TIDM34AI
RNS Number : 8258I
Stagecoach Group Limited
07 December 2022
7 December 2022
Stagecoach Group Limited (formerly Stagecoach Group plc)
Interim results for the half-year ended 29 October 2022
Financial summary
"Adjusted" results "Statutory" results
Results excluding
separately disclosed
items*
H1 2023 H1 2022 H1 2023 H1 2022
-------------------------- ----------- ----------- ---------- ----------
Revenue (GBPm) 669.6 579.4 669.6 579.4
-------------------------- ----------- ----------- ---------- ----------
Total operating profit
(GBPm) 46.8 32.9 33.0 45.2
Non-operating separately
disclosed items (GBPm) - - 1.5 -
Net finance costs (GBPm) (10.4) (14.5) (10.1) (14.1)
-------------------------- ----------- ----------- ---------- ----------
Profit before taxation
(GBPm) 36.4 18.4 24.4 31.1
-------------------------- ----------- ----------- ---------- ----------
*See definitions in note 20 to the condensed financial
statements
Financial highlights
-- Growth in adjusted profit reflecting recovery in passenger
volumes and payments from national governments to protect public
transport services for customers
-- Half-year profit consistent with management's expectations
and overall expectations for full-year profit are broadly
unchanged
-- Further positive underlying cash generation and reduction in
net debt, notwithstanding additions to net debt resulting from two
acquisitions of businesses in the half-year
-- Substantial strengthening of pensions position:
o Net pre-deferred tax pensions assets of GBP167.4m at 29
October 2022, a GBP197.2m improvement in the half-year
o Proactive de-risking of pension schemes
-- Active management of economic headwinds to control costs,
maintain sustainable bus networks, and help protect customers and
employees from cost-of-living pressures
Strategic and operational highlights
-- Growth in passenger demand in UK regional bus
o Recent passenger journeys at around 80% of equivalent 2019
levels
o Challenging economic environment supporting modal shift away
from car to bus
o Free bus travel scheme for under-22s is supporting strong
growth in bus travel by young people in Scotland
-- Proactive management of labour shortages and re-shaping of
local bus networks to reflect new travel patterns
-- Expansion in contracted London bus operations
o Acquisition of two businesses with more than 300 buses and 28
routes contracted with Transport for London, providing good
strategic fit with existing depot footprint
-- Positive long-term outlook, leveraging the benefits of new
ownership and supportive government policy and funding
Martin Griffiths, Stagecoach Group Chief Executive, said:
"We are pleased to report a positive set of results for the
half-year ended 29 October 2022 as we move forward under new
ownership. We have delivered increased revenue and profit,
reflecting growth in our business and investment by the UK,
Scottish and Welsh Governments in bus networks.
"We have made further progress as we rebuild from the pandemic,
manage the immediate-term macro-economic headwinds, and position
our business to maximise the opportunities for growth as we
transition to a net zero future. At the same time, the current
economic environment is helping to demonstrate the good value of
our public transport services and encourage modal shift away from
the car.
"We remain positive on the long-term outlook for the Group,
while mindful of the macro-economic challenges facing businesses
across the country. Underpinned by a strong financial position and
with strong relationships with our national and local government
partners, we are well-positioned for future growth for the benefit
of our customers, employees, investors and wider stakeholders."
For further information, please contact:
Stagecoach Group Limited www.stagecoachgroup.com
Investors and analysts
Ross Paterson, Chief Financial Officer 07714 667897
Bruce Dingwall, Director of Finance 07917 555293
Media
Steven Stewart, Director of Communications 07764 774680
John Kiely, Edelman Smithfield 07785 275665
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 29 October
2022. The Company was re-registered from a public limited company
to a private limited company, and re-named from Stagecoach Group
plc to Stagecoach Group Limited, on 17 October 2022.
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
In the first half of the financial year, we have made further
progress as we rebuild from the pandemic, manage the immediate-term
macro-economic headwinds, and position our business to maximise the
opportunities for growth as we transition to a net zero future. At
the same time, the current economic environment is helping to
demonstrate the good value of our public transport services and
encourage modal shift away from the car.
There has been a recovery in demand for our public transport
services, with year-on-year growth in regional bus passenger
journeys of 20.6% in first half of the year. Our recent regional
bus passenger journeys were at around 80% of pre-pandemic levels,
with recent commercial passenger revenue at around 92%.
Concessionary travel volumes have recovered less quickly than
fare-paying passenger volumes, although we are seeing positive
growth in bus travel under the Scottish Government's under-22 free
bus travel scheme.
UK Bus (regional operations)
We are continuing to work collaboratively with national and
local government in England, Scotland and Wales to re-shape local
bus networks to reflect new travel patterns. Our transport services
are more important than ever in getting people to work, accessing
education, skills and public services, and connecting people in our
communities. We remain grateful for the huge commitment and
professionalism of our people who are delivering services safely in
our communities day in, day out.
Government also recognises the importance of our services in
delivering economic growth, social equity and objectives around
decarbonisation. This is reflected in the investment national
governments have made in pandemic recovery funding, as well as
other funding streams to support our own investment in the
transition to net zero.
Along with our partner regional and local transport authorities,
we are progressing the delivery of dozens of Bus Service
Improvement Plans across England. In addition, we welcome the new
GBP2 fare initiatives in England by the UK Government and several
metro mayor Combined Authorities. This is one element of a package
of interventions which can help make public transport more
affordable and attract more people to bus travel.
During the first half of the year, we have invested in further
customer improvements. Our new dedicated UK customer contact centre
is fully established, and we are rolling out new ticketing options
for our customers, such as our Flexirider product, to deliver even
better value and match changed travel patterns.
We continue to invest in the future of the business. Net capital
expenditure in the half-year ended 29 October 2022 was GBP22.1m (H1
2022: GBP19.6m) and we forecast it to be c.GBP123m (2022: GBP38.4m)
for the full-year. We have already made capital commitments for
future years too. We are continuing to invest in the transition of
our bus fleet to new zero-emission technologies as part of our
target to deliver a net zero UK bus fleet by 2035. We are
progressing the introduction of new electric buses in several
locations, and over the coming months we will deliver the UK's
first all-electric city bus networks in Inverness and Perth. As
part of our sustainability journey to net zero, we have announced
plans for a GBP48m investment in around 200 Euro VI buses in the
coming months. These buses have 95% lower pollutants than Euro III
buses and will allow us to more quickly phase out older vehicles
from our fleet, benefitting local air quality and reducing carbon
emissions.
We published new research in November 2022 on modal shift, which
demonstrates that consumers support partnership working between
local authorities and bus operators to deliver a balanced package
of incentives. It is clear this approach can deliver significant
modal shift from car to public transport and active travel.
As part of our business strategy, we are continuing to seek new
opportunities to diversify and grow our business. We are pleased to
have played our part in the success of the 2022 Commonwealth Games
in Birmingham with the delivery of key transport for spectators,
media and athletes.
UK Bus (London)
During the first half of the year, we have grown our operations
in London with the acquisition of bus operations previously
operated by Kelsian Group and HCT Group. In total, these operations
involve around 950 employees and more than 300 buses, and we have
taken over responsibility for delivering 28 routes on behalf of
Transport for London ("TfL"). The depot locations are a good
strategic fit for our existing London operation and extend the area
previously served.
Trading in our London bus operations has been challenging with a
small operating loss for the first half of the year compared to a
good operating profit in the equivalent prior year period. The
London bus business is contracted to run specified services on
behalf of Transport for London and cannot unilaterally reduce
service levels. Accordingly, staff shortages have resulted in
higher levels of lost mileage and weaker operational performance,
which have resulted in contractual penalties and lower quality
incentive income. In addition, staff and other costs have increased
because of the staff shortages, as well as high inflation. 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. The fuel hedging we have in place gives us more time to
adjust to increases in fuel prices.
In common with other businesses in our sector, we are taking
steps to manage the continued labour shortages in the UK economy.
Our priority has been to focus resources where they will deliver
the best benefit for most customers in our local communities. In
the first six months of the year, we have recruited and trained
more than 2,300 new bus drivers, to protect and improve the
reliability of our services.
Financial results
In the half-year to 29 October 2022, revenue grew to GBP669.6m
(H1 2022: GBP579.4m) and adjusted total operating profit grew to
GBP46.8m (H1 2022: GBP32.9m). Revenue excludes COVID-19 grant
income from government, which is reported as other operating
income. The growth in revenue reflects recovering passenger demand
across our regional bus and tram services as pandemic-related
restrictions have eased and confidence has returned, as well as the
effect of new businesses acquired in the half-year. The growth in
adjusted total operating profit reflects that revenue growth and
payments from governments to support the recovery of public
transport networks vital to the future of the country. Unadjusted
operating profit was GBP33.0m (H1 2022: GBP45.2m), with the
decrease principally due to the growth in adjusted total operating
profit being offset by transaction costs in the half-year related
to the two offers to acquire the Company, and non-recurring
separately disclosed gains in the prior half-year.
Positive cash generation in the half-year saw a GBP28.1m (H1
2022: GBP45.1m) reduction in net debt, even after the increases in
net debt of GBP34.4m arising on the acquisitions of two bus
businesses in London.
In addition, we saw a substantial strengthening of our pensions
position in the half-year. At 29 October 2022, our net pre-deferred
tax pension assets were GBP167.4m, a GBP197.2m improvement in the
half-year. Steps taken during the half-year have further de-risked
our pension schemes.
Dividend policy
The Board has proposed no dividends in respect of the half-year
ended 29 October 2022.
The Group takes account of its performance, financial position
and prospects when setting dividends. It does not have a prescribed
formula for determining each year's dividends, other than the
desire to maintain sufficient liquidity to fund available capital
expenditure and growth opportunities, taking into account expected
cash flow from the business together with the ongoing commitment to
seek to maintain an investment grade credit rating. The Group
continues to have substantial available liquidity and it is our
ambition to resume dividend payments in due course.
Outlook
We remain positive on the long-term outlook for the Group, while
mindful of the immediate-term macro-economic challenges facing
businesses across the country. Under new ownership, we have made
further capital investment in delivering a more sustainable
business and we are confident that we can deliver growth that
benefits all stakeholders.
Public transport will be critical to delivering national and
regional government ambitions to create a greener, healthier and
more inclusive country, and more connected local communities. We
are excited by the significant opportunities from the transport
strategies being progressed nationally in England, Scotland and
Wales, as well as in our major city regions and other local
transport authority areas.
We are confident that our strong financial position and the
momentum we are seeing means that we are well-positioned for future
growth for the benefit of our customers, employees, investors and
wider stakeholders.
Summary of financial results
Revenue, split by segment, is summarised below :
REVENUE H1 2023 H1 2022 Growth
GBPm GBPm %
-------- -------- -------
UK Bus (regional operations) 508.1 438.4 15.9%
UK Bus (London) 154.4 135.6 13.9%
UK Rail 7.1 5.4 31.5%
Group revenue 669.6 579.4
-------- --------
Operating profit, split by segment, is summarised below:
OPERATING PROFIT H1 2023 H1 2022
GBPm % margin GBPm % margin
------- --------- ------ ---------
UK Bus (regional operations) 50.4 9.9% 30.3 6.9%
UK Bus (London) (1.6) (1.0)% 8.3 6.1%
UK Rail (0.5) (2.1)
Group overheads (5.0) (5.2)
Restructuring costs (0.1) (0.1)
------- --------- ------ ---------
Operating profit before joint
ventures and separately disclosed
items 43.2 31.2
Joint ventures - share of profit
after tax
WCT Group 0.1 1.6
Citylink 2.9 0.1
Crown Sightseeing 0.6 -
---------
Total operating profit before separately
disclosed items 46.8 32.9
Separately disclosed items (13.8) 12.3
---------
Total operating profit: Group
operating profit and share of joint
ventures' profit after taxation 33.0 45.2
------- --------- ------ ---------
Financial Review
UK Bus (regional operations)
Summary
* Strong growth in revenue and operating profit
reflecting recovering customer demand and payments
from government for continuing bus services
* Operationally challenging period with lost mileage
arising from staff shortages
* Positive long-term outlook for the business
Financial performance
The financial performance of UK Bus (regional operations) for
the half-year ended 29 October 2022 is summarised below:
H1 2023 H1 2022
GBPm GBPm Change
--------------- -------- -------- -------
Revenue 508.1 438.4 15.9%
Like-for-like
revenue 497.0 432.1 15.0%
--------------- -------- -------- -------
Operating
profit 50.4 30.3 66.3%
--------------- -------- -------- -------
Operating
margin 9.9% 6.9% 300bp
--------------- -------- -------- -------
We have been pleased with the recovery in passenger demand for
our services, which has contributed to the rise in operating profit
from the equivalent prior period. We continue to see journeys by
fare-paying passengers currently recovering faster than
concessionary journeys. We continue to progress a number of
ticketing initiatives to reflect the changes we are seeing in
travel patterns.
It has been an operationally challenging period for the
business, with staff shortages resulting in planned reductions in
our services and unplanned cancellations of services. Staff
shortages are being seen across the economy, and combined with
higher inflation, is feeding higher pay demands. We have
selectively increased fares to reflect increased costs, while
aiming to take a balanced approach that recognises the cost of
living pressures on many of our customers.
The operating profit for the half-year includes GBP45.9m of
COVID-related grant income from governments (H1 2022: GBP65.2m). We
have continued to benefit from the financial commitments made by
governments across the UK to secure the continuity of bus services
while passenger volumes recover, and we expect the various
government financial support arrangements to cover the period
through to March 2023.
Like-for-like vehicle miles operated in the half-year were 8.5%
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 25.7%
and like-for-like revenue per journey reduced 4.6%. The increase in
revenue per mile reflects the COVID-related increase in
year-on-year revenue despite the year-on-year decrease in vehicle
mileage. The reduction in revenue per journey is largely
attributable to the rise in concessionary journey numbers not being
matched by an equivalent increase in concessionary revenue,
recognising that prior year concessionary revenue payments were
maintained at close to pre-COVID revenue rates despite the
substantially lower concessionary journey numbers in the prior
year.
Like-for-like revenue was built up as follows:
H1 H1 2022 Change
2023 GBPm %
GBPm
-------------------- ------ -------- -------
Commercial
on and off
bus revenue 281.1 226.8 23.9%
Concessionary
revenue 121.9 127.3 (4.2)%
-------------------- ------ -------- -------
Commercial
and concessionary
revenue 403.0 354.1 13.8%
Tendered and
school revenue 56.7 54.9 3.3%
Contract and
other revenue 37.3 23.1 61.5%
Like-for-like
revenue 497.0 432.1 15.0%
-------------------- ------ -------- -------
The year-on-year recovery in passenger demand for our bus
services is reflected in the growth in commercial revenue.
As expected, having generally maintained concessionary revenue
payments at closer to pre-COVID levels during the pandemic, public
authorities have been reducing their concessionary revenue payments
during the period to better reflect the reductions in concessionary
patronage. This reduction in concessionary revenue has been
partially offset by the introduction of the under-22 free bus
travel scheme in Scotland, which has seen strong growth in travel
by young people.
The increase in tendered and school revenue reflects a
continuation of the effects of operators exiting the market, in
addition to more demand responsive transport ("DRT") contracts and
some previously commercial services being converted to tendered
services.
The principal reason for the increase in contract and other
revenue, compared to the equivalent period in the prior year, is
the work undertaken for the 2022 Commonwealth Games.
Outlook
We will continue to work collaboratively with national and local
governments across the country to re-shape local bus networks to
reflect new travel patterns.
Whilst we expect further recovery in demand for our services, we
see ongoing forecasting uncertainty in relation to passenger
demand, payments from government to support the continuation of
regional bus services and cost inflation. We anticipate that it
will take some time for demand for our regional bus services to
return to pre-COVID levels and are therefore planning for a number
of scenarios. Nevertheless, we currently forecast continued good
regional bus profitability for the second half of the year to 29
April 2023.
COVID-19 recovery funding from governments was a significant
part of our income in the half-year ended 29 October 2022. As we
move forward and return to a more commercial model for regional bus
services, we are working with governments and others in the sector
to strike an appropriate balance between aligning bus networks in
the short to medium-term to customer demand, driving long-term
modal shift from car to public transport and active travel as a key
component of achieving Net Zero, and ensuring value for money from
continued government support for bus services amidst significant
pressure on government finances more generally.
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
* Short-term financial performance challenging arising
from impact of staff shortages
* Significant expansion with acquisitions from Kelsian
Group and HCT Group
Financial performance
The financial performance of UK Bus (London) for the half-year
ended 29 October 2022 is summarised below:
H1 2023 H1 2022 Change
GBPm GBPm %
------------------------- -------- -------- ---------
Revenue 154.4 135.6 13.9%
Like-for-like
revenue 137.0 135.6 1.0%
Operating (loss)/profit (1.6) 8.3 (119.3)%
------------------------- -------- -------- ---------
Operating margin (1.0)% 6.1% (710)bp
------------------------- -------- -------- ---------
Consistent with other sectors of the UK economy, we are facing
operational challenges due to the effects of upward wage pressure
and increased staff turnover and staff shortages. In respect of the
Group's financial performance, the greatest impact has been borne
in our London business, where the impact of lost mileage has
resulted in significant contractual penalties and lost quality
incentive income. 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 recently reached an agreement on a pay award for our East
London bus drivers and South East London and Kent ("Selkent") bus
drivers and engineers. The settlement sees a 10% increase in basic
pay rates, backdated to the anniversary of the previous pay
agreement. That award reflects the current high inflationary
environment and comparable awards made by competitor bus operators
in the London market. We will separately consider pay for our
supervisory roles and staff who joined us with the businesses
acquired in the half-year.
Our tender results during the first half of the year have been
satisfactory, 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 will continue to tender at contract prices designed
to deliver financial returns that reflect the capital investment
required.
We have significantly expanded our operations in London with the
acquisition of bus operations previously operated by Kelsian Group
and HCT Group, growing our business by around 950 employees and
more than 300 buses. The condensed financial statements reflect the
provisional acquisition accounting for the acquired businesses,
including the recognition of onerous contract provisions for
loss-making Transport for London contracts assumed by the Group as
part of the transactions. However, we forecast cost synergies from
integrating the acquired businesses and expect them to boost our
long-term London bus profitability. Further detail on the
acquisitions is provided in note 6 to the condensed financial
statements.
Outlook
We anticipate higher like-for-like revenue growth in the second
half of the year with the benefit from higher inflation indexation
of contract revenues. While this should see some recovery in
profitability, we expect any profit for the year ending 29 April
2023 to be modest. We believe the business will recover its
profitability over the medium-term, and we see good prospects for
growth from the integration of our recent acquisitions.
UK Rail
Summary
* Continuing positive progress on unwinding our former
train operating companies
* Sheffield Supertram supported by further government
payments for essential services
Financial performance
The financial performance of UK Rail for the half-year ended 29
October 2022 is summarised below:
H1 2023 H1 2022 Change
GBPm GBPm %
--------------- -------- -------- -------
Revenue 7.1 5.4 31.5%
Like-for-like
revenue 6.7 5.1 31.4%
Operating
loss (0.5) (2.1)
--------------- -------- -------- -------
The like-for-like revenue is in respect of the ongoing Sheffield
Supertram business, with the year-on-year increase principally
reflecting the recovery in passenger demand as COVID-related
restrictions have been eased.
The operating loss for the half-year includes the costs of our
business development team, the majority of whose work is focused on
unwinding our former rail franchises and evaluating and bidding for
future contract opportunities. These costs have been partially
offset by the further positive progress in concluding matters in
relation to those former rail franchises.
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 the past 25
years and will continue to work hard to deliver a safe, high
quality and professional service to our customers, meet our
obligations and ensure a smooth transition to the new operator.
Our commercial and business development team continues to
explore, and bid for, new opportunities in the UK. We will continue
to balance the costs of those business development activities with
our assessment of the prospective risk-reward of the available
opportunities.
Adjusted EBITDA, depreciation and intangible asset
amortisation
Earnings before interest, taxation, depreciation, software
amortisation and separately disclosed items ("adjusted EBITDA")
increased to GBP 99.6 m (H1 2022: GBP86.4m). Adjusted EBITDA can be
reconciled to the financial statements as follows:
Year to
H1 H1 2022 29 Oct 2022
2023 GBPm GBPm
GBPm
----------------------- ------- ---------- -------------
Total operating
profit 33.0 45.2 54.7
Separately disclosed
items 13.8 (12.3) 31.9
Software amortisation 0.5 0.7 1.2
Depreciation 51.5 52.5 102.7
Impairment losses - - 4.4
Add back joint
venture tax 0.8 0.3 0.9
----------------------- ------- ---------- -------------
Adjusted EBITDA 99.6 86.4 195.8
----------------------- ------- ---------- -------------
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 GBP 52.0 m is lower
than the GBP53.2m for the equivalent prior year period, and
principally reflects our constrained capital expenditure since
early in 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 GBP0.4m (H1 2022:
GBPNil) was recorded in the half-year ended 29 October 2022 in
relation to intangible assets acquired in the half-year as part of
the acquisition of two London bus businesses.
Reassessment of onerous contract provision
As at 30 April 2022, an onerous contract provision of GBP8.1m
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
charge for Sheffield Supertram of GBP 0.3 m (H1 2022: GBP3.9m
profit) in the half-year ended 29 October 2022.
Transaction costs
We have recorded transaction costs of GBP 12.9 m, predominantly
professional fees and share based payment expenses accelerated by
the change of control of the Company, in relation to the offer for
the Company from DWS Infrastructure and the lapsed all-share
combination with National Express Group plc (H1 2022: GBP1.2m).
Acquisition costs
GBP0.2m (H1 2022: GBPNil) 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.
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.
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 GBP
1.5 m being recognised during the half-year ended 29 October
2022.
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, 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 the secured lenders. The carrying value of the instrument
was GBP2.9m as at 30 April 2022. We estimated the carrying value of
the instrument to be GBP 3.2 m as at 29 October 2022, resulting in
a gain of GBP 0.3 m (H1 2022: GBP0.4m) recognised in finance income
in the half-year ended 29 October 2022.
Tax
The separately disclosed taxation credit of GBP0.8m (H1 2022:
charge of GBP17.0m) comprises a credit of GBP0.8m (H1 2022: charge
of GBP0.9m) in relation to the taxation effect of the pre-tax
separately disclosed items, and GBPNil (H1 2022: charge of
GBP16.1m), in relation to the one-off effect of the change in the
UK corporation tax rate.
Net finance costs
Net finance costs, excluding separately disclosed items, for the
half-year ended 29 October 2022 were GBP 10.4 m (H1 2022: GBP14.5m)
and are further analysed below. The decrease in net finance costs
is principally due to the lower pensions finance charges arising
from the prior year reduction in the pension deficit, in addition
to higher interest received on surplus cash balances.
H1 H1 2022
2023 GBPm
GBPm
----------------------------- ------ --------
Finance costs
Interest payable
and facility costs
on bank loans, overdrafts
and trade finance 0.7 0.7
Lease interest payable 1.6 1.4
Interest payable
and other finance
costs on bonds 8.4 8.5
Interest payable
on Covid Corporate
Financing Facility
commercial paper - 0.9
Effect of interest
rate swaps 0.8 0.1
Unwinding of discount
on provisions 0.5 0.5
Interest expense
on defined benefit
pension schemes - 2.6
----------------------------- ------ --------
12.0 14.7
----------------------------- ------ --------
Finance income
Interest receivable
on cash and cash
equivalents (1.6) (0.2)
Net finance costs,
excluding separately
disclosed items ("adjusted
net finance costs") 10.4 14.5
----------------------------- ------ --------
Taxation
The tax charge for the half-year to 29 October 2022 has been
calculated on the basis of the estimated annual effective rate for
the year ending 29 April 2023.
Our share of profit from joint ventures is reported after tax in
arriving at the profit before tax in the consolidated income
statement. To better understand the Group's effective tax rate, we
show below the Group's tax charge, including our share of joint
ventures' tax, relative to the Group's profit before tax excluding
joint ventures' tax. On that basis, the effective tax rate for the
half-year ended 29 October 2022, excluding separately disclosed
items, was 18.0% (H1 2022: 19.8%).
The tax charge on profit can be analysed as follows:
Half-year to 29 October 2022 Pre-tax profit Tax Rate
GBPm GBPm %
---------------------------------------------------------- --------------- ------ -----
Excluding separately disclosed items 37.2 (6.7) 18.0
Separately disclosed items (12.0) 0.8
---------------------------------------------------------- --------------- ------ -----
With joint venture taxation gross 25.2 (5.9)
Reclassify joint venture taxation for reporting purposes (0.8) 0.8
---------------------------------------------------------- --------------- ------ -----
Reported in income statement 24.4 (5.1)
---------------------------------------------------------- --------------- ------ -----
The effective tax rate, excluding separately disclosed items, of
18.0% is lower than the 19.5% rate of UK corporation tax for the
year, 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 29 October 2022 of
GBP16.8m (H1 2022: GBP2.5m) compares to the tax charge for Group
companies of GBP5.1m (H1 2022: GBP20.4m). The difference
principally reflects the timing of tax payments on prior year fair
value movements on fuel derivatives.
The separately disclosed tax credit of GBP0.8m (H1 2022: charge
of GBP17.0m) is explained earlier in the section headed "Separately
disclosed items".
Cash flows and net debt
The Group has continued to focus on delivering positive cash
flow and maintain strong available liquidity. That continued during
the half-year ended 29 October 2022, where net debt was reduced by
GBP28.1m from GBP224.3m to GBP196.2m and net debt plus net train
operating company liabilities was reduced by GBP29.6m from
GBP264.5m to GBP234.9m. We recognise that the positive cash flow
partly reflects that dividend payments have been paused and capital
expenditure constrained. Our capital expenditure is weighted to the
second half of the year ending 29 April 2023, partly reflecting
further investment in the transition to zero-emission vehicles, and
we expect to resume dividend payments when appropriate.
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 29 October
2022, the consolidated net assets included net liabilities
(excluding cash) of GBP 38.7 m (30 April 2022: GBP 40.2 m) in
respect of such items. Accordingly, if all items were settled at
their 29 October 2022 carrying values, consolidated net debt would
increase by that amount. Consolidated net debt plus outstanding
train operating company net liabilities as at 29 October 2022 was
GBP234.9m (30 April 2022: GBP 264.5 m).
Net cash from operating activities before tax for the half-year
ended 29 October 2022 was GBP 102.8 m (H1 2022: GBP71.2m) and can
be further analysed as follows:
H1 2023 H1 2022
GBPm GBPm
------------------------ -------- --------
EBITDA of Group
companies before
separately disclosed
items 95.2 84.4
Cash effect of
current period
separately disclosed
items (8.2) 4.7
(Gain)/loss on
disposal of property,
plant and equipment (1.0) 0.7
Capital grant
amortisation (1.2) (0.6)
Share based payment
movements, excluding
separately disclosed
items 0.2 1.7
Working capital
movements 33.7 (1.6)
Net interest paid (17.7) (18.1)
Dividends received
from joint ventures 1.8 -
Net cash flows
from operating
activities before
taxation 102.8 71.2
------------------------ -------- --------
Net debt (as analysed in note 16 to the condensed financial
statements) decreased from GBP 224.3 m at 30 April 2022 to GBP
196.2 m at 29 October 2022. The movement in net debt was:
Half-year to 29 October GBPm
2022
------------------------------- --------
Net cash flows from operating
activities before taxation 102.8
Tax paid (16.8)
Investing activities (57.5)
Other (0.4)
------------------------------- --------
Movement in net debt in
the half-year 28.1
Opening net debt (224.3)
Closing net debt (196.2)
------------------------------- --------
Net cash flows from operating activities were higher than the
equivalent prior period principally due to favourable working
capital inflows and increased adjusted EBITDA from Group
companies.
The GBP33.7m working capital inflow in the half-year ended 29
October 2022 includes inflows of approximately GBP 12.3 m in
relation to COVID-19 related payments from governments and inflows
of approximately GBP 11.1 m in relation to a refund from the
Teesside Local Government Pension Scheme, following the cessation
of the Group's participation in the prior year. We consider the
inflow of COVID-19 related payments to be a timing difference,
which we expect to reverse in the second half of the year.
The net impact on net debt of purchases and disposals of
property, plant and equipment, split by segment, was:
H1 2023 H1 2022
GBPm GBPm
------------------------- -------- --------
UK Bus (regional
operations) 17.7 9.9
UK Bus (London) 4.4 9.7
Net capital expenditure 22.1 19.6
------------------------- -------- --------
Net capital expenditure reconciles to the condensed financial
statements as follows:
H1 2023 H1 2022
GBPm GBPm
-------------------------------------------------- -------- --------
Cash flow from:
* Purchase of property, plant and equipment 26.5 10.4
* Disposal of property, plant and equipment (3.5) (0.7)
* Capital grants received (6.6) (1.2)
Decrease in net
debt from negotiated
early termination
of lease (0.3) -
Increase in net
debt from new
leases in period 6.0 11.1
22.1 19.6
-------------------------------------------------- -------- --------
In addition to the amounts shown in the table above, the impact
of purchases of intangible assets was GBP 1.0 m (H1 2022:
GBP2.6m).
Financial position and liquidity
The Group maintains a good financial position , as evidenced
by:
-- We have available liquidity of over GBP 500 m.
-- We have comfortably complied with all applicable debt
covenants for the year to 29 October 2022.
-- The ratio of net debt at 29 October 2022 to adjusted EBTIDA
for the year ended 29 October 2022 was 1.0 times (year ended 30
October 2021: 1.5 times).
-- Adjusted EBITDA for the half-year ended 29 October 2022 was
9.6 times (H1 2022: 6.0 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 29 October 2022 were GBP 577.0 m (30 April 2022:
GBP 391.5 m). The increase in the net assets principally reflects
the actuarial gains on defined benefit pension schemes and the
profit for the half-year ended 29 October 2022.
Retirement benefits
The reported net assets of GBP 577.0 m (30 April 2022: GBP 391.5
m), 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 GBP 167.4 m (30 April
2022: GBP 29.8 m net retirement benefit liabilities) and associated
deferred tax assets of GBP 3.2 m (30 April 2022: GBP 21.6 m).
The Group recognised pre-tax actuarial gains of GBP 191.4 m in
the half-year ended 29 October 2022 (H1 2022: GBP16.5m) on Group
defined benefit schemes.
The discount rate used to determine pension scheme liabilities
as at 29 October 2022 was 4.7 %, compared to 3.2 % as at 30 April
2022.
The Stagecoach Group Pension Scheme is the Group's largest
defined benefit pension scheme exposure. The Scheme's latest formal
valuation was as at September 2021 and showed a funding surplus of
GBP48.7m. Following the change of ownership of the Company to a
company managed by DWS Infrastructure, and based on a legally
binding agreement entered into between the Company and the
Trustees, employer funding contributions, in excess of salary
related contributions, increased to GBP12.5m per annum, with a plan
for increases of 3% per annum compound, for ten years or until the
Scheme's long-term funding objective is met, whichever is earlier.
By 29 October 2022, the Group had made significant progress in
de-risking its main defined benefit scheme, adjusting its asset
allocation to take advantage of lower prices to purchase gilts and
bonds as a hedge against its pension liabilities and had
substantially achieved the long-term funding objective on a whole
scheme basis. Our main defined benefit scheme does not use
collateral-backed leveraged liability-driven investment, and
therefore we avoided the challenges faced by some other pension
schemes in recent weeks. The GBP12.5m per annum employer funding
contributions referred to above are continuing but, given the
substantially improved funding position of the Scheme, we intend to
explore the need for continuing contributions with the Scheme
Trustees.
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 2022 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. T here 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.
Auditors' review
For UK companies, there is no statutory or regulatory
requirement for auditors to report on interim financial
information. A review of interim financial information by the
auditors is substantially less in scope than an audit and does not
provide the level of assurance of an audit. We recognise the
importance of reporting the interim financial information on a
timely basis. To help ensure that we published the interim
financial information at a similar time to previous years and
recognising that an interim review does not provide the level of
assurance of an audit in any event, we decided not to engage the
auditors to perform a review of the interim financial report for
the half-years ended 29 October 2022, 30 October 2021 and 31
October 2020. The financial statements for the year ending 29 April
2023 will be subject to audit as usual.
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 20 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 29 October 2022. 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.
Outlook
We remain positive on the long-term outlook for the Group, while
mindful of the immediate-term macro-economic challenges facing
businesses across the country. Under new ownership, we have made
further capital investment in delivering a more sustainable
business and we are confident that this strategic long-term
approach can deliver growth that benefits all stakeholders.
Public transport will be critical to delivering national and
regional government ambitions to create a greener, healthier and
more inclusive country, and more connected local communities. We
are excited by the significant opportunities from the transport
strategies being progressed nationally in England, Scotland and
Wales, as well as in our major city regions and other local
transport authority areas.
We are confident that our strong financial position and the
momentum we are seeing means we are well-positioned for future
growth for the benefit of our customers, employees, investors and
wider stakeholders.
Martin Griffiths
Chief Executive
7 December 2022
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
Martin Griffiths Ross Paterson
Chief Executive Chief Financial Officer
7 December 2022 7 December 2022
Cautionary statement
The preceding interim management report has been prepared for
the shareholders of the Company, as a body, and for no other
persons. Its purpose is to assist shareholders 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 29 October 2022 Half-year to 30 October 2021
Performance Performance
excluding Separately excluding Separately
separately disclosed separately disclosed
disclosed items Results for disclosed items Results for
items (note 4) the period items (note 4) the period
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
CONTINUING
OPERATIONS
Revenue 3(a) 669.6 - 669.6 579.4 - 579.4
Operating
costs and
other
operating
income (626.4) (13.8) (640.2) (548.2) 12.3 (535.9)
Operating
profit of
Group
companies 3(b) 43.2 (13.8) 29.4 31.2 12.3 43.5
Share of
profit of
joint
ventures
after
taxation 3(c) 3.6 - 3.6 1.7 - 1.7
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
Total
operating
profit: Group
operating
profit and
share of
joint
ventures'
profit after
taxation 3(b) 46.8 (13.8) 33.0 32.9 12.3 45.2
Non-operating
separately
disclosed
item 4 - 1.5 1.5 - - -
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
Profit before
interest and
taxation 46.8 (12.3) 34.5 32.9 12.3 45.2
Finance costs (12.0) - (12.0) (14.7) - (14.7)
Finance income 1.6 0.3 1.9 0.2 0.4 0.6
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
Profit before
taxation 36.4 (12.0) 24.4 18.4 12.7 31.1
Taxation (5.9) 0.8 (5.1) (3.4) (17.0) (20.4)
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
Profit for the
period, all
attributable
to equity
holders of
the parent 30.5 (11.2) 19.3 15.0 (4.3) 10.7
--------------- ------ ------------- -------------- -------------- -------------- -------------- --------------
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
29 October 30 October
2022 2021
GBPm GBPm
----------------------------------------------------------- ------------ ------------
Profit for the period 19.3 10.7
----------------------------------------------------------- ------------ ------------
Items that may be reclassified to profit or
loss
Cash flow hedges:
* Net fair value gains on cash flow hedges 30.0 30.0
* Reclassified and reported in profit for the period (43.7) 0.5
* Tax effect of cash flow hedges 2.7 (5.8)
Total items that may be reclassified to profit
or loss (11.0) 24.7
----------------------------------------------------------- ------------ ------------
Items that will not be reclassified to profit
or loss
Actuarial gains on Group defined benefit pension
schemes, excluding withholding tax 257.7 16.5
Tax effect of actuarial gains on Group defined
benefit pension schemes (18.5) (4.0)
Movement in withholding tax payable on pension (66.3) -
surpluses
Effect of change in the UK corporation tax
rate on Group defined benefit pension schemes - 15.8
Total items that will not be reclassified
to profit or loss 172.9 28.3
----------------------------------------------------------- ------------ ------------
Other comprehensive income for the period 161.9 53.0
----------------------------------------------------------- ------------ ------------
Total comprehensive income for the period,
all attributable to equity holders of the parent 181.2 63.7
----------------------------------------------------------- ------------ ------------
CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
Unaudited Audited
------------ ---------------
As at As at
29 October 30 April 2022
Notes 2022 GBPm
GBPm
--------------------------------- -------- ------------ ---------------
ASSETS
Non-current assets
Goodwill 7 87.0 51.9
Other intangible assets 8 7.9 4.3
Property, plant and equipment: 9
- Owned assets 701.9 732.1
- Right-of-use assets 82.1 68.6
Interests in joint ventures 10 10.7 7.2
Derivative instruments at fair
value 43.5 36.2
Retirement benefit assets - net
of withholding tax payable 12 171.8 45.3
Other receivables 21.5 20.4
--------------------------------- -------- ------------ ---------------
1,126.4 966.0
--------------------------------- -------- ------------ ---------------
Current assets
Inventories 13.5 12.3
Trade and other receivables 139.8 133.5
Current tax recoverable 4.0 -
Derivative instruments at fair
value 47.3 61.2
Cash and cash equivalents 290.2 248.9
Assets classed as held for sale 1.2 2.4
--------------------------------- -------- ------------ ---------------
496.0 458.3
--------------------------------- -------- ------------ ---------------
Total assets 3(d) 1,622.4 1,424.3
--------------------------------- -------- ------------ ---------------
LIABILITIES
Current liabilities
Trade and other payables 313.1 268.5
Current tax liabilities - 18.2
Borrowings:
- Lease liabilities 27.5 22.1
Derivative instruments at fair
value 4.8 2.2
Provisions 18 40.3 36.7
--------------------------------- -------- ------------ ---------------
385.7 347.7
--------------------------------- -------- ------------ ---------------
Non-current liabilities
Other payables 41.7 27.9
Borrowings:
- Lease liabilities 59.7 52.3
- Other borrowings 396.0 404.7
Derivative instruments at fair
value 2.9 1.6
Deferred tax liabilities 70.5 48.4
Provisions 18 84.5 75.1
Retirement benefit obligations 12 4.4 75.1
--------------------------------- -------- ------------ ---------------
659.7 685.1
--------------------------------- -------- ------------ ---------------
Total liabilities 3(d) 1,045.4 1,032.8
--------------------------------- -------- ------------ ---------------
Net assets 3(d) 577.0 391.5
--------------------------------- -------- ------------ ---------------
EQUITY
Ordinary share capital 13 3.2 3.2
Share premium account 8.4 8.4
Retained earnings 147.7 (48.8)
Capital redemption reserve 422.8 422.8
Own shares (69.6) (69.6)
Cash flow hedging reserve 64.4 75.4
--------------------------------- -------- ------------ ---------------
Total equity, all attributable
to the parent 576.9 391.4
Non-controlling interest 0.1 0.1
--------------------------------- -------- ------------ ---------------
Total equity 577.0 391.5
--------------------------------- -------- ------------ ---------------
The accompanying notes form an integral part of this
consolidated balance sheet.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Cash Total
Ordinary Share Capital flow Equity
share premium Retained redemption Own hedging attributable Non-controlling Total
capital account earnings reserve shares reserve to parent interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- -------- --------- ----------- ------- --------
Balance at 30
April 2022 3.2 8.4 (48.8) 422.8 (69.6) 75.4 391.4 0.1 391.5
---------------- --------- -------- --------- ----------- ------- -------- ------------- ---------------- -------
Profit for the
period - - 19.3 - - - 19.3 - 19.3
Other
comprehensive
income/(loss),
net of tax - - 172.9 - - (11.0) 161.9 - 161.9
---------------- --------- -------- --------- ----------- ------- -------- ------------- ---------------- -------
Total
comprehensive
income/(loss) - - 192.2 - - (11.0) 181.2 - 181.2
---------------- --------- -------- --------- ----------- ------- -------- ------------- ---------------- -------
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 3.2 8.4 147.7 422.8 (69.6) 64.4 576.9 0.1 577.0
Balance at 1
May 2021 3.2 8.4 (299.0) 422.8 (69.6) (4.8) 61.0 - 61.0
Profit for the
period - - 10.7 - - - 10.7 - 10.7
Other
comprehensive
income, net
of tax - - 28.3 - - 24.7 53.0 - 53.0
---------------- --------- -------- --------- ----------- ------- -------- ------------- ---------------- -------
Total
comprehensive
income - - 39.0 - - 24.7 63.7 - 63.7
---------------- --------- -------- --------- ----------- ------- -------- ------------- ---------------- -------
Credit in
relation to
equity-settled
share based
payments - - 1.7 - - - 1.7 - 1.7
Balance at 30
October 2021 3.2 8.4 (258.3) 422.8 (69.6) 19.9 126.4 - 126.4
---------------- --------- -------- --------- ----------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
------------ ------------
Half-year Half-year
to to
29 October 30 October
2022 2021
Notes GBPm GBPm
-------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated by operations 14 118.7 89.3
Interest paid (19.3) (18.3)
Interest received 1.6 0.2
Dividends received from joint ventures 1.8 -
Net cash flows from operating activities
before tax 102.8 71.2
Tax paid (16.8) (2.5)
-------------------------------------------- ------ ------------ ------------
Net cash from operating activities
after tax 86.0 68.7
-------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Acquisition of subsidiaries 6 (13.6) -
Purchase of property, plant and equipment (26.5) (10.4)
Disposal of property, plant and equipment 3.5 0.7
Receipt of capital grants 6.6 1.2
Purchase of intangible assets (1.0) (2.6)
Net cash outflow from investing activities (31.0) (11.1)
-------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Payments of principal portion of lease
liabilities (13.7) (12.8)
Net cash flow from financing activities (13.7) (12.8)
-------------------------------------------- ------ ------------ ------------
Net increase in cash and cash equivalents 41.3 44.8
Cash and cash equivalents at beginning
of period 248.9 483.2
Cash and cash equivalents at end of
period 290.2 528.0
-------------------------------------------- ------ ------------ ------------
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 29 October 2022 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
30 April 2022, 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 30 April 2022, as described
on pages 106 to 121 of the Group's 2022 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 29 October 2022. The comparative
figures for the half-year ended 30 October 2021 include the results
for all segments for the 26 weeks ended 30 October 2021.
This condensed consolidated interim financial information for
the half-year ended 29 October 2022 has not been audited or
reviewed by the auditors. The comparative financial information
presented in this announcement for the year ended 30 April 2022
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 30 April 2022 were approved
by the Board of Directors on 29 June 2022. They received a
qualified 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.
As explained in the Group's 2022 Annual Report, the report of
the auditors was qualified, only in respect of a difference of
interpretation on how the Group's participation in Local Government
Pension Schemes ("LGPS") should be accounted for. Further details
are provided below and in the Group's 2022 Annual Report on pages
92, and 108 to 110.
The Group concluded that its accounting for its participation in
LGPSs remained appropriate. However, the Group also identified a
potential alternative basis of accounting for its participation in
LGPSs and sees the choice of basis as a significant judgement in
applying the Group's accounting policies.
The Directors took independent expert advice on the accounting,
which supported their view that the Group's accounting remains
appropriate. They also confirmed that the basis of the Group's
accounting is consistent with other major groups with UK public
transport operations that have LGPS participations. They also noted
that the alternative basis of accounting would result in an
increase in the Group's consolidated profit before tax and net
assets and so result in a less prudent outcome. In light of all of
those factors, the Directors concluded that the Group's accounting
for its participation in LGPSs remained appropriate.
The Group's auditor, Ernst & Young, has a different
interpretation from the Directors and believes that the alternative
accounting approach should be applied and accordingly, it qualified
its audit opinion on the financial statements for the year ended 30
April 2022 in relation to that.
The Directors, having considered the independent professional
advice, consider that the accounting treatment adopted is the most
appropriate because:
-- The Directors have been advised that it complies with the applicable accounting standards;
-- It provides comparability over time;
-- It is consistent with how the Group understands its sector
peers account for similar arrangements, and so it provides
comparability with peers;
-- It is less likely than the alternative approach to result in
the recognition of irrecoverable net pension assets.
Applying the alternative basis of accounting would have no
impact on the Group's reported consolidated cash flows or its
reported net debt, and any impact on adjusted measures of
consolidated profit would be immaterial. It would increase the
reported consolidated profit before tax for the half-year ended 29
October 2022 by GBP0.2m (half-year ended 30 October 2021: GBP0.1m)
and increase reported consolidated net assets as at 29 October 2022
by GBP12.8m (30 April 2022: GBP10.8m).
The Board of Directors approved this announcement, including the
condensed consolidated interim financial information, on 7 December
2022. This announcement will be available on the Group's website at
http://www.stagecoachgroup.com/investors/financial-analysis/reports/
.
1 BASIS OF PREPARATION (CONTINUED)
(b) New accounting standards adopted during the period
From 1 May 2022, the following standards and amendments are
effective in the Group's consolidated financial statements:
-- Reference to the Conceptual Framework (Amendment to IFRS 3)
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendment to IAS 16)
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendment to IAS 37)
-- Annual Improvements 2018-20
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 29 October 2022, we have made further
progress. We have delivered increased revenue and adjusted profit,
and are pleased to report a further fall in the Group's
consolidated net debt and strengthening of the funding position of
our pension schemes.
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"). The key areas of forecasting uncertainty include:
-- The effect of more challenging UK macroeconomic conditions,
including the combination of high inflation and low
unemployment;
-- The duration and scale of government support measures to the
bus sector, including the Bus Recovery Grant for eligible local bus
services in England;
-- The extent and timing of a continued recovery in passenger demand; and
-- The size of the network (mileage) to support that level of passenger demand.
References below to pre-COVID levels refer to the forecast
amounts for the relevant periods just prior to the COVID-19
situation emerging in the UK in early 2020.
Our base case forecast assumes that regional bus vehicle mileage
is 87% of pre-COVID levels throughout the going concern period. It
also assumes that regional bus commercial revenue is at 91% of
pre-COVID levels for the six months ending 29 April 2023,
increasing to 99% of pre-COVID levels for the remainder of the
going concern period, reflecting inflationary price increases and
assumed growth in patronage as the country continues to recover
from the pandemic. Concessionary revenue for the going concern
period, is forecast at 98% of pre-COVID levels. During the
pandemic, governments have confirmed additional COVID-related
measures to support the continuity of regional bus services. Our
base case forecast assumes that regional bus support measures by
governments in England, Scotland and Wales cover the period to
March 2023.
Our severe and plausible downside scenarios contemplate lower
regional bus commercial revenue, in addition to more cautious
assumptions around higher inflationary cost increases. The range of
downside scenarios considered cover:
-- commercial revenue at between 89% and 91% of pre-COVID levels
in the six months ending 29 April 2023;
-- commercial revenue at between 95% and 99% of pre-COVID levels
for the remainder of the going concern period;
-- concessionary revenue at 92% of pre-COVID levels in the six months ending 29 April 2023;
-- concessionary revenue at between 96% and 98% of pre-COVID
levels for the remainder of the going concern period;
-- we assume that cost inflation is between 0% and 3% higher
than the base case forecast for the duration of the going concern
period;
-- vehicle mileage between 82% and 87% of pre-COVID levels for
the duration of the going concern period;
-- the Group's pre-tax pension deficit to GBP100m; and
-- certain contingent liabilities, including in respect of our
former North America business, crystallising as actual
liabilities.
(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 covenants tests during
the going concern period in our committed bank facilities entered
into in March 2020 and the GBP400m sterling bond.
Having constrained the Group's capital expenditure during the
pandemic, our base case forecast assumes that we return to more
"normal" levels of investment, 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 regional bus 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.
In addition, the following non-controllable mitigations could be
available to the Group, the benefits of which have not been
reflected in our going concern assessment: asset sale and
leasebacks; reduced employer funding contributions arising from the
substantially improved pensions funding position of our schemes;
and obtaining covenant variations or waivers.
1 BASIS OF PREPARATION (CONTINUED)
(c) Going concern (continued)
(iii) Covenant headroom
Under all of the modelled scenarios, the Group remains in
compliance with the covenant tests in our committed bank facilities
entered into in March 2020 and the GBP400m sterling bond. In the
most severe of the downside scenarios modelled (the reverse stress
test scenario), headroom against the covenant tests exists
throughout the going concern period, after taking account of
controllable, mitigating actions.
(iv) Public policy context
During the COVID-19 pandemic to date, the governments in
England, Scotland and Wales have demonstrated a concern to ensure
the continuity of bus services. Neither we nor the respective
governments want to see cuts in bus services that hinder people
connecting with work, shops, education, healthcare or leisure. As
we continue to recover from the pandemic, the governments want to
get bus usage back to what it was pre-pandemic and then increase
patronage and grow buses' mode share. Public transport is key to
various components of the current public policy agenda in the UK:
economic growth, decarbonisation, levelling up. In light of all of
that, we are confident that governments will continue to take
action, including providing financial support, to avoid significant
cuts in regional bus services. While that does not guarantee
significant profits for regional bus operators, it means that
significant losses appear unlikely during the going concern period.
Against that context, we have confidence in the Group's ability to
continue as a going concern for the duration of the going concern
period.
(v) Going concern conclusion
Accordingly, the condensed consolidated interim financial
information for the half-year ended 29 October 2022 has been
prepared on a going concern basis. Taking account of the recent
change in the Company's ownership, recovery from the COVID-19
situation, 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 a period of 12 months
from the date of this announcement.
2 SEASONALITY
The trajectory of the recovery from the COVID-19 situation, and
the arrangements with government, could affect the phasing of the
Group's revenue and profit for the year ending 29 April 2023.
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 operations) Coach and bus operations United Kingdom
UK Bus (London) Bus operations United Kingdom
UK Rail Rail operations and United Kingdom
business 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 30 April 2022.
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).
(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 29 October 2022
----------------------------------------------------------
Commercial Concessionary Tendered Contract Total
passenger revenue & school & other
revenue revenue revenue
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
---------------------- ----------- -------------- ---------- --------- ------
Unaudited
----------------------------------------------------------
Half-year to 30 October 2021
----------------------------------------------------------
Commercial Concessionary Tendered Contract Total
passenger revenue & school & other
revenue revenue revenue
GBPm GBPm GBPm GBPm GBPm
---------------------- ----------- -------------- ---------- --------- ------
UK Bus (regional
operations) 233.1 127.3 54.9 23.1 438.4
UK Bus (London) - - - 135.6 135.6
---------------------- ----------- -------------- ---------- --------- ------
Total bus operations 233.1 127.3 54.9 158.7 574.0
UK Rail 4.8 - - 0.6 5.4
---------------------- ----------- -------------- ---------- --------- ------
Reported Group
revenue 237.9 127.3 54.9 159.3 579.4
---------------------- ----------- -------------- ---------- --------- ------
3 SEGMENTAL ANALYSIS (CONTINUED)
(b) Operating profit
Operating profit split by segment, was as follows:
Unaudited Unaudited
------------------------------------ ------------------------------------
Half-year to 29 October Half-year to 30 October
2022 2021
------------------------------------ ------------------------------------
Performance Separately Results Performance Separately Results
excluding disclosed for the excluding disclosed for the
separately items period separately items period
disclosed (note 4) disclosed (note
items items 4)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
UK Bus (regional
operations) 50.4 (2.5) 47.9 30.3 4.7 35.0
UK Bus (London) (1.6) (0.8) (2.4) 8.3 - 8.3
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
Total bus operations 48.8 (3.3) 45.5 38.6 4.7 43.3
UK Rail (0.5) (0.8) (1.3) (2.1) 8.8 6.7
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
48.3 (4.1) 44.2 36.5 13.5 50.0
Group overheads (5.0) (9.7) (14.7) (5.2) (1.2) (6.4)
Restructuring costs (0.1) - (0.1) (0.1) - (0.1)
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
Total operating
profit of Group
companies 43.2 (13.8) 29.4 31.2 12.3 43.5
Share of joint
ventures' profit
after taxation 3.6 - 3.6 1.7 - 1.7
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
Total operating
profit: Group operating
profit and share
of joint ventures'
profit after taxation 46.8 (13.8) 33.0 32.9 12.3 45.2
-------------------------- ------------ ----------- --------- ------------ ----------- ---------
(c) Joint ventures
The share of profit from joint ventures was further split as
follows:
Unaudited Unaudited
------------- -----------------
Half-year to Half-year to
29 October 30 October 2021
2022
GBPm GBPm
---------------------------------------- ------------- -----------------
WCT Group (UK Rail)
Operating profit 0.1 1.9
Taxation - (0.3)
0.1 1.6
Citylink (UK Bus, regional operations)
Operating profit 3.6 0.1
Taxation (0.7) -
---------------------------------------- ------------- -----------------
2.9 0.1
---------------------------------------- ------------- -----------------
Crown Sightseeing (UK Bus, London)
Operating profit 0.7 -
Taxation (0.1) -
---------------------------------------- ------------- -----------------
0.6 -
---------------------------------------- ------------- -----------------
Share of profit of joint ventures
after taxation 3.6 1.7
----------------------------------------- ------------- -----------------
(d) Gross assets and liabilities
Assets and liabilities split by segment were as follows:
Unaudited Audited
--------------------------------------------- ----------------------------------------------
As at 29 October 2022 As at 30 April 2022
Net Net
Gross assets/ Gross assets/
Gross assets liabilities (liabilities) Gross assets liabilities (liabilities)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------- -------------- -------------- ------------- -------------- ---------------
UK Bus (regional
operations) 1,069.2 (317.8) 751.4 1,006.4 (283.3) 723.1
UK Bus (London) 210.7 (90.1) 120.6 133.4 (121.2) 12.2
UK Rail 6.8 (54.4) (47.6) 2.7 (55.0) (52.3)
----------------------- ------------- -------------- -------------- ------------- -------------- ---------------
1,286.7 (462.3) 824.4 1,142.5 (459.5) 683.0
Central functions 30.8 (29.4) 1.4 25.7 (27.6) (1.9)
Joint ventures 10.7 - 10.7 7.2 - 7.2
Borrowings and cash
equivalents 290.2 (483.2) (193.0) 248.9 (479.1) (230.2)
Taxation 4.0 (70.5) (66.5) - (66.6) (66.6)
----------------------- ------------- -------------- -------------- ------------- -------------- ---------------
Total 1,622.4 (1,045.4) 577.0 1,424.3 (1,032.8) 391.5
----------------------- ------------- -------------- -------------- ------------- -------------- ---------------
The UK Rail net liabilities of GBP47.6m (30 April 2022:
GBP52.3m) shown above include GBP38.7m (30 April 2022: GBP40.2m) 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 20.
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
29 October 30 October 2021
2022
GBPm GBPm
--------------------------------------- ------------- -----------------
Operating costs and other operating
income
Non-software intangible asset (0.4) -
amortisation
Reassessment of onerous contract
provision (0.3) 3.9
Expired rail franchises - 4.9
Re-measurement of pensions settlement - 4.7
Transaction costs (12.9) (1.2)
Acquisition costs (0.2) -
(13.8) 12.3
--------------------------------------- ------------- -----------------
Non-operating separately disclosed
item
Disposal of Megabus retail and
Falcon 1.5 -
--------------------------------------- ------------- -----------------
Finance income
Change in fair value of Deferred
Payment Instrument 0.3 0.4
---------------------------------------- ------------- -----------------
Separately disclosed items before
taxation (12.0) 12.7
Taxation effect 0.8 (17.0)
---------------------------------------- ------------- -----------------
Separately disclosed items after
taxation (11.2) (4.3)
---------------------------------------- ------------- -----------------
(b) Reassessment of onerous contract provision
In the year ended 2 May 2020 and taking account of the effects
of the COVID-19 situation, the Group assessed its assets for
impairment and reviewed for onerous contracts.
As part of that, an onerous contract provision of GBP14.1m was
recorded as at 2 May 2020 in respect of the Group's Sheffield
Supertram concession. The amount of that onerous contract provision
is re-assessed, and adjusted if appropriate, at each balance sheet
date. As at 30 April 2022, an onerous contract provision of GBP8.1m
was held in respect of the Sheffield Supertram concession and
represented the majority of the total onerous contract provision of
GBP8.3m. We have recalculated the Sheffield Supertram onerous
contract provision, reflecting our latest forecast for the
business. That re-assessment resulted in a GBP0.4m increase (H1
2022: GBP3.5m reduction) in the level of the provision, with the
increase, net of the GBP0.1m (H1 2022: GBP0.4m) of Sheffield
Supertram's other operating profit in the half-year, charged (H1
2022: credited) to the consolidated income statement for the
half-year ended 29 October 2022 and presented as a separately
disclosed item.
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. The forecasts used to estimate the provision as at 29
October 2022 assume that underlying passenger revenue from 29
October 2022, as a percentage of the underlying pre-COVID revenue,
will be around 86% for the six months ended 29 April 2023 and
around 96% for the remaining period, until the end of the Supertram
concession in March 2024. Underlying passenger revenue has been
normalised to take account of changes in the timing of
infrastructure work on the tram system. If total forecast revenue
from 29 October 2022 was increased by 10%, the onerous contract
provision as at 29 October 2022 would be GBP2.1m lower (30 April
2022: GBP2.5m lower) and if it was decreased by 10%, the provision
would be GBP2.1m higher (30 April 2022: GBP2.5m higher).
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 two years 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 29 October 2022.
(c) Expired rail franchises
As part of concluding matters in relation to our former
involvement in the UK train operating market, we have recorded a
gain of GBP4.9m in the half-year ended 30 October 2021. We have
separately disclosed the gain for consistency, as it relates to
costs that were previously recorded as separately disclosed
items.
Due to the size and nature of this change in estimate, the
Directors consider that it is helpful for understanding the Group's
financial performance to disclose it separately.
4 SEPARATELY DISCLOSED ITEMS (CONTINUED)
(d) Re-measurement of pensions settlement
On 16 March 2021, the Group ceased to participate in the Tyne
& Wear Local Government Pension scheme. The Group recognised an
estimated settlement receivable of GBP3.5m as at 1 May 2021, based
on the then most recent actuarial valuations and estimates by an
independent professionally qualified actuary.
The final settlement received by the Group in the half-year
ended 30 October 2021 was GBP8.2m, an increase of GBP4.7m above the
GBP3.5m receivable previously recognised at 1 May 2021. The
increase in the exit settlement of GBP4.7m arose due to final
actuarial assumptions on settlement as determined by the relevant
authority, differing from previous estimates.
(e) Transaction costs
The Group has recorded expenses of GBP 12.9 m, 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 (H1 2022: GBP1.2m). 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.
(f) Acquisition costs
GBP0.2m (H1 2022: GBPNil) 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.
(g) 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.
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 GBP
1.5 m 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.
(h) 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, 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. The carrying
value of the instrument was GBP2.9m as at 30 April 2022. We
estimated the carrying value of the instrument to be GBP 3.2 m as
at 29 October 2022, resulting in a gain of GBP 0.3 m (H1 2022:
GBP0.4m) recognised in finance income in the half-year ended 29
October 2022.
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.
4 SEPARATELY DISCLOSED ITEMS (CONTINUED)
(i) Taxation effect
The separately disclosed taxation credit of GBP0.8m (H1 2022:
charge of GBP17.0m) comprises a credit of GBP0.8m, (H1 2022: charge
of GBP0.9m) in relation to the taxation effect of the pre-tax
separately disclosed items and a charge of GBPNil (H1 2022:
GBP16.1m) in relation to the effect of the change in the UK
corporation tax rate increasing from 19% to 25% which was treated
as a separately disclosed item due to its size and nature.
The transaction costs (excluding expenses related to early
vesting of certain share-based awards) and acquisition costs have
been treated as non tax-deductible while all the other pre-tax
separately disclosed items have been treated as
deductible/taxable.
5 DIVIDS
No dividends have been paid during, or declared in respect of,
the half-year ended 29 October 2022, the half-year ended 30 October
2021, or the year ended 30 April 2022.
6 BUSINESS COMBINATIONS AND DISPOSALS
In the half-year ended 29 October 2022, the Group acquired two
businesses. The details of these business combinations are as
follows:
(a) Lea Interchange Bus Company Limited
On 25 June 2022, the Group acquired 100% of the share capital of
Lea Interchange Bus Company Limited, a bus operator providing
services in the London area.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are as follows:
Unaudited
GBPm
--------------------------------- ----------
Other intangible assets 0.8
Property plant and equipment
- owned assets 0.6
- right-of-use assets 13.6
Inventories 0.3
Trade and other receivables 2.0
Trade and other payables (5.3)
Lease liabilities (13.6)
Provisions (8.8)
Deferred tax asset 2.3
Net liabilities acquired (8.1)
Goodwill arising on acquisition 26.2
--------------------------------- ----------
Total consideration 18.1
--------------------------------- ----------
Consideration
- settled by cash 10.6
- contingent consideration 7.5
--------------------------------- ----------
Total consideration 18.1
--------------------------------- ----------
As permitted by IFRS 3, Business Combinations, the fair value of
acquired identifiable assets and liabilities have been presented on
a provisional basis. The fair value adjustments will be finalised
within 12 months of the acquisition date, principally in relation
to the valuation of intangible assets and provisions acquired.
It is expected that historic tax losses will be assumed by the
Group as part of this acquisition. We are awaiting confirmation of
the final calculation of these losses, which are currently
estimated to be in the region of GBP6.7m. Due to restrictions on
their use, we have not recognised a deferred tax asset in respect
of those losses.
Goodwill of GBP26.2m arising from the acquisition consists of
certain intangibles that cannot be separately identified and
measured due to their nature. This includes acquiring an assembled
workforce, particularly at a time of labour shortages, extending
the Group's geographical footprint to effectively compete for new
Transport for London contracts, and synergy potential from site
consolidation. None of the goodwill recognised is expected to be
deductible for income tax purposes.
The consideration recorded as payable includes GBP7.5m of
contingent consideration which represents a further GBP1.0m per
annum payable for ten years commencing 12 months following
completion, subject to certain conditions. The minimum expected
undiscounted payment is GBPNil and the maximum expected
undiscounted payment is GBP10m. The likelihood of the conditions
not being satisfied are remote and we expect the maximum amount to
be paid. The fair value of the contingent consideration, with the
effects of discounting, has been estimated at GBP7.5m.
6 BUSINESS COMBINATIONS AND DISPOSALS (CONTINUED)
(b) Bus operations previously operated by HCT Group
On 26 August 2022 the Group acquired the trade and assets of the
London "red bus" operations previously operated by HCT Group.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are as follows:
Unaudited
GBPm
--------------------------------- ----------
Other intangible assets 2.7
Property, plant and equipment
- owned assets 0.4
- right-of-use assets 7.2
Inventories 0.3
Trade and other receivables 0.9
Trade and other payables (4.1)
Lease liabilities (7.2)
Provisions (6.8)
Deferred tax asset 1.5
--------------------------------- ----------
Net liabilities acquired (5.1)
Goodwill arising on acquisition 8.9
--------------------------------- ----------
Total consideration 3.8
--------------------------------- ----------
Consideration
- settled by cash 3.0
- contingent consideration 0.8
--------------------------------- ----------
Total consideration 3.8
--------------------------------- ----------
As permitted by IFRS 3, Business Combinations, the fair value of
acquired identifiable assets and liabilities have been presented on
a provisional basis. The fair value adjustments will be finalised
within 12 months of the acquisition date, principally in relation
to the valuation of intangible assets and provisions acquired.
Goodwill of GBP8.9m arising from the acquisition consists of
certain intangibles that cannot be separately identified and
measured due to their nature. This includes acquiring an assembled
workforce, particularly at a time of labour shortages, growth in
our geographical footprint and access to leased sites not reflected
in the right-of-use asset value. None of the goodwill recognised is
expected to be deductible for income tax purposes.
The consideration recorded as payable includes GBP0.8m of
contingent consideration which is due to be paid within the next 12
months. The minimum expected undiscounted payment is GBPNil and the
maximum expected undiscounted payment is GBP0.8m. We expect the
maximum amount to be paid, with the amount recognised undiscounted
as the effect of discounting is not material.
(c) Impact of acquisitions
The acquired businesses contributed GBP17.4m of revenue and
GBPNil operating profit to the Group's results for the period
between their acquisition and the balance sheet date of 29 October
2022. Had both acquisitions completed on the first day of the
financial year, the Group's revenue and operating profit would have
been GBP685.9m and GBP33.0m respectively for the half-year ended 29
October 2022.
(d) 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.
Further details of the disposal are included in note 4(g).
7 GOODWILL
The movements in goodwill were as follows:
Unaudited Unaudited Audited
------------ ------------ ----------
Half-year Half-year Year to
to to 30 April
29 October 30 October 2022
2022 2021
GBPm GBPm GBPm
--------------------------------------- ------------ ------------ ----------
Net book value at beginning of period 51.9 51.9 51.9
Goodwill arising through acquisitions 35.1 - -
of businesses
Net book value at end of period 87.0 51.9 51.9
--------------------------------------- ------------ ----------
Goodwill arose in the half-year ended 29 October 2022 on two
business combinations. Further details of the business combinations
and the provisional fair value adjustments are included in note
6.
The goodwill represents items that cannot be separately
recognised, including the assembled workforce particularly at a
time of labour market shortages, extending the Group's geographical
footprint to effectively compete for new Transport for London
contracts, synergy potential from site consolidation and access to
leased sites not reflected in the right-of-use asset value.
8 OTHER INTANGIBLE ASSETS
The movements in other intangible assets were as follows:
Unaudited Unaudited Audited
------------ ------------ ----------
Half-year Half-year Year to
to to 30 April
29 October 30 October 2022
2022 2021
GBPm GBPm GBPm
------------------------------------------- ------------ ------------ ----------
Cost at beginning of period 33.2 39.8 39.8
Reclassification of items to prepayments - - (5.0)
Acquired through business combinations 3.5 - -
Additions 1.0 2.6 3.1
Disposals (1.4) - (4.7)
Cost at end of period 36.3 42.4 33.2
------------------------------------------- ------------ ----------
Accumulated amortisation at beginning
of period (28.9) (27.5) (27.5)
Amortisation charged to income statement (0.9) (0.7) (1.4)
Disposals 1.4 - -
------------------------------------------- ------------ ------------ ----------
Accumulated amortisation at end of period (28.4) (28.2) (28.9)
------------------------------------------- ------------ ------------ ----------
Net book value at beginning of period 4.3 12.3 12.3
------------------------------------------- ------------ ------------ ----------
Net book value at end of period 7.9 14.2 4.3
------------------------------------------- ------------ ------------ ----------
9 PROPERTY, PLANT AND EQUIPMENT
(a) Owned assets
The movements in property, plant and equipment were as
follows:
Unaudited Unaudited Audited
------------ ------------ ----------
Half-year Half-year Year to
to to 30 April
29 October 30 October 2022
2022 2021
GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ----------
Cost at beginning of period 1,582.6 1,560.8 1,560.8
Additions 8.8 8.6 45.9
Acquired through business combinations 1.0 - -
Transfers from right-of-use assets - - 22.0
Transferred to assets held for sale (0.1) - (3.7)
Disposals (17.8) (15.3) (42.4)
Cost at end of period 1,574.5 1,554.1 1,582.6
------------------------------------------ ------------ ----------
Depreciation at beginning of period (850.5) (800.4) (800.4)
Depreciation charged to income statement (38.5) (40.1) (79.8)
Impairment charged to income statement - - (4.4)
Transfers from right-of-use assets - - (7.5)
Transferred to assets held for sale - - 1.3
Disposals 16.4 14.7 40.3
Depreciation at end of period (872.6) (825.8) (850.5)
------------------------------------------ ------------ ----------
Net book value at beginning of period 732.1 760.4 760.4
------------------------------------------ ------------ ------------ ----------
Net book value at end of period 701.9 728.3 732.1
------------------------------------------ ------------ ------------ ----------
9 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(b) Movements in right-of-use assets
The movements in right-of-use assets were as follows:
Unaudited Unaudited Audited
------------ ------------ ----------
Half-year Half-year Year to
to to 30 April
29 October 30 October 2022
2022 2021
GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ----------
Cost at beginning of period 118.9 140.1 140.1
Additions 6.0 11.1 19.0
Acquired through business combinations 20.8 - -
Transfers to owned property, plant and
equipment - - (22.0)
Disposals (5.8) (8.2) (18.2)
Cost at end of period 139.9 143.0 118.9
------------------------------------------ ------------ ----------
Depreciation at beginning of period (50.3) (49.5) (49.5)
Depreciation charged to income statement (13.0) (12.4) (23.9)
Transfers to owned property, plant and
equipment - - 7.5
Disposals 5.5 8.2 15.6
Depreciation at end of period (57.8) (53.7) (50.3)
------------------------------------------ ------------ ----------
Net book value at beginning of period 68.6 90.6 90.6
------------------------------------------ ------------ ------------ ----------
Net book value at end of period 82.1 89.3 68.6
------------------------------------------ ------------ ------------ ----------
10 INTERESTS IN JOINT VENTURES
The movements in the carrying values of interests in joint
ventures were as follows:
Unaudited Unaudited Audited
------------ ------------ ----------
Half-year Half-year Year to
to to 30 April
29 October 30 October 2022
2022 2021
GBPm GBPm GBPm
---------------------------------------- ------------ ------------ ----------
Net book value at beginning of period 7.2 6.7 6.7
Increase in investment (see note 4(g)) 1.7 - -
Share of recognised profit 3.6 1.7 3.4
Dividends received in cash (1.8) - (2.9)
Net book value at end of period 10.7 8.4 7.2
---------------------------------------- ------------ ----------
A loan payable to joint venture, Scottish Citylink Coaches
Limited, of GBP1.7m (30 April 2022: GBP1.7m) is included within
current liabilities under the caption "Trade and other payables". A
loan receivable from Crown Sightseeing of GBP0.1m (30 April 2022:
GBP0.1m) and a provision against that receivable of GBP0.1m (30
April 2022: GBP0.1m) are included within current assets under the
caption "Trade and other receivables".
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 30 April 2022. There have been no material changes in any of
the Group's significant financial risk management policies since 30
April 2022.
Liquidity risk
There have been no material changes since 30 April 2022 in the
contractual undiscounted cash outflows for financial
liabilities.
11 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
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
29 October 2022.
Unaudited
-------- ---------- -------
Level 2 Level 3 Total
GBPm GBPm GBPm
------------------------------------------- -------- ---------- -------
Assets
Deferred Payment Instrument from disposal
of subsidiaries - 3.2 3.2
Financial derivatives 90.8 - 90.8
------------------------------------------- -------- ---------- -------
Total assets 90.8 3.2 94.0
------------------------------------------- -------- ---------- -------
Liabilities
Contingent consideration for acquisition
of businesses - (8.3) (8.3)
Financial derivatives (7.7) - (7.7)
------------------------------------------- -------- ---------- -------
Total liabilities (7.7) (8.3) (16.0)
------------------------------------------- -------- ---------- -------
The following table represents the Group's financial assets and
liabilities that are measured at fair value within the hierarchy at
30 April 2022.
Audited
-------- -------- ------
Level 2 Level 3 Total
GBPm GBPm GBPm
------------------------------------------- -------- -------- ------
Assets
Deferred Payment Instrument from disposal
of subsidiaries - 2.9 2.9
Financial derivatives 97.4 - 97.4
Total assets 97.4 2.9 100.3
------------------------------------------- -------- -------- ------
Liabilities
Financial derivatives (3.8) - (3.8)
------------------------------------------- -------- -------- ------
There were no transfers between levels during the half-year
ended 29 October 2022.
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 29 October 2022 and 30 April 2022.
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 GBP3.2m as at 29 October 2022 (30 April 2022: GBP2.9m).
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.
11 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value estimation (continued)
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 29 October
2022, taking account of the approximate remaining two-year term of
the instrument.
The carrying amounts of financial assets and financial
liabilities and their respective fair values were:
Carrying value Fair value
---------------------- ----------------------
29 October 30 April 29 October 30 April
2022 2022 2022 2022
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 3.2 2.9 3.2 2.9
Financial assets measured
at amortised cost
- Non-current assets
- Insurance claim receivables 14.0 14.0 14.0 14.0
- Other receivables 0.3 0.2 0.3 0.2
- Current assets
- Accrued income 34.0 26.0 34.0 26.0
- Trade receivables, net
of impairment 29.9 26.2 29.9 26.2
- Other receivables 0.4 0.8 0.4 0.8
- Cash and cash equivalents 290.2 248.9 290.2 248.9
----------------------------------- ----------- ---------
Total financial assets 372.0 319.0 372.0 319.0
----------------------------------- ----------- --------- ----------- ---------
Financial liabilities
Financial liabilities
measured at amortised cost
- Non-current liabilities
- Contingent consideration
for business combinations (8.3) - (8.3) -
- Borrowings (455.7) (457.0) (431.5) (465.8)
- Current liabilities
- Trade payables (23.7) (31.3) (23.7) (31.3)
- Payables for purchase
of property, plant and
equipment (2.3) (3.6) (2.3) (3.6)
- Interest payable (0.1) (0.2) (0.1) (0.2)
- Accruals (170.8) (135.4) (170.8) (135.4)
- Loan from joint venture (1.7) (1.7) (1.7) (1.7)
- Borrowings (27.5) (22.1) (27.5) (22.1)
----------------------------------- ----------- --------- ----------- ---------
Total financial liabilities (690.1) (651.3) (665.9) (660.1)
----------------------------------- ----------- --------- ----------- ---------
Net financial liabilities (318.1) (332.3) (293.9) (341.1)
----------------------------------- ----------- --------- ----------- ---------
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. Further
details are provided in note 6.
-- 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
29 October 30 April 2022
2022
GBPm GBPm
-------------------------------- ------------ ---------------
Retirement benefit assets 171.8 45.3
Retirement benefit obligations (4.4) (75.1)
-------------------------------- ------------ ---------------
167.4 (29.8)
-------------------------------- ------------ ---------------
(c) Gross pension scheme assets and obligations
The gross pension scheme assets and the present value of
obligations as at 29 October 2022 were as follows:
Unaudited
-----------------------------------------------------------
Funded schemes
----------------------------
SPS LGPS Other Unfunded plans Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------- ---------- -------- ------ --------------- ----------
Fair value of scheme assets 1,453.4 158.0 16.4 - 1,627.8
Present value of obligations (1,200.4) (130.6) (9.3) (3.8) (1,344.1)
-------------------------------------------------- ---------- -------- ------ --------------- ----------
253.0 27.4 7.1 (3.8) 283.7
Asset ceiling - (27.8) - - (27.8)
-------------------------------------------------- ---------- -------- ------ --------------- ----------
Pension asset/(liability) before withholding tax 253.0 (0.4) 7.1 (3.8) 255.9
Withholding tax payable on surplus (88.5) - - - (88.5)
-------------------------------------------------- ---------- -------- ------ --------------- ----------
Net asset/(liability) 164.5 (0.4) 7.1 (3.8) 167.4
-------------------------------------------------- ---------- -------- ------ --------------- ----------
(d) Movements in net pre-tax retirement benefit liabilities
The movements for the half-year ended 29 October 2022 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
------------------------------------------------------------------ ------ ------ ------ --------------- ------
(Liability)/asset at beginning of period (7.3) - 3.7 (4.0) (7.6)
Current service cost (2.0) (0.2) (0.4) - (2.6)
Administration costs (0.4) - - - (0.4)
Employers' contributions 8.1 0.2 0.4 0.1 8.8
Recognised in the consolidated statement of comprehensive income 254.6 (0.4) 3.4 0.1 257.7
Asset/(liability) at end of period 253.0 (0.4) 7.1 (3.8) 255.9
------------------------------------------------------------------ ------ ------ ------ --------------- ------
12 RETIREMENT BENEFITS (CONTINUED)
(e) Scheme valuations
The latest actuarial valuations of the then two sections of SPS
were completed as at 30 September 2021. The combined surplus across
the two sections on the Trustees' technical provisions basis was
GBP48.7m, comprising scheme assets of GBP1,482.3m less benefit
obligations of GBP1,433.6m. The weighted average discount rate
applied in determining the value of those benefit obligations was
3.4%. The discount rate reflected the asset allocation of SPS and
its strong track record of investment returns.
The latest actuarial valuations of the relevant LGPS schemes
were completed as at 31 March 2019. The combined deficit across
those schemes on the funding basis agreed by each of the
Administering Authorities was GBP1.5m, comprising scheme assets of
GBP360.8m less benefit obligations of GBP362.3m. The weighted
average discount rate applied in determining the value of those
benefit obligations was 2.0%. Between the date of those valuations
and 29 October 2022, the Group exited two of the LGPS schemes.
13 ORDINARY SHARE CAPITAL
At 29 October 2022, there were 576,099,960 ordinary shares in
issue (30 April 2022: 576,099,960). This figure includes 14,143,274
(30 April 2022: 24,581,369) 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
29 October 30 October
2022 2021
GBPm GBPm
----------------------------------------------------- ------------ ------------
Operating profit of Group companies 29.4 43.5
Separately disclosed items 13.8 (12.3)
Depreciation 51.5 52.5
Software amortisation 0.5 0.7
EBITDA of Group companies before separately
disclosed items ("Adjusted EBITDA from Group
companies") 95.2 84.4
Cash effect of current period separately disclosed
items (8.2) 4.7
(Gain)/loss on disposal of property, plant
and equipment (1.0) 0.7
Capital grant amortisation (1.2) (0.6)
Share based payment movements (excluding separately
disclosed items) 0.2 1.7
----------------------------------------------------- ------------ ------------
Operating cashflows before working capital
movements 85.0 90.9
(Increase)/decrease in inventories (0.6) 0.1
Decrease in receivables 12.2 6.7
Increase/(decrease) in payables 31.3 (5.2)
Decrease in provisions (3.4) (0.5)
Differences between employer contributions
and pension expense in operating profit (5.8) (2.7)
----------------------------------------------------- ------------ ------------
Cash generated by operations 118.7 89.3
----------------------------------------------------- ------------ ------------
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
29 October 30 October
2022 2021
Notes GBPm GBPm
-------------------------------------------- ------ ------------- -------------
Increase in cash and cash equivalents 41.3 44.8
Cash flow from movement in borrowings 13.7 12.8
-------------------------------------------- ------ ------------- -------------
55.0 57.6
New leases in period (6.0) (11.1)
Lease additions from business combinations (20.8) -
Negotiated early termination of lease 0.3 -
Other movements (0.4) (1.4)
-------------------------------------------- ------ ------------- -------------
Decrease in net debt 28.1 45.1
Net debt at beginning of period 16 (224.3) (312.6)
-------------------------------------------- ------ ------------- -------------
Net debt at end of period 16 (196.2) (267.5)
-------------------------------------------- ------ ------------- -------------
16 NET DEBT AND CHANGES IN LIABILITIES ARISING FROM FINANCING
ACTIVITIES
Changes in net debt (as defined in note 20) are summarised
below:
Unaudited
Half-year to 29 October 2022
-----------------------------------------------------------------------------------------
Negotiated early Lease additions
lease from business Charged to
Opening Cashflows New leases termination combinations income statement Closing
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- ---------- ----------- ----------------- ---------------- ----------------- --------
Cash and cash
equivalents 248.9 41.3 - - - - 290.2
Gross debt - see
split in table
below (473.2) 13.7 (6.0) 0.3 (20.8) (0.4) (486.4)
Net debt (224.3) 55.0 (6.0) 0.3 (20.8) (0.4) (196.2)
----------------- -------- ---------- ----------- ----------------- ---------------- ----------------- --------
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 29 October 2022 As at 30 April 2022
GBPm GBPm
------------------------------------------------------------------------ ---------------------- --------------------
Current liabilities: borrowings (27.5) (22.1)
Non-current liabilities: borrowings (455.7) (457.0)
Current liabilities: interest rate derivatives included in financial
derivatives (4.8) (2.2)
Non-current liabilities: interest rate derivatives included in
financial derivatives - (1.6)
Current liabilities: loan from joint venture (1.7) (1.7)
------------------------------------------------------------------------ ---------------------- --------------------
Total liabilities arising from financing activities (489.7) (484.6)
------------------------------------------------------------------------ ---------------------- --------------------
Changes in liabilities from financing activities are presented
in the table below.
Unaudited
Half-year to 29 October 2022
---------------------------------------------------------------------------------------------
Lease
additions
Negotiated from Fair value Charged to
early lease business movements on income
Opening Cashflows New leases termination combinations hedge statement Closing
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- -------- ---------- ----------- ------------- ------------- ------------- ------------- --------
Lease
liabilities (74.4) 13.7 (6.0) 0.3 (20.8) - - (87.2)
Bonds -
- Principal (400.0) - - - - - - (400.0)
-
Unamortised
costs &
discounts
on issue 1.2 - - - - - (0.4) 0.8
------------- -------- ---------- ----------- ------------- ------------- ------------- ------------- --------
Gross debt (473.2) 13.7 (6.0) 0.3 (20.8) - (0.4) (486.4)
Loan from
joint
venture (1.7) - - - - - - (1.7)
Accrued
interest on
bonds (9.5) 16.0 - - - - (8.0) (1.5)
Effect of
fair value
hedges on
carrying
value of
borrowings 3.6 - - - - 1.1 - 4.7
Interest
rate
derivatives
that hedge
liabilities
from
financing
activities (3.8) 0.9 - - - (1.1) (0.8) (4.8)
------------- -------- ---------- ----------- ------------- ------------- ------------- ------------- --------
Total
liabilities
arising
from
financial
activities (484.6) 30.6 (6.0) 0.3 (20.8) - (9.2) (489.7)
------------- -------- ---------- ----------- ------------- ------------- ------------- ------------- --------
17 NON-CASH TRANSACTION
As explained in note 4(g), 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 30 April 2022 and 29 October
2022 principally relate to claims provisions for estimated
liabilities on incurred incidents up to the balance sheet date.
The total claims provisions of GBP99.3m (30 April 2022:
GBP97.9m) have increased during the half-year, reflecting the
latest assessment of the required provision for claims on major
incidents. These provisions contain GBP14.0m (30 April 2022:
GBP14.0m) 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 29 October 2022
were GBP41.3m (30 April 2022: GBP19.3m).
(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.
In November 2021, SSWT sought permission to appeal against
the CAT's decision to grant the CPO. Permission was refused
and SSWT applied to the Court of Appeal for permission to bring
the appeal, which was granted. The appeal was heard in June
2022, which was unsuccessful.
The claim is disputed in respect of its technical merits. No
provision is held as at 29 October 2022 (30 April 2022: 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 29 October 2022, the
liabilities in the consolidated financial statements for such
matters total GBP0.7m (30 April 2022: GBP1.0m) in addition
to those covered by the claims provisions.
(iii) Contingent liabilities re former North America Division
As explained in note 29(iii) to the Group's consolidated financial
statements for the year ended 30 April 2022, 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 GBP32.1m
as at 30 April 2022 to GBP 29.4 m as at 29 October 2022.
20 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 29 October 2022 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 29 October
2022 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 29 October 2022
Exclude Exclude Exclude
Reported effect of effect of expired rail Like-for-like
revenue acquisitions 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
----------------------- -------- --------------- -------------- --------------- -------------- -----------------
Unaudited
-------------------------------------------------------------------------------------
Half-year to 30 October 2021
Exclude effect of Exclude expired Like-for-like
Reported revenue disposals rail franchises revenue
----------------------- ------ ----------------- --------------------- -------------------- ---------------------
UK Bus (regional
operations) GBPm 438.4 (6.3) - 432.1
UK Rail GBPm 5.4 - (0.3) 5.1
----------------------- ------ ----------------- --------------------- -------------------- ---------------------
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.
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 5 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 29
October 2022, and the comparative prior year period, to the
condensed financial statements is shown on page 8 of this
document.
Adjusted EBITDA is also presented for the year to 29 October
2022. That, and the constituent elements of the reconciliation for
that year, are determined by adding the amounts for the half-year
ended 29 October 2022 to the amounts for the year ended 30 April
2022, and deducting the amounts for the half-year ended 30 October
2021.
20 DEFINITIONS (CONTINUED)
(a) Alternative performance measures (continued)
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 10 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
29 October 30 April
2022 2022
GBPm GBPm
--------------------------------------------------- ------------ ----------
Net debt as shown in note 16 196.2 224.3
Net train operating company liabilities
as shown in note 3(d) 38.7 40.2
--------------------------------------------------- ------------ ----------
Net debt plus train operating company liabilities 234.9 264.5
--------------------------------------------------- ------------ ----------
(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(h)).
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.
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END
IR BCBDDDXGDGDL
(END) Dow Jones Newswires
December 07, 2022 02:00 ET (07:00 GMT)
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