of the
instrument discharges it in full. The Deferred Payment Instrument is part of the consideration received for the sale of a business and it does not relate to the ongoing operating activities of the Group. The Directors therefore consider that it is helpful for understanding the Group's financial performance to disclose separately changes in the fair value of the Deferred Payment Instrument.
Separately disclosed items can include both pre-tax and tax-related items.
(END) Dow Jones Newswires
December 06, 2023 02:00 ET (07:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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