Interim results
6 December 2023
Stagecoach Group
LimitedInterim results for the half-year ended 28
October 2023
Financial summary
|
|
“Adjusted” resultsResults excluding
separately disclosed items* |
“Statutory” results |
|
|
H1 2024 |
H1 2023 (restated) |
H1 2024 |
H1 2023 (restated) |
|
Revenue (£m) |
773.2 |
669.6 |
773.2 |
669.6 |
|
Total operating profit (£m) |
43.3 |
46.9 |
51.1 |
33.1 |
|
Non-operating separately disclosed items (£m) |
- |
- |
- |
1.5 |
|
Net finance costs (£m) |
(2.1) |
(10.3) |
(3.5) |
(10.0) |
|
Profit before taxation (£m) |
41.2 |
36.6 |
47.6 |
24.6 |
*See definitions in note 21 to the condensed
financial statements
Strategic and operational
highlights
- Implementation
of simpler, leaner organisational structure completed
- Appointment of
Claire Miles as Chief Executive Officer effective October 2023
- Growth in
regional passenger demand with a 5.3% increase in regional bus
passenger journeys in the half-year ended 28 October 2023 compared
to the equivalent prior year period
- Supportive
government policy continued through the £2 bus fare cap in England
underpinning the increase in regional passenger demand
- Recruited and
trained more than 2,300 new bus drivers to deliver our services
during the half-year ended 28 October 2023
Financial highlights
- Good financial
results reflecting business initiatives and continued strength of
regional bus operations
- Revenue from
regional bus operations grew by 15.1% to £584.7m in the half-year
ended 28 October 2023 compared to the comparative prior year
period
- Net debt
increased by £60.4m from £241.1m at 29 April 2023 to £301.5m as at
28 October 2023 reflecting net capital expenditure of £62.3m in the
period, supporting the transition of our bus fleet to zero emission
vehicles
- No change to our
outlook for the year ending 27 April 2024
For further information, please contact:
Stagecoach Group Limited
www.stagecoachgroup.com
Investors and analysts
|
Bruce Dingwall, Chief Financial Officer |
07917 555293 |
Notes to editors
Stagecoach Group
- Stagecoach is
one of Britain’s leading public transport businesses, helping
connect communities for over 40 years.
- Stagecoach is
Britain's biggest bus and coach operator, and it runs the Supertram
light rail network in Sheffield.
- Our team of
around 23,000 people and our c.8,300 buses, coaches and trams are
part of the fabric of daily life in England, Scotland and
Wales.
- We connect
people with jobs, skills and training. We bring
customers to our high streets, link tourists with visitor
attractions, and draw families, friends and communities
together.
- Our impact is
about far more than transport – we support the economy, help cut
congestion on our roads, protect our environment and air quality,
boost safety on our roads, and contribute to a healthier
nation.
Interim management report
The Directors of Stagecoach Group Limited are
pleased to present their report on the Company for the half-year
ended 28 October 2023.
Description of the business
Stagecoach Group Limited is a private limited
company, limited by shares. It is incorporated, domiciled and has
its registered office in Scotland. The Company is a wholly owned
subsidiary of Inframobility UK Bidco Limited, which is indirectly
owned by an international infrastructure fund managed and advised
by DWS Infrastructure. Throughout this document, we refer to
Stagecoach Group Limited as “the Company” and we refer to the group
headed by it as “Stagecoach” or “the Group”.
Overview
Introduction
We have delivered a positive set of financial
results for the half-year ended 28 October 2023 as we work in
partnership with national and local government to maximise the
opportunities from public transport for consumers and the country
while navigating the current economic environment.
There has been a further recovery in demand for
our public transport services, with growth in regional bus
passenger journeys of 5.3% compared to the equivalent prior year
period.
UK Bus (regional operations)
Bus services continue to benefit from a
supportive policy environment from national and local government.
In England, recovery funding expired at the end of July 2023 and
has been replaced by an enhanced operating grant, with forward
visibility until the end of March 2025. Further funding has also
been allocated to local authorities to support commercial and
tendered bus services over the same period. Since its launch in
January 2023, the £2 bus fare cap scheme has driven an increase in
bus patronage, particularly from existing bus users, and the scheme
has now been extended until December 2024. In Scotland, the
under-22 concessionary scheme continues to support increased
patronage, offsetting suppressed demand within the old age and
disabled concessionary scheme. In Wales, emergency COVID support
ended in July 2023, with ongoing transitionary funding confirmed in
place until March 2024.
The Department of Transport and Scottish
Government have allocated significant funding for bus
transformation projects in England and Scotland, including the
delivery of bus priority schemes. These projects are expected to
deliver significant customer benefits in future years through
improved punctuality and reliability.
The Department for Transport has launched the
second phase of the Zero Emission Bus Regional Areas (“ZEBRA2”)
programme in England, with up to £129m of funding available to
support the introduction of zero emission buses, and we are
supporting local authority bids for this scheme. The Scottish
Government launched the second phase of the Scottish Zero Emission
Bus Challenge Fund (“ScotZEB2”) earlier this year, and we were
disappointed to be recently informed that those bids, in their
current form, were unsuccessful.
We are pleased with the professional and
constructive manner in which we managed the demobilisation of our
Wigan depot prior to the commencement of Transport for Greater
Manchester’s new franchising system. Our plans are well advanced
for the mobilisation of the services we will operate on behalf of
Transport for Greater Manchester from the Middleton, Oldham and
Queens Road depots from March 2024.
UK Bus (London)
Similar to the experience of other operators,
trading in our London bus operations has been challenging with the
losses incurred in the period reflecting the impact of upward wage
pressure and elevated levels of staff turnover and staff shortages.
The impact of lost mileage has resulted in significant contractual
penalties and lost quality incentive income. Road works and traffic
congestion are a continuing challenge for operators in the London
market, which is adversely affecting service delivery. Engagement
is ongoing with Transport for London on these issues. However, we
expect profitability to improve as we address labour market
challenges, benefit from lagged inflationary increases in contract
revenues and seek to re-price contracts as they are tendered.
Macro-economic factors
We are actively managing the current
inflationary environment by taking a balanced approach to
protecting our customers and employees from the cost-of-living
pressures as far as possible, while ensuring we maintain properly
funded and sustainable bus networks.
Ensuring we recruit and retain sufficient staff
to provide a reliable level of service for customers remains an
overriding priority for this business. During the half-year ended
28 October 2023, we have recruited and trained more than 2,300 new
bus drivers to deliver our services. The business has delivered a
net increase of more than 500 drivers compared to the start of the
year. We remain grateful for the huge commitment and
professionalism of our people who are delivering services safely in
our communities day in, day out.
Operational structure
Following the acquisition of the Group in May
2022, a detailed review of the Group’s structure and operations was
undertaken. We have simplified our leadership organisational
structure, providing greater clarity on decision-making and more
focused support to enhance lines of communication and
collaboration. We were delighted to appoint Claire Miles as our
Chief Executive Officer effective October 2023.
Financial results
In the half-year to 28 October 2023, revenue
grew to £773.2m (H1 2023: £669.6m) and adjusted total operating
profit fell slightly to £43.3m (H1 2023: £46.9m). Revenue excludes
COVID-19 grant income from government, which is reported as other
operating income. The growth in revenue reflects a continuation of
recovering passenger demand across our regional bus and tram
services, impact of favourable pricing and the effect of the new
London businesses acquired in the prior year. The modest reduction
in adjusted total operating profit in the period is principally
attributable to the higher losses in London, which stem from the
elevated levels of staff shortages in that part of the business.
Unadjusted operating profit was £51.1m (H1 2023: restated £33.1m),
with the increase due to non-recurring separately disclosed gains
in the current year and significant transaction costs reported in
the prior year period related to the two offers to acquire the
Company.
During the half-year, net debt increased from
£241.1m to £301.5m, reflecting increased capital investment and
loan to shareholders, partly offset by underlying cash
generation. We expect our net capital expenditure for
the year ending 27 April 2024 to be in excess of £250m, which
reflects our continued commitment to invest in the future of the
business, supporting the transition of our bus fleet to zero
emission vehicles.
Outlook
We remain positive on the long-term outlook for
the Group. Public transport delivers the sustainable connectivity
people need to access work, education, healthcare, shopping,
leisure, and meeting family and friends. As we transition towards a
post-pandemic world, we are focused on further rebuilding
profitability and adapting our services to meet new and emerging
travel patterns.
Whilst the next General Election may lead to
some change in the detail of transport policy, there is broad
cross-party support for the role that buses play in delivering
government objectives on social equity and inclusion, economic
development and levelling-up, and in transport decarbonisation. We
have worked closely with local and national government in
maintaining bus services through the pandemic and into recovery. We
anticipate that this close partnership will be a continuing feature
of transport policy, including through an expansion of bus service
franchising, and we are engaging closely with national and local
policy-makers to maximise the opportunities that this will
offer.
While there remains some uncertainty around the
wider economic environment, there is no change to our expected
outlook for the year ending 27 April 2024.
Summary of financial
results
Revenue, split by segment, is summarised
below:
|
REVENUE |
H1 2024 |
H1 2023 |
Growth |
|
|
£m |
£m |
% |
|
|
|
|
|
|
UK Bus (regional operations) |
584.7 |
508.1 |
15.1% |
|
UK Bus (London) |
179.8 |
154.4 |
16.5% |
|
UK Rail |
8.7 |
7.1 |
22.5% |
|
Group revenue |
773.2 |
669.6 |
|
Operating profit, split by segment, is
summarised below:
|
OPERATING PROFIT |
H1 2024 |
H1 2023 |
|
|
£m |
% margin |
£m |
% margin |
|
|
|
|
|
|
|
UK Bus (regional operations) |
52.3 |
8.9% |
50.4 |
9.9% |
|
UK Bus (London) |
(5.8) |
(3.2)% |
(1.5) |
(1.0)% |
|
UK Rail |
(1.5) |
|
(0.5) |
|
|
Group overheads |
(4.5) |
|
(5.0) |
|
|
Restructuring costs |
- |
|
(0.1) |
|
|
Operating profit before joint ventures and separately
disclosed items |
40.5 |
|
43.3 |
|
|
|
|
|
|
|
|
Joint ventures – share of profit after tax |
|
|
|
|
|
WCT Group |
- |
|
0.1 |
|
|
Citylink |
2.4 |
|
2.9 |
|
|
Crown Sightseeing |
0.4 |
|
0.6 |
|
|
Total operating profit before separately disclosed
items |
43.3 |
|
46.9 |
|
|
Separately disclosed items |
7.8 |
|
(13.8) |
|
|
Total operating profit: Group operating profit and share of
joint ventures’ profit after taxation |
51.1 |
|
33.1 |
|
Financial Review
UK Bus (regional
operations)
|
Summary |
- Good growth in revenue and operating
profit reflecting continued recovery in passenger demand
- Supportive government funding to
maintain continuing bus services
|
Financial performance
The financial performance of UK Bus (regional
operations) for the half-year ended 28 October 2023 is summarised
below:
|
|
H1 2024£m |
H1 2023£m |
Change |
|
Revenue |
584.7 |
508.1 |
15.1% |
|
Like-for-like revenue |
584.2 |
497.0 |
17.5% |
|
Operating profit |
52.3 |
50.4 |
3.8% |
|
Operating margin |
8.9% |
9.9% |
(100)bp |
We have been pleased with the recovery in
passenger demand for our services, which has contributed to the
rise in operating profit from the prior year. The growth in
passenger demand has been underpinned by supportive government
initiatives, notably the £2 fare cap schemes and under-22 free bus
travel in Scotland. The rise in revenue also reflects the impact of
having selectively increased fares to reflect increased staff
costs, as we continue to focus on recruiting and retaining
sufficient staff to deliver a reliable service across the
country.
The operating profit for the year includes
£24.2m of COVID-related bus support scheme grant income from
governments (H1 2023: £45.9m), reflecting the moderation of the
funding of these schemes during the period.
Like-for-like vehicle miles operated in the year
were 0.2% lower than the equivalent prior year period, reflecting
adjustments to our network to take account of customer demand and
staff shortages. Like-for-like revenue per vehicle mile increased
17.8% and like-for-like revenue per journey increased by 11.7%.
Like-for-like revenue was built up as
follows:
|
|
H1 2024£m |
H1 2023£m |
Change |
|
Commercial on and off bus revenue |
307.9 |
281.1 |
9.5% |
|
Concessionary revenue |
165.5 |
121.9 |
35.8% |
|
Commercial and concessionary revenue |
473.4 |
403.0 |
17.5% |
|
Tendered and school revenue |
75.3 |
56.7 |
32.8% |
|
Contract and other revenue |
35.5 |
37.3 |
(4.8)% |
|
Like-for-like revenue |
584.2 |
497.0 |
17.5% |
The year-on-year recovery in passenger demand
for our bus services is reflected in the growth in commercial
revenue. The vast majority of the rise in concessionary revenue
during the period reflects the revenue received from the Department
for Transport and combined authorities in respect of £2 fare cap
schemes, in addition to the continued growth in the under-22 free
bus travel scheme in Scotland, all of which are encouraging more
people to travel by bus.
The substantial increase in tendered and school
revenue reflects some previously commercial services being
converted to tendered services, supported by additional central
government funding provided to local authorities for these
services.
As expected, contract and other revenue has
reduced from the prior year due to the non-recurring work
undertaken for the 2022 Commonwealth Games.
Outlook
Although we see ongoing forecasting uncertainty
in relation to passenger demand and cost inflation, we currently
forecast continued good regional bus profitability for the second
half of the year ending 27 April 2024. We are looking forward to
commencing the new franchised contracts that we will operate on
behalf of Transport for Greater Manchester from the Middleton,
Oldham and Queens Road depots from March 2024, with our
mobilisation plans well underway.
We continue to see positive long-term prospects
for the business, and believe the current economic environment is
helping to demonstrate the good value of our public transport
services and encourage modal shift away from the car.
UK Bus (London)
|
Summary |
- Operationally challenging period with
adverse traffic conditions
- Disappointing financial performance
arising from continued impact of staff shortages
|
Financial performance
The financial performance of UK Bus (London) for
the half-year ended 28 October 2023 is summarised below:
|
|
H1 2024£m |
H1 2023£m |
Change |
|
Revenue |
179.8 |
154.4 |
16.5% |
|
Like-for-like revenue |
143.5 |
137.0 |
4.7% |
|
Operating loss |
(5.8) |
(1.5) |
|
|
Operating margin |
(3.2)% |
(1.0)% |
(220)bp |
The financial performance of our London business
in the period was disappointing. The losses incurred in the period
reflect the impact of upward wage pressure and increased staff
turnover and staff shortages. The impact of lost mileage has
resulted in significant contractual penalties and lost quality
incentive income. Road works and traffic congestion are a
continuing challenge for operators in the London market, which is
adversely affecting service delivery. Engagement is ongoing with
Transport for London on these issues. We expect profitability to
improve as we address labour market challenges, benefit from lagged
inflationary increases in contract revenues and seek to re-price
contracts as they are tendered.We are pleased with our tender
results in the period, and we continuously review our bid models,
contract pricing and cost efficiency to identify opportunities to
further improve our performance on tenders for Transport for London
contracts. We plan to continue to bid for new contract
opportunities at prices we believe would deliver appropriate rates
of return.
Outlook
We currently expect our operating losses to
moderate in the second half of the financial year, as we continue
to focus our efforts on recruiting and retaining sufficient bus
drivers to reliably provide the contracted bus services. We believe
the business will recover its profitability over the medium-term,
and we see good prospects for growth with our expanded garage
footprint following last year’s acquisitions.
UK Rail
|
Summary |
- Strong growth in passenger demand and
revenue at Sheffield Supertram
|
Financial performance
The financial performance of UK Rail for the
half-year ended 28 October 2023 is summarised below:
|
|
H1 2024£m |
H1 2023£m |
Change |
|
Revenue |
8.7 |
7.1 |
22.5% |
|
Like-for-like revenue |
8.7 |
6.7 |
29.9% |
|
Operating loss |
(1.5) |
(0.5) |
|
The like-for-like revenue is in respect of the
ongoing Sheffield Supertram business. We are pleased with the
performance of the business during the period, where a continued
strong recovery in passenger demand, combined with good cost
control, has moderated the underlying trading losses, as we
continue to fulfil our obligations under the contract.
Outlook
In October 2022, South Yorkshire Mayoral
Combined Authority decided to transition the Supertram system in
Sheffield to a publicly owned operator when the Group’s concession
ends in 2024. We are proud of the service we have delivered over
our period of operation and will continue to work hard to deliver a
safe, high quality and professional service to our customers, meet
our obligation and ensure a smooth transition to the new operator.
We continue to hold an onerous contract provision for the estimated
net costs of fulfilling our contractual obligation. The level of
provision has reduced from 29 April 2023, reflecting the moderation
in operating losses arising from the strong performance in the
first half of this year.Adjusted EBITDA, depreciation and
intangible asset amortisation
Earnings before interest, taxation,
depreciation, software amortisation and separately disclosed items
(“adjusted EBITDA”) increased to £97.9m (H1 2023 restated:
£100.5m). Adjusted EBITDA can be reconciled to the financial
statements as follows:
|
|
H1 2024£m |
H1 2023£mRestated |
Year to 28 Oct 2023£m |
|
Total operating profit |
51.1 |
33.1 |
65.5 |
|
Separately disclosed items |
(7.8) |
13.8 |
8.7 |
|
Software amortisation |
0.5 |
0.5 |
1.0 |
|
Depreciation |
53.3 |
52.3 |
107.9 |
|
Impairment losses |
- |
- |
3.3 |
|
Add back joint venture tax |
0.8 |
0.8 |
1.3 |
|
Adjusted EBITDA |
97.9 |
100.5 |
187.7 |
The year-on-year increase in adjusted EBITDA
principally reflects the recovery in passenger demand for public
transport in response to the easing of COVID-19 restrictions.
Depreciation and software amortisation of £53.8m
is higher than the £52.8m for the equivalent prior year period, and
principally reflects our recommencement of capital expenditure
following constraint during the COVID-19 pandemic.
Separately disclosed items
The Directors believe that there are certain
items that we should separately disclose to help explain the
consolidated results. We summarise those “separately disclosed
items” in note 4 to the condensed financial statements and further
explain them below.
Non-software intangible asset amortisation
Non-software intangible asset amortisation of
£0.6m (H1 2023: £0.4m) was recorded in the half-year ended 28
October 2023 in relation to intangible assets arising from the two
London bus acquisitions made in the year to 29 April 2023.
Reassessment of onerous contract provision
As at 29 April 2023, an onerous contract
provision of £8.9m was held in respect of the Sheffield Supertram
concession. We have recalculated the onerous contract provision,
reflecting our latest forecast for the business, and recorded a
separately disclosed credit for Sheffield Supertram of £4.4m (H1
2023: £0.3m charge) in the half-year ended 28 October 2023.
Restructuring and associated costs
Following the acquisition of the Group in the
year ended 29 April 2023, a detailed review of the Group’s
structure and operations was undertaken. This included the use of
an external consultancy agency along with the management experience
of the new owner. The Group expects to implement the remaining
actions arising from that review during the remainder of this year.
In the half-year ended 28 October 2023 the Group incurred
redundancy and related costs of £2.3m (H1 2023: £Nil).
Expired rail franchises
As part of concluding matters in relation to its
former involvement in the UK train operating market, the Group has
recorded a separately disclosed gain of £1.4m (H1 2023: £Nil). The
gain is presented as a separately disclosed item as it relates to
costs that were previously recorded as separately disclosed
items.
Property disposal
Following the demobilisation of our Wigan depot
prior to the commencement of Transport for Greater Manchester’s new
franchising system the depot was sold generating a gain on its
disposal of £4.9m.
Changes in the fair value of Deferred Payment
Instrument
We received a Deferred Payment Instrument as
deferred consideration for the sale of the North American business.
The instrument, which is accounted for at fair value through profit
or loss, has a maturity date of October 2024 and due to the credit
and other recoverability risks associated with the instrument, it
carrying value is at a discount to its face value. The Group’s
exposure to the purchaser of the North American business ranks
behind the secured lenders. The carrying value of the instrument
was £3.5m as at 29 April 2023. We estimated the carrying value of
the instrument to be £2.1m as at 28 October 2023, resulting in a
loss of £1.4m (H1 2023: gain of £0.3m) recognised in finance costs
(H1 2023: finance income) in the half-year ended 28 October
2023.
Tax
The separately disclosed taxation charge of
£1.6m (H1 2023: credit of £0.8m) is in relation to the taxation
effect of the pre-tax separately disclosed items.
Net finance costs
Net finance costs, excluding separately
disclosed items, for the half-year ended 28 October 2023 were £2.1m
(H1 2023 restated: £10.3m) and are further analysed below. The
decrease in net finance costs is principally due to the higher
pensions finance income arising from the prior year reduction in
the pension deficit, in addition to higher interest received on
surplus cash balances.
|
|
H1 2024£m |
H1 2023(restated)£m |
|
Finance costs |
|
|
|
Interest payable and facility costs on bank loans, overdrafts and
trade finance |
0.5 |
0.7 |
|
Lease interest payable |
1.9 |
1.7 |
|
Interest payable and other finance costs on bonds |
8.4 |
8.4 |
|
Effect of interest rate swaps |
2.1 |
0.8 |
|
Unwinding of discount on provisions |
1.1 |
0.5 |
|
|
14.0 |
12.1 |
|
Finance income |
|
|
|
Interest receivable on cash and money market deposits |
(3.7) |
(1.6) |
|
Interest receivable on parent company loans |
(0.9) |
- |
|
Interest income on defined benefit pension schemes |
(7.3) |
(0.2) |
|
|
(11.9) |
(1.8) |
|
Net finance costs, excluding separately disclosed items
(“adjusted net finance costs”) |
2.1 |
10.3 |
Taxation
The tax charge for the half-year to 28 October
2023 has been calculated on the basis of the estimated annual
effective rate for the year ending 27 April 2024.
The tax charge on profit can be analysed as
follows:
|
Half-year to 28 October 2023 |
Pre-tax profit£m |
Tax£m |
Rate% |
|
Excluding separately disclosed items |
42.0 |
(9.0) |
21.4% |
|
Separately disclosed items |
6.4 |
(1.6) |
|
|
With joint venture taxation gross |
48.4 |
(10.6) |
|
|
Reclassify joint venture taxation for reporting purposes |
(0.8) |
0.8 |
|
|
Reported in income statement |
47.6 |
(9.8) |
|
The effective tax rate, excluding separately
disclosed items, of 21.4% is lower than the standard rate of tax of
25% for the year to 27 April 2024, principally due to tax relief on
additional pension contributions in respect of defined benefit
schemes which are in surplus.
The cash tax paid in the half-year ended 28
October 2023 of £Nil (H1 2023: £16.8m) compares to the tax charge
for Group companies of £9.8m (H1 2023: £5.1m). The difference
reflects the availability of capital allowances (given the high
level of capital investment in the year coupled with the
availability of full expensing) which impacts cash tax but not
effective tax rate.
The separately disclosed tax charge of £1.6m (H1
2023: credit of £0.8m) is explained earlier in the section headed
“Separately disclosed items”.
Cash flows and net debt
The Group has continued to maintain strong
available liquidity. During the half-year ended 28 October 2023,
net debt increased by £60.4m from £241.1m to £301.5m and net debt
plus net train operating company liabilities increased by £59.9m
from £265.8m to £325.7m. We recognise that the increase in net debt
largely reflects the loans to shareholders and an increase in
capital expenditure that was constrained during the COVID-19
period. Our capital expenditure is weighted to the second half of
the year ending 27 April 2024, partly reflecting further investment
in the transition to zero-emission vehicles.
By the half-year end date of 29 October 2022,
all of the major rail franchises previously operated by Group
subsidiaries had ended. However, the settlement of the train
operating company assets, liabilities and contractual positions
continues for some time following the end of the relevant
franchises. As at 28 October 2023, the consolidated net assets
included net liabilities (excluding cash) of £24.2m (29 April 2023:
£24.7m) in respect of such items. Accordingly, if all items were
settled at their 28 October 2023 carrying values, consolidated net
debt would increase by that amount. Consolidated net debt plus
outstanding train operating company net liabilities as at 28
October 2023 was £325.7m (29 April 2023: £265.8m).
Net cash from operating activities before tax
for the half-year ended 28 October 2023 was £62.2m (H1 2023
restated: £103.5m) and can be further analysed as follows:
|
|
H1 2024£m |
H1 2023 (restated)£m |
|
EBITDA of Group companies before separately disclosed items |
94.3 |
96.1 |
|
Cash effect of current period separately disclosed items |
4.5 |
(8.2) |
|
Loss/(gain) on disposal of property, plant and equipment |
0.4 |
(1.0) |
|
Capital grant amortisation |
(2.4) |
(1.2) |
|
Share based payment movements, excluding separately disclosed
items |
- |
0.2 |
|
Working capital movements |
(15.9) |
33.7 |
|
Net interest paid |
(19.0) |
(17.9) |
|
Dividends received from joint ventures |
0.3 |
1.8 |
|
Net cash flows from operating activities before taxation |
62.2 |
103.5 |
Net debt (as analysed in note 16 to the
condensed financial statements) increased from £241.1m as at 29
April 2023 to £301.5m as at 28 October 2023. The movement in net
debt was:
|
Half-year to 28 October 2023 |
£m |
|
Net cash flows from operating activities before taxation |
62.2 |
|
Tax paid |
- |
|
Investing activities |
(72.2) |
|
Financing activities |
(50.0) |
|
Other |
(0.4) |
|
Movement in net debt in the half-year |
(60.4) |
|
Opening net debt |
(241.1) |
|
Closing net debt |
(301.5) |
Net cash flows from operating activities were
lower than the equivalent prior period, principally due to a £15.9m
working capital outflow in the half-year ended 28 October 2023
relating to a decrease in provisions following the settlement of
certain insurance claims and a slight increase in receivables. In
comparison, there was a favourable working capital inflow of £33.7m
in the half-year ended 29 October 2022 which included inflows of
approximately £12.3m in relation to COVID-19 related payments from
governments and inflows of approximately £11.1m in relation to a
refund from the Teesside Local Government Pension Scheme, following
the cessation of the Group’s participation in the prior year. The
inflow of COVID-19 related payments was a timing difference which
reversed in the second half of the year ended 29 April 2023.
The net impact on net debt of purchases and
disposals of property, plant and equipment, split by segment,
was:
|
|
H1 2024£m |
H1 2023£m |
|
UK Bus (regional operations) |
40.4 |
17.7 |
|
UK Bus (London) |
21.9 |
4.4 |
|
Net capital expenditure |
62.3 |
22.1 |
Net capital expenditure reconciles to the
condensed financial statements as follows:
|
|
H1 2024£m |
H1 2023£m |
|
Cash flow from: |
|
|
|
- Purchase of property, plant and equipment |
74.4 |
26.5 |
|
- Disposal of property, plant and equipment (including
separately disclosed items) |
(8.6) |
(3.5) |
|
- Capital grants received |
(12.8) |
(6.6) |
|
Decrease in net debt from negotiated early termination of
lease |
- |
(0.3) |
|
Increase in net debt from new leases in period |
9.3 |
6.0 |
|
|
62.3 |
22.1 |
In addition to the amounts shown in the table
above, the impact of purchases of intangible assets was £0.9m (H1
2023: £1.0m).
Financial position and
liquidity
The Group maintains a good financial position,
as evidenced by:
- We have available liquidity of over
£400m.
- We have comfortably complied with
all applicable debt covenants for the year ended 28 October
2023.
The ratio of net
debt as at 28 October 2023 to adjusted EBITDA for the year ended 28
October 2023 was 1.6 times (year ended 29 October 2022: 1.0
times). Adjusted
EBITDA for the half-year ended 28 October 2023 was 46.6 times (H1
2023: restated 9.8 times) adjusted net finance
charges. Two major
credit rating agencies – S&P and Moody’s – continue to assign
investment grade credit ratings to the Group’s £400m bonds.
Financial position of the
Group
Net assets
Net assets at 28 October 2023 were £519.7m (29
April 2023: £497.8m). The increase in the net assets principally
reflects the profit for the half-year ended 28 October 2023.
Retirement benefits
The reported net assets of £519.7m (29 April
2023: £497.8m), that are shown on the consolidated balance sheet
are after taking account of net pre-tax retirement benefit assets,
net of withholding tax payable on surpluses, of £175.5m (29 April
2023: £195.9m net retirement benefit liabilities) and associated
deferred tax assets of £3.2m (29 April 2023:
£3.5m).
The Group recognised pre-tax actuarial losses of
£30.7m, net of withholding tax, in the half-year ended 28 October
2023 (H1 2023: £191.4m gain) on Group defined benefit schemes.
The discount rate used to determine pension
scheme liabilities as at 28 October 2023 was 5.7%, compared to 4.9%
as at 29 April 2023.
The Stagecoach Group Pension Scheme is the
Group’s largest defined benefit pension scheme exposure. The
Scheme’s latest formal valuation was as at 31 October 2022 and
showed a surplus on a scheme funding basis of £87.3m. As a result
of the improved funding position, the Scheme Trustees and employers
agreed amendments to the long term Funding Agreement providing for
the employers to make deficit payments to the Scheme of £4.4m
spread over 12 months from 1 May 2023. Further to this, the
employers have agreed in principle to make payments into an escrow
account of £4.1m for each of the years to 3 May 2025 and 2 May
2026, to be used underpin the funding position of the Scheme
through to April 2031, when the escrow funds may be released back
to the employers or paid into the scheme depending on the funding
position of the Scheme.
Principal risks and
uncertainties
Like most businesses, there is a range of risks
and uncertainties facing the Group. A brief summary is given below
of those specific risks and uncertainties that the Directors
believe could have the most significant impact on the Group’s
financial position and/or future financial performance. Pages 9 to
15 of the Group’s 2023 Annual Report set out specific risks and
uncertainties in more detail.
The matters summarised below are not intended to
represent an exhaustive list of all possible risks and
uncertainties. The focus below is on those specific risks and
uncertainties that the Directors believe could have the most
significant impact on the Group’s position or performance.
- Major event such as a serious
accident – there is a risk that the Group is involved (directly or
indirectly) in a major operational incident.
- Economy – the economic environment
in the geographic areas in which the Group operates affects the
demand for the Group’s services, the availability of suitable staff
and the Group’s costs. A weaker economy may also increase the risk
of the Group’s contingent liabilities, particularly those in
relation to its former North American business, crystallising.
- Terrorism – there is a risk that
the demand for the Group’s services could be adversely affected by
a significant terrorist incident.
- Changing customer habits – There is
a risk that changes in people’s working patterns, shopping habits
and/or other preferences affect demand for the Group’s transport
services, which could in turn affect the Group’s financial
performance and/or financial position. We see trends of increased
home working, home shopping, telemedicine and home schooling. To
the extent the effects of that on travel patterns are not offset by
modal shift to bus/tram, there will be a longer term adverse effect
on the Group’s revenue and potentially its financial performance
and/or financial position.
- Pension scheme funding – the Group
participates in a number of defined benefit pension schemes, and
there is a risk that the cash contributions required increase or
decrease due to changes in factors such as regulatory approach,
investment performance, discount rates and life
expectancies. There remains a risk of further
significant market movements that could result in significant
changes in the amount of our net retirement benefit assets reported
in the financial statements.
- Insurance and claims environment –
there is a risk that the cost to the Group of settling claims
against it is significantly higher or lower than expected.
- Climate change – we see public
transport as a critical part of the battle against climate change.
At the same time, we recognise that climate change presents a
number of risks to the Group.
- Regulatory changes and availability
of public funding – there is a risk that changes to the regulatory
environment or changes to the availability of public funding could
affect the Group’s prospects. The extent to which
payments from government continue to support public transport
services will affect the Group’s future profitability and cash
flow.
- People and culture – There is a
risk that the Group is unable to attract, develop and retain an
appropriately skilled, diverse and responsible workforce and
leadership team, and maintain a healthy business culture which
encourages and supports ethical behaviours and decision
making.
- Disease – there is a risk that
demand for the Group’s services could be adversely affected by a
significant outbreak of disease. This was identified by the Board
as a principal risk some years ago, but the COVID-19 situation is a
clear and substantial crystallisation of the risk.
- Information security – there is a
risk that potential malicious attacks on our systems lead to a loss
of data or disruption to operations.
- Information technology – there is a
risk that technology failures or interruptions could adversely
affect the Group, including a risk that the Group’s capability to
make sales digitally either fails or cannot meet levels of
demand.
- Competition – in certain of the
markets we operate in, there is a risk of increased competitive
pressures from existing competitors and new entrants.
- Treasury risks – the Group is
affected by changes in fuel prices, interest rates and exchange
rates.
Use of non-GAAP measures
Our reported interim financial information is
prepared in accordance with UK-adopted International Accounting
Standard 34, Interim Financial Reporting. In measuring our
financial performance and position, the financial measures that we
use include those that we have derived from our reported results in
order to eliminate factors that distort period-on-period
comparisons and/or provide useful information to stakeholders.
These are non-GAAP financial measures and include measures such as
like-for-like revenue, adjusted EBITDA and net debt. We believe
this information, along with comparable GAAP measurements, is
useful to shareholders and analysts in providing a basis for
measuring our financial performance and position. Note 21 to the
condensed financial statements provides further information on
these non-GAAP financial measures.
Going concern
On the basis of current financial projections
and the facilities available, the Directors are satisfied that the
Group has adequate resources to continue for the foreseeable future
and, accordingly, consider it appropriate to adopt the going
concern basis in preparing the condensed financial statements for
the half-year ended 28 October 2023. We have not identified a
material uncertainty regarding the Group’s ability to continue as a
going concern for a period of not less than 12 months. Further
detail of our going concern assessment is explained in note 1(c) to
the condensed financial statements.
Ray O’TooleExecutive
Chairman6 December 2023
Responsibility Statement
We confirm that to the best of our
knowledge:
(a) the condensed
consolidated interim financial information contained in this
document has been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as adopted in
the UK;
(b) the interim
management report contained in this document includes a fair review
of the information required by the Financial Conduct Authority’s
Disclosure and Transparency Rules (“DTR”) 4.2.7R (indication of
important events during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year); and
(c) as the Company
does not issue listed shares, DTR 4.2.8R in respect of related
party transactions has not been applied.
By order of and on behalf of the Board
Ray
O’Toole Bruce
DingwallExecutive
Chairman Chief
Financial Officer6 December
2023 6 December
2023
Cautionary statement
The preceding interim management report has been
prepared for the shareholder of the Company, as a body, and for no
other persons. Its purpose is to assist the shareholder
of the Company to assess the strategies adopted by the Company and
the potential for those strategies to succeed and for no other
purpose. The interim management report contains
forward-looking statements that are subject to risk factors
associated with, amongst other things, the economic, regulatory
policy and business circumstances occurring from time to time in
the sectors and markets in which the Group operates. It
is believed that the expectations reflected in these statements are
reasonable, but they may be affected by a wide range of variables
that could cause actual results to differ materially from those
currently anticipated. No assurances can be given that
the forward-looking statements will be realised. The
forward-looking statements reflect the knowledge and information
available at the date of preparation. Nothing in the
interim management report should be considered or construed as a
profit forecast for the Group. Except as required by
law, the Group has no obligation to update forward-looking
statements or to correct any inaccuracies therein.
CONDENSED FINANCIAL
STATEMENTS
CONSOLIDATED INCOME
STATEMENT
|
|
|
Unaudited |
Unaudited |
|
|
|
Half-year to 28 October 2023 |
Half-year to 29 October 2022 (Restated) |
|
|
|
Performance excluding separately disclosed items |
Separately disclosed items(note 4) |
Results for the period |
Performance excluding separately disclosed items |
Separately disclosed items(note 4) |
Results for the period |
|
|
Notes |
£m |
£m |
£m |
£m |
£m |
£m |
|
CONTINUING OPERATIONS |
|
|
|
|
|
|
|
|
Revenue |
3(a) |
773.2 |
- |
773.2 |
669.6 |
- |
669.6 |
|
Operating costs and other operating income |
|
(732.7) |
7.8 |
(724.9) |
(626.3) |
(13.8) |
(640.1) |
|
Operating profit of Group companies |
3(b) |
40.5 |
7.8 |
48.3 |
43.3 |
(13.8) |
29.5 |
|
Share of profit of joint ventures after taxation |
3(c) |
2.8 |
- |
2.8 |
3.6 |
- |
3.6 |
|
Total operating profit: Group operating profit and share of
joint ventures’ profit after taxation |
3(b) |
43.3 |
7.8 |
51.1 |
46.9 |
(13.8) |
33.1 |
|
Non-operating separately disclosed item |
4 |
- |
- |
- |
- |
1.5 |
1.5 |
|
Profit before interest and taxation |
|
43.3 |
7.8 |
51.1 |
46.9 |
(12.3) |
34.6 |
|
Finance costs |
|
(14.0) |
(1.4) |
(15.4) |
(12.1) |
- |
(12.1) |
|
Finance income |
|
11.9 |
- |
11.9 |
1.8 |
0.3 |
2.1 |
|
Profit before taxation |
|
41.2 |
6.4 |
47.6 |
36.6 |
(12.0) |
24.6 |
|
Taxation |
|
(8.2) |
(1.6) |
(9.8) |
(5.9) |
0.8 |
(5.1) |
|
Profit for the period, all attributable to equity holders
of the parent |
|
33.0 |
4.8 |
37.8 |
30.7 |
(11.2) |
19.5 |
The accompanying notes form an integral part of
this consolidated income statement.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
|
Unaudited |
Unaudited |
|
|
Half-year to28 October 2023 |
Half-year to29 October2022 (Restated) |
|
|
£m |
£m |
|
|
|
|
|
Profit for the period |
37.8 |
19.5 |
|
Items that may be reclassified to profit or
loss |
|
|
|
Cash flow hedges: |
|
|
|
- Net fair value
gains on cash flow hedges |
33.9 |
30.0 |
|
- Reclassified and
reported in profit for the period |
(13.7) |
(43.7) |
|
- Tax effect of
cash flow hedges |
(5.1) |
2.7 |
|
Total items that may be reclassified to profit or
loss |
15.1 |
(11.0) |
|
Items that will not be reclassified to profit or
loss |
|
|
|
Actuarial gains on Group defined benefit pension schemes, excluding
withholding tax |
(30.7) |
191.4 |
|
Tax effect of actuarial gains on Group defined benefit pension
schemes |
(0.3) |
(18.5) |
|
Total items that will not be reclassified to profit or
loss |
(31.0) |
172.9 |
|
Other comprehensive income for the period |
(15.9) |
161.9 |
|
Total comprehensive income for the period, all attributable
to equity holders of the parent |
21.9 |
181.4 |
CONSOLIDATED BALANCE SHEET (STATEMENT OF
FINANCIAL POSITION)
|
|
Unaudited |
Audited |
|
|
Notes |
As at 28 October
2023£m |
As at 29 April 2023£m |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
7 |
92.5 |
92.1 |
|
Other intangible assets |
8 |
7.1 |
7.1 |
|
Property, plant and equipment: |
9 |
734.2 |
711.3 |
|
Right-of-use assets |
9 |
76.3 |
80.2 |
|
Interests in joint ventures |
10 |
14.5 |
12.0 |
|
Derivative instruments at fair value |
|
11.7 |
11.5 |
|
Retirement benefit assets – net of withholding tax payable |
12 |
178.8 |
199.4 |
|
Other receivables |
|
12.7 |
15.4 |
|
|
|
1,127.8 |
1,129.0 |
|
Current assets |
|
|
|
|
Inventories |
|
14.0 |
12.3 |
|
Trade and other receivables |
|
193.6 |
112.1 |
|
Derivative instruments at fair value |
|
22.8 |
13.9 |
|
Current tax recoverable |
|
- |
0.4 |
|
Cash and cash equivalents |
|
180.5 |
245.6 |
|
Assets classed as held for sale |
|
1.7 |
3.4 |
|
|
|
412.6 |
387.7 |
|
Total assets |
3(d) |
1,540.4 |
1,516.7 |
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
262.9 |
248.3 |
|
Current tax liabilities |
|
0.5 |
- |
|
Borrowings: |
|
|
|
|
- Lease
liabilities |
|
22.1 |
25.0 |
|
- Other
borrowings |
|
- |
1.8 |
|
Derivative instruments at fair value |
|
0.5 |
9.1 |
|
Provisions |
18 |
45.9 |
56.4 |
|
|
|
331.9 |
340.6 |
|
Non-current liabilities |
|
|
|
|
Other payables |
|
62.0 |
51.7 |
|
Borrowings: |
|
|
|
|
- Lease liabilities |
|
59.9 |
60.3 |
|
- Other borrowings |
|
401.4 |
407.1 |
|
Derivative instruments at fair value |
|
4.6 |
12.4 |
|
Deferred tax liabilities |
|
74.9 |
59.8 |
|
Provisions |
18 |
82.7 |
83.5 |
|
Retirement benefit obligations |
12 |
3.3 |
3.5 |
|
|
|
688.8 |
678.3 |
|
Total liabilities |
3(d) |
1,020.7 |
1,018.9 |
|
Net assets |
3(d) |
519.7 |
497.8 |
|
EQUITY |
|
|
|
|
Ordinary share capital |
13 |
3.2 |
3.2 |
|
Share premium account |
|
8.4 |
8.4 |
|
Retained earnings |
|
133.6 |
126.8 |
|
Capital redemption reserve |
|
422.8 |
422.8 |
|
Own shares |
|
(69.6) |
(69.6) |
|
Cash flow hedging reserve |
|
21.2 |
6.1 |
|
Total equity, all attributable to the parent |
|
519.6 |
497.7 |
|
Non-controlling interest |
|
0.1 |
0.1 |
|
Total equity |
|
519.7 |
497.8 |
The accompanying notes form an integral part of
this consolidated balance sheet.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
|
|
Ordinary share capital£m |
Share premiumaccount£m |
Retained earnings£m |
Capital redemption reserve£m |
Own shares£m |
Cash flow hedging reserve£m |
TotalEquity attributable to
parent£m |
Non-controlling interest£m |
Total equity£m |
|
Balance at 29 April 2023 |
3.2 |
8.4 |
126.8 |
422.8 |
(69.6) |
6.1 |
497.7 |
0.1 |
497.8 |
|
Profit for the period |
- |
- |
37.8 |
- |
- |
- |
37.8 |
- |
37.8 |
|
Other comprehensive income/(loss), net of tax |
- |
- |
(31.0) |
- |
- |
15.1 |
(15.9) |
- |
(15.9) |
|
Total comprehensive income |
- |
- |
6.8 |
- |
- |
15.1 |
21.9 |
- |
21.9 |
|
Balance at 28 October 2023 |
3.2 |
8.4 |
133.6 |
422.8 |
(69.6) |
21.2 |
519.6 |
0.1 |
519.7 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 April 2022 (restated) |
3.2 |
8.4 |
(38.2) |
422.8 |
(69.6) |
75.4 |
402.0 |
0.1 |
402.1 |
|
Profit for the period |
- |
- |
19.5 |
- |
- |
- |
19.5 |
- |
19.5 |
|
Other comprehensive income/(loss), net of tax |
- |
- |
172.9 |
- |
- |
(11.0) |
161.9 |
- |
161.9 |
|
Total comprehensive income/(loss) |
- |
- |
192.4 |
- |
- |
(11.0) |
181.4 |
- |
181.4 |
|
Credit in relation to equity-settled share based payments |
- |
- |
3.9 |
- |
- |
- |
3.9 |
- |
3.9 |
|
Effect of tax deduction on share based payments in excess of
cumulative income statement expense |
- |
- |
0.4 |
- |
- |
- |
0.4 |
- |
0.4 |
|
Balance at 29 October 2022 (restated) |
3.2 |
8.4 |
158.5 |
422.8 |
(69.6) |
64.4 |
587.7 |
0.1 |
587.8 |
CONSOLIDATED STATEMENT OF CASH
FLOWS
|
|
|
Unaudited |
Unaudited |
|
|
|
Half-year to28
October2023 |
Half-year to29 October2022 (Restated) |
|
|
Notes |
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
Cash generated by operations |
14 |
80.9 |
119.5 |
|
Interest paid |
|
(23.6) |
(19.4) |
|
Interest received |
|
4.6 |
1.6 |
|
Dividends received from joint ventures |
|
0.3 |
1.8 |
|
Net cash flows from operating activities before
tax |
|
62.2 |
103.5 |
|
Tax paid |
|
- |
(16.8) |
|
Net cash from operating activities after tax |
|
62.2 |
86.7 |
|
Cash flows from investing activities |
|
|
|
|
Acquisition of subsidiaries |
6 |
(1.9) |
(13.6) |
|
Purchase of property, plant and equipment |
|
(74.4) |
(26.5) |
|
Disposal of property, plant and equipment |
|
1.5 |
3.5 |
|
Receipt of capital grants |
|
12.8 |
6.6 |
|
Purchase of intangible assets |
|
(0.9) |
(1.0) |
|
Net cash outflow from investing activities |
|
(62.9) |
(31.0) |
|
Cash flows from financing activities |
|
|
|
|
Loan to parent company |
|
(50.0) |
- |
|
Payments of principal portion of lease liabilities |
|
(12.6) |
(14.4) |
|
Net cash flow from financing activities |
|
(62.6) |
(14.4) |
|
Net (decrease)/increase in cash and cash
equivalents |
|
(63.3) |
41.3 |
|
Cash and cash equivalents at beginning of period |
|
243.8 |
248.9 |
|
Cash and cash equivalents at end of period |
|
180.5 |
290.2 |
The accompanying notes form an integral part of
this consolidated statement of cash flows.
NOTES
(a) Basis of preparation
The condensed consolidated interim financial
information for the half-year ended 28 October 2023 has been
prepared in accordance with the Disclosure and Transparency Rules
of the United Kingdom's Financial Conduct Authority and UK-adopted
International Accounting Standard 34, Interim Financial Reporting.
The condensed consolidated interim financial information should be
read in conjunction with the annual financial statements for the
year ended 29 April 2023, which have been prepared in accordance
with UK-adopted International Accounting Standards. The accounting
policies and methods of computation applied in the consolidated
interim financial information are the same as those of the annual
financial statements for the year ended 29 April 2023, as described
on pages 64 to 78 of the Group's 2023 Annual Report which can be
found on the Stagecoach Group website at
http://www.stagecoachgroup.com/investors/financial-analysis/reports/.
The figures for this half-year include the
results for all segments for the 26 weeks to 28 October 2023. The
comparative figures for the half-year ended 29 October 2022 include
the results for all segments for the 26 weeks ended 29 October
2022.
This condensed consolidated interim financial
information for the half-year ended 28 October 2023 has not been
audited or reviewed by the auditors. The comparative financial
information presented in this announcement for the year ended 29
April 2023 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006 and does not reflect all of
the information contained in the Company's annual financial
statements. The annual financial statements for the year ended 29
April 2023 were approved by the Board of Directors on 29 June
2023. They received an unqualified audit report from
the auditors, did not contain an emphasis of matter paragraph, did
not contain a statement under section 498 of the Companies Act 2006
and have been filed with the Registrar of
Companies.
The Board of Directors approved this
announcement, including the condensed consolidated interim
financial information, on 6 December 2023. This announcement will
be available on the Group's website at
http://www.stagecoachgroup.com/investors/financial-analysis/reports/.
Change in the accounting policy for the
treatment of Battery Contracts
As disclosed in the annual report for the year
ended 30 April 2022 the Group leases electric buses. In some cases,
the Group enters into separate agreements for the provisions of
batteries to power the buses (the “Battery Contracts”). Some
judgement is involved in determining whether each Battery Contract
is, or contains, a lease.
The Battery Contracts are separate legal
agreements from any leases of buses and contain separate terms and
conditions. In the years ended 1 May 2021 and 30 April 2022, the
Directors had formed the view that the Battery Contracts did not
meet the IFRS definition of leases as in the Directors’ view the
battery provider had control of the battery assets and had
substantive rights of substitution for the batteries. This matter
was disclosed as a critical accounting judgement in both of those
years.
On 29 November 2022, the IFRS Interpretations
Committee (“IFRIC”) met and discussed the definition of a lease.
Following the publication of the decision of IFRIC, the Group
reviewed its accounting treatment of the Battery Contracts. In
light of the IFRIC decision, the Group has decided that it would be
more appropriate for the Group to treat the Battery Contracts as
leases.
The Group has restated its results for the
half-year ended 29 October 2022 to reflect this change in
accounting policy. A summary of the impact of the change in policy
is summarised in the tables on pages 18 and 19.
Change in accounting for the Group’s
participation in Local Government Pension Schemes
(“LGPSs”)
Certain of the Company’s subsidiaries
participate in LGPSs, which are all closed to new members from the
Group. Where a private sector employer ceases to have any employees
who are active members in a LGPS, that automatically triggers the
employer’s exit from the LGPS except where the employer agrees
alternative arrangements with the relevant LGPS. When an exit from
an LGPS is triggered, an amount may be payable or receivable by the
employer to or from the administering authority of the relevant
scheme.
In prior years, the Group had accounted for its
participation in LGPSs in the same way as its other pension
arrangements, by:
- measuring the
relevant assets in respect of LGPS participations at fair
value;
- measuring the
obligations to pay pensions through to the expected deaths of the
relevant members/their dependents at discounted present value;
- where applicable, restricting the net
asset recognised (i.e. the gross assets less the gross obligations)
to the present value of economic benefits available in the form of
any future refunds from the scheme or reductions in future
contributions to the scheme.
In the year ended 30 April 2022, the Directors
were of the view, having taken independent expert advice on the
accounting, that the Group’s accounting was appropriate and was
consistent with other major groups with UK public transport
operations that have LGPS participations.
|
1 |
BASIS OF PREPARATION (CONTINUED) |
The Group’s auditors, Ernst & Young, reached
a different conclusion to the Directors on the basis of accounting
for the Group’s participation in LGPSs that are closed to new
members from the Group. In particular that:
- the measurement
of the defined benefit obligation should reflect the expected cash
flows payable under the scheme rules through to the expected exit
by the employer (for example, on the retirement of the last active
member) and including any expected exit payment or credit; and
- there should be no additional IFRIC
14 restriction to the LGPS net asset, given the right of the Group
to receive a refund from the scheme is limited only to the extent
of the actuarially determined surplus at the point of exit or any
discretion applied by the administering authority.
Notwithstanding the different interpretation of
the Group’s auditors, the Directors had concluded that the Group’s
accounting for its participation in LGPSs remained appropriate and
was a reasonable interpretation of the relevant standards.
Accordingly, the Group’s auditors qualified their audit opinion in
relation to the accounting for the Group’s participation in Local
Government Pension Schemes that are closed to new members.
Subsequent to the acquisition of the Group by
Inframobility UK Bidco Limited, the Directors have reassessed the
Group’s approach to the accounting in this area in the year ended
29 April 2023.
The policy applied by the Group has been revised
such that where a section of the LGPS is closed to new members, the
defined benefit obligation is calculated taking into consideration
the specific rules set out in The Local Government Pension Scheme
Regulations 2013 (“the Regulations”) and reflects the estimated
cash flows required to eliminate the Company’s obligations from
these schemes, including the estimated cash flows arising on an
exit. No additional IFRIC 14 restriction is applied to any LGPS net
asset, given the right of the Group to receive a refund from the
scheme is limited only to the extent of the actuarially determined
surplus at the point of exit or any discretion applied by the
administering authority.
Comparative amounts have been restated accordingly.
The effect of the restatement, together with the effect of the
change in policy with respect to the treatment of battery
contracts, is set out below.
|
|
|
Unaudited half-year to 29 October 2022 |
|
CONSOLIDATED INCOME STATEMENT |
|
As reported |
Effect of LGPS accounting |
Effect of battery contracts |
Restated |
|
|
|
£m |
£m |
£m |
£m |
|
Operating costs and other operating income excluding separately
disclosed items |
|
(626.4) |
- |
0.1 |
(626.3) |
|
Operating costs and other operating income |
|
(640.2) |
- |
0.1 |
(640.1) |
|
Profit before interest and taxation |
|
34.5 |
- |
0.1 |
34.6 |
|
Finance costs |
|
(12.0) |
- |
(0.1) |
(12.1) |
|
Finance income |
|
1.9 |
0.2 |
- |
2.1 |
|
Profit before taxation |
|
24.4 |
0.2 |
- |
24.6 |
|
Taxation |
|
(5.1) |
- |
- |
(5.1) |
|
Profit for the period |
|
19.3 |
0.2 |
- |
19.5 |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME |
As reported |
Effect of LGPS accounting |
Effect of battery contracts |
Restated |
|
|
|
£m |
£m |
£m |
£m |
|
Profit for the year |
|
19.3 |
0.2 |
- |
19.5 |
|
Total items that may be reclassified to profit or loss |
|
(11.0) |
- |
- |
(11.0) |
|
Items that will not be reclassified to profit or loss |
|
172.9 |
- |
- |
172.9 |
|
Total comprehensive income for the period |
|
181.2 |
0.2 |
- |
181.4 |
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS |
|
As reported |
Effect of LGPS accounting |
Effect of battery contracts |
Restated |
|
|
|
£m |
£m |
£m |
£m |
|
Cash generated by operations |
|
118.7 |
- |
0.8 |
119.5 |
|
Net cash flows from operating activities before tax – interest
paid |
|
(19.3) |
- |
(0.1) |
(19.4) |
|
Net cash flows from operating activities before tax |
|
102.8 |
- |
0.7 |
103.5 |
|
Net cash flows from operating activities after tax |
|
86.0 |
- |
0.7 |
86.7 |
|
Cash flows from financing activities – Payments of principal
portion of lease liabilities |
|
(13.7) |
- |
(0.7) |
(14.4) |
|
Net cash outflow from financing activities |
|
(13.7) |
- |
(0.7) |
(14.4) |
|
1 |
BASIS OF PREPARATION (CONTINUED) |
|
|
|
Audited – as at 30 April 2022 |
|
CONSOLIDATED BALANCE SHEET |
|
As reported |
Effect of LGPS accounting |
Effect of battery contracts |
Restated |
|
|
|
£m |
£m |
£m |
£m |
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment – Right-of-use assets |
|
68.6 |
- |
6.3 |
74.9 |
|
Retirement benefit assets |
|
45.3 |
10.5 |
- |
55.8 |
|
Non-current assets |
|
966.0 |
10.5 |
6.3 |
982.8 |
|
Total assets |
|
1,424.3 |
10.5 |
6.3 |
1,441.1 |
|
Current liabilities |
|
|
|
|
|
|
Lease liabilities |
|
(22.1) |
- |
(1.4) |
(23.5) |
|
Current liabilities |
|
(347.7) |
- |
(1.4) |
(349.1) |
|
Non-current liabilities |
|
|
|
|
|
|
Lease liabilities |
|
(52.3) |
- |
(5.1) |
(57.4) |
|
Retirement benefit obligations |
|
(75.1) |
0.3 |
- |
(74.8) |
|
Non-current liabilities |
|
(685.1) |
0.3 |
(5.1) |
(689.9) |
|
Total liabilities |
|
(1,032.8) |
0.3 |
(6.5) |
(1,039.0) |
|
Net assets |
|
391.5 |
10.8 |
(0.2) |
402.1 |
|
Retained earnings |
|
(48.8) |
10.8 |
(0.2) |
(38.2) |
|
Total equity attributable to parent |
|
391.5 |
10.8 |
(0.2) |
402.1 |
(b) New accounting standards adopted
during the period
From 30 April 2023, the following standards and
amendments are effective in the Group’s consolidated financial
statements:
- IAS 12 Income Taxes – International
Tax Reform – Pillar Two Model Rules
- IFRS 17 Insurance Contracts
- Amendments to IAS 12 Income Taxes –
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
- Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgements – Disclosure of Accounting Policies
- Amendments to IAS 8 Accounting
Policy, Changes in Accounting Estimates and Errors – Definition of
Accounting Estimates
The application of these amendments has not had
any material impact on the disclosures or net assets of the
Group.
(c) Going concern
(i) Going concern assessmentDuring the half-year
ended 28 October 2023, we have delivered another positive set of
financial results and made progress on delivering our key
objectives. We have seen a continued recovery in passenger demand,
as we work in partnership with national and local government to
maximise the opportunities from public transport for consumers and
the country while navigating the current economic environment.
The Board considered the liquidity position and
covenant headroom in the Group’s financial forecasts which cover
the period of 12 months from the date of this announcement (“the
going concern period”), recognising the challenges around reliably
estimating and forecasting the effects of the wider economic
environment on our business.
The key areas of forecasting uncertainty
include:
- The timing and extent of the recovery
in demand for regional bus journeys;
- Availability and cost of staff;
and
- The nature and extent of payments from
government for continuing regional bus services, including
available funding to support the £2 fare cap scheme in
England.
Our base case forecast assumes that regional bus
commercial revenue returns to 98% of pre-COVID levels for the year
ending 3 May 2025, reflecting consistent patronage with that
achieved in the year ended 29 April 2023 along with inflationary
fare increases already implemented. Concessionary revenue for the
year ending 27 April 2024 is forecast at 100% of pre-COVID levels,
increasing to 102% pre-COVID levels for the year ending 3 May
2025.
Our base case forecast reflects the two-year
funding settlement for bus operators in England, which included
£300m of further funding for the wider bus sector to protect bus
services until 2025, in addition to further funding for the £2 fare
cap to 31 December 2024.
|
1 |
BASIS OF PREPARATION (CONTINUED) |
(c) Going concern
(continued)
(i) Going concern assessment (continued)Our
severe and plausible downside scenarios contemplate lower regional
bus commercial revenue over the forecast period, in addition to
more cautious assumptions around our levels of cost increases and
government funding support. The downside scenario considered in the
going concern period was:
- passenger numbers at 75%-76% of
pre-COVID levels in the going concern period;
- commercial revenue at 90%-91% of
pre-COVID levels in the going concern period;
- concessionary revenue at 91% of
pre-COVID levels for the remainder of the going concern
period;
- no additional government funding of
zero emission buses, beyond awards already made; and
- failure to win the majority of its
bus franchise bids resulting in the loss of services in a number of
its depots.
(ii) Mitigating actionsTo the extent any severe
downside scenarios materialised, we consider that the Group would
have sufficient controllable, mitigating actions to avoid a breach
of the covenant tests in our committed bank facilities.
Having constrained the Group’s capital
expenditure during the period of COVID, our base case forecast
assumes we increase our investment in capital expenditure, as we
progress our plans to transition to a zero emission bus fleet.
Accordingly, reducing or deferring this capital expenditure would
be the key mitigation available. In addition, we would be able to
further reduce the Group’s cost base, in particular reducing
vehicle mileage to better match customer demand, which would result
in variable cost savings. These mitigations are within the Group’s
control and do not have any associated penalties.
(iii) Covenant headroomUnder the base case and
downside scenarios, the Group remains in compliance with the
covenant tests in our committed core bank facilities which expire
in March 2026. In the reverse stress test scenario, headroom
against the covenant tests exists throughout the going concern
period, after taking account of controllable, mitigating
actions.
(iv) Going concern conclusionAccordingly, the
condensed consolidated interim financial information for the
half-year ended 28 October 2023 has been prepared on a going
concern basis. Taking account of the economic background in the UK,
and other relevant factors, the Directors concluded that it
remained appropriate to adopt the going concern basis of accounting
in preparing the consolidated interim financial information, with
no material uncertainties identified. The Directors have a
reasonable expectation that the Group will continue to operate as a
going concern for at least a period of 12 months from the date of
approval of this announcement.
We do not expect significant seasonal demand
fluctuations to affect the phasing of the Group’s revenue and
profit for the year ending 27 April 2024.
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 business development |
United Kingdom |
The basis of segmentation and the basis on which
segment profit/(loss) is measured are consistent with the Group’s
last annual financial statements for the year ended 29 April
2023.
The Group has interests in three joint ventures:
WCT Group that operates in UK Rail, Citylink that operates in UK
Bus (regional operations) and Crown Sightseeing that operates in UK
Bus (London). The results of these joint ventures are
shown separately in note 3(c).
|
3 |
SEGMENTAL ANALYSIS (CONTINUED) |
(a) Revenue
Due to the nature of the Group’s business, the
origin and destination of revenue (the United Kingdom) is the same
in almost all cases. As the Group predominately sells
bus and rail services to individuals, it has few customers that are
individually “major”. Its major customers are typically
public bodies that subsidise or procure transport services – such
customers include local authorities, transport authorities and the
UK Department for Transport.
The vast majority of the UK Bus (London) revenue
is from Transport for London.
Revenue split by class and segment, was as
follows:
|
|
Unaudited |
|
|
Half-year to 28 October 2023 |
|
|
Commercial passenger revenue |
Concessionary revenue |
Tendered & school revenue |
Contract & other revenue |
|
Total |
|
|
£m |
£m |
£m |
£m |
|
£m |
|
UK Bus (regional operations) |
307.9 |
165.5 |
75.8 |
35.5 |
|
584.7 |
|
UK Bus (London) |
- |
- |
- |
179.8 |
|
179.8 |
|
Total bus operations |
307.9 |
165.5 |
75.8 |
215.3 |
|
764.5 |
|
UK Rail |
7.9 |
- |
- |
0.8 |
|
8.7 |
|
Reported Group revenue |
315.8 |
165.5 |
75.8 |
216.1 |
|
773.2 |
|
|
Unaudited |
|
|
Half-year to 29 October 2022 |
|
|
Commercial passenger revenue |
Concessionary revenue |
Tendered & school revenue |
Contract & other revenue |
|
Total |
|
|
£m |
£m |
£m |
£m |
|
£m |
|
UK Bus (regional operations) |
292.2 |
121.9 |
56.7 |
37.3 |
|
508.1 |
|
UK Bus (London) |
- |
- |
- |
154.4 |
|
154.4 |
|
Total bus operations |
292.2 |
121.9 |
56.7 |
191.7 |
|
662.5 |
|
UK Rail |
6.8 |
- |
- |
0.3 |
|
7.1 |
|
Reported Group revenue |
299.0 |
121.9 |
56.7 |
192.0 |
|
669.6 |
(b) Operating profit
Operating profit split by segment, was as
follows:
|
|
Unaudited |
Unaudited |
|
|
Half-year to 28 October 2023 |
Half-year to 29 October 2022 (Restated) |
|
|
Performance excluding separately disclosed items |
Separately disclosed items(note 4) |
Results for the period |
Performance excluding separately disclosed items |
Separately disclosed items(note 4) |
Results for the period |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
UK Bus (regional operations) |
52.3 |
2.6 |
54.9 |
50.4 |
(2.5) |
47.9 |
|
UK Bus (London) |
(5.8) |
(0.6) |
(6.4) |
(1.5) |
(0.8) |
(2.3) |
|
Total bus operations |
46.5 |
2.0 |
48.5 |
48.9 |
(3.3) |
45.6 |
|
UK Rail |
(1.5) |
5.8 |
4.3 |
(0.5) |
(0.8) |
(1.3) |
|
|
45.0 |
7.8 |
52.8 |
48.4 |
(4.1) |
44.3 |
|
Group overheads |
(4.5) |
- |
(4.5) |
(5.0) |
(9.7) |
(14.7) |
|
Restructuring costs |
- |
- |
- |
(0.1) |
- |
(0.1) |
|
Total operating profit of Group companies |
40.5 |
7.8 |
48.3 |
43.3 |
(13.8) |
29.5 |
|
Share of joint ventures’ profit after taxation |
2.8 |
- |
2.8 |
3.6 |
- |
3.6 |
|
Total operating profit: Group operating profit and share of
joint ventures’ profit after taxation |
43.3 |
7.8 |
51.1 |
46.9 |
(13.8) |
33.1 |
(c) Joint ventures
The share of profit from joint ventures was
further split as follows:
|
|
|
Unaudited |
Unaudited |
|
|
|
Half-year to 28 October 2023 |
Half-year to 29 October 2022 |
|
|
|
£m |
£m |
|
WCT Group (UK Rail) |
|
|
|
|
Operating profit |
|
- |
0.1 |
|
Citylink (UK Bus, regional operations) |
|
|
|
|
Operating profit |
|
3.0 |
3.6 |
|
Finance income |
|
0.1 |
|
|
Taxation |
|
(0.7) |
(0.7) |
|
|
|
2.4 |
2.9 |
|
Crown Sightseeing (UK Bus, London) |
|
|
|
|
Operating profit |
|
0.5 |
0.7 |
|
Taxation |
|
(0.1) |
(0.1) |
|
|
|
0.4 |
0.6 |
|
Share of profit of joint ventures after
taxation |
|
2.8 |
3.6 |
|
3 |
SEGMENTAL ANALYSIS (CONTINUED) |
(d) Gross assets and
liabilities
Assets and liabilities split by segment were as
follows:
|
|
Unaudited |
Audited |
|
|
As at 28 October 2023 |
As at 29 April 2023 |
|
|
Gross assets |
Gross liabilities |
Net
assets/(liabilities) |
Gross assets |
Gross liabilities |
Net assets/(liabilities) |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
UK Bus (regional operations) |
1,050.0 |
(309.0) |
741.0 |
1,029.5 |
(303.1) |
726.4 |
|
UK Bus (London) |
200.3 |
(88.2) |
112.1 |
192.7 |
(80.1) |
112.6 |
|
UK Rail |
8.2 |
(33.3) |
(25.1) |
6.8 |
(38.9) |
(32.1) |
|
|
1,258.5 |
(430.5) |
828.0 |
1,229.0 |
(422.1) |
806.9 |
|
Central functions |
86.9 |
(31.4) |
55.5 |
29.7 |
(42.7) |
(13.0) |
|
Joint ventures |
14.5 |
- |
14.5 |
12.0 |
- |
12.0 |
|
Borrowings and cash equivalents |
180.5 |
(483.4) |
(302.9) |
245.6 |
(494.3) |
(248.7) |
|
Taxation |
- |
(75.4) |
(75.4) |
0.4 |
(59.8) |
(59.4) |
|
Total |
1,540.4 |
(1,020.7) |
519.7 |
1,516.7 |
(1,018.9) |
497.8 |
The UK Rail net liabilities of £25.1m (29 April
2023: £32.1m) shown above include £24.2m (29 April 2023: £24.7m) of
train operating company net liabilities in relation to major rail
franchises previously operated by the Group.
Central assets and liabilities include interest
payable and receivable and other net assets of the holding company
and other head office companies. Segment assets and liabilities are
determined by identifying the assets and liabilities that relate to
the business of each segment but excluding intra-Group balances,
cash, cash equivalents, borrowings, taxation, interest payable and
interest receivable.
|
4 |
SEPARATELY DISCLOSED ITEMS |
(a) Summary of separately disclosed
items
The Group highlights amounts before certain
“separately disclosed items” as defined in note 21.
The items shown in the columns headed
“separately disclosed items” on the face of the consolidated income
statement can be further analysed as follows:
|
|
|
Unaudited |
Unaudited |
|
|
|
Half-year to 28 October 2023 |
Half-year to 29 October 2022 |
|
|
|
£m |
£m |
|
Operating costs and other operating income |
|
|
|
|
Non-software intangible asset amortisation |
|
(0.6) |
(0.4) |
|
Reassessment of onerous contract provision |
|
4.4 |
(0.3) |
|
Restructuring and associated costs |
|
(2.3) |
- |
|
Expired rail franchises |
|
1.4 |
- |
|
Property disposal |
|
4.9 |
- |
|
Transaction costs |
|
- |
(12.9) |
|
Acquisition costs |
|
- |
(0.2) |
|
|
|
7.8 |
(13.8) |
|
Non-operating separately disclosed item |
|
|
|
|
Disposal of Megabus retail and Falcon |
|
- |
1.5 |
|
Finance (costs) / income |
|
|
|
|
Change in fair value of Deferred Payment Instrument |
|
(1.4) |
0.3 |
|
|
|
|
|
|
Separately disclosed items before taxation |
|
6.4 |
(12.0) |
|
Taxation effect |
|
(1.6) |
0.8 |
|
Separately disclosed items after taxation |
|
4.8 |
(11.2) |
(b) Reassessment of onerous contract
provision
As at 29 April 2023, an onerous contract
provision of £8.9m was held in respect of the Sheffield Supertram.
We have recalculated the Sheffield Supertram onerous contract
provision, reflecting our latest forecast for the business. That
re-assessment resulted in a £4.8m decrease (H1 2023: £0.4m
increase) in the level of the provision, with the increase, net of
the £0.4m (H1 2023: £0.1m) of Sheffield Supertram’s other operating
loss (H1 2022: profit) in the half-year, charged (H1 2023:
credited) to the consolidated income statement for the half-year
ended 29 October 2023 and presented as a separately disclosed
item.
|
4 |
SEPARATELY DISCLOSED ITEMS (CONTINUED) |
(b) Reassessment of onerous contract
provision (continued)
The estimate of the Supertram onerous contract
provision involves estimation uncertainty, particularly in relation
to forecast passenger revenue, albeit the level of estimation
uncertainty is reducing as we approach the contract expiry date of
March 2024. Underlying passenger revenue has been normalised to
take account of changes in the timing of infrastructure work on the
tram system.
No specific assumptions have been made regarding
climate change in estimating the Supertram onerous contract
provision. Taking account of the remaining term of the Supertram
concession being less than a year and that the trams are
electrically (rather than diesel) powered, we do not consider that
climate change considerations materially affect the estimate of the
provision as at 28 October 2023.
(c) Restructuring and associated
costs
Following the acquisition of the Group in the
year to 29 April 2023, a detailed review of the Group’s structure
and operations was undertaken. This included the use of an external
consultancy agency along with the management experience of the new
owner. In the half-year ended 28 October 2023, the Group incurred
redundancy and related costs of £2.3m (H1 2023: £Nil).
(d) Expired rail franchises
As part of concluding matters in relation to its
former involvement in the UK train operating market, the Group has
recorded a separately disclosed gain of £1.4m in the half-year
ended 28 October 2023 (H1 2023: £Nil). The gain is presented as a
separately disclosed item as it relates to costs that were
previously recorded as separately disclosed items.
(e) Property disposal
Following the demobilisation of our Wigan depot,
prior to the commencement of Transport for Greater Manchester’s new
franchising system, the depot was sold, generating a gain on its
disposal of £4.9m. Due to the size of the profit on the disposal
this has been presented as a separately disclosed item.
(f) Transaction costs
No transaction costs were incurred in the
half-year ended 28 October 2023.
In the half year to 29 October 2022 the Group
recorded expenses of £12.9m, predominantly professional fees,
accelerated shared based payment expenses (see below) and
accelerated management incentives, in relation to the offer from
DWS Infrastructure and the lapsed all-share combination with
National Express Group plc. Due to the non-recurring nature of the
expenses, the Directors consider that it is helpful for
understanding the Group’s financial performance to disclose
separately the expenses incurred.
The change of control triggered the early
vesting of certain share based awards. As a result, share based
payment expenses that were previously expected to arise in future
periods were immediately expensed and are classified within
separately disclosed items for the half-year ended 29 October
2022.
(g) Acquisition costs
No acquisition costs were incurred in the
half-year ended 28 October 2023. £0.2m of costs incurred in
connection with the acquisition of two London bus businesses in the
half-year ended 29 October 2022 have been presented as a separately
disclosed item, because the costs are not related to the ongoing
trading of the Group and due to the irregularity of business
acquisitions.
(h) Disposal of megabus retail and
Falcon
In August 2022, the Group disposed of the
following businesses to its joint venture, Scottish Citylink
Coaches Limited:
- the megabus retail platform and
customer-service business, which sells and markets inter-city coach
services in England and Wales
- Falcon South-West, which retails
tickets for the coach route between Plymouth and Bristol
Airport.
We have assessed the assets transferred to
Scottish Citylink Coaches and consider them to constitute a
business as defined in International Financial Reporting Standard 3
(“IFRS 3”), Business Combinations. The carrying value of the
Group’s interest in Scottish Citylink has been increased by the
cost of the additional investment, being the estimated fair value
of the business transferred to Scottish Citylink. The gain
resulting from the sale of the business to Scottish Citylink has
been recognised in full in the half-year ended 29 October 2022 and
has not been restricted to the extent of the other investor’s
interest in the joint venture.
|
4 |
SEPARATELY DISCLOSED ITEMS (CONTINUED) |
(h) Disposal of megabus retail and
Falcon (continued)
The consideration received in respect of the
disposal was an increase in the Group’s share of Scottish Citylink
Coaches Limited, from 35% to 37.5%, which has resulted in a gain on
disposal of £1.5m being recognised during the half-year ended 29
October 2022. Due to the irregular occurrence of business
disposals, the Directors consider that it is helpful for
understanding the Group’s financial performance to disclose
separately the gain realised in respect of the business
disposal.
(i) Change in fair value of Deferred
Payment Instrument
The Group received a Deferred Payment Instrument
as deferred consideration for the sale of the North American
business in April 2019. The instrument, which is accounted for as
fair value through profit or loss, has a maturity date of October
2024 and due to credit and other recoverability risks associated
with the instrument, it carrying value is at a discount to its face
value. The Group's exposure to the purchaser of the North American
business ranks behind all of the secured lenders. The carrying
value of the instrument was £3.5m as at 29 April 2023. We estimated
the carrying value of the instrument to be £2.1m as at 28 October
2023, resulting in a loss of £1.4m (H1 2023: gain of £0.3m)
recognised in finance costs (H1 2023: finance income) in the
half-year ended 28 October 2023.
Changes in the fair value of the Deferred
Payment Instrument may occur in several consecutive financial years
until the issuer of the instrument discharges it in full. The
Deferred Payment Instrument is part of the consideration received
for the sale of a business and it does not relate to the ongoing
operating activities of the Group. The Directors therefore consider
that it is helpful for understanding the Group’s financial
performance to disclose separately changes in the fair value of the
Deferred Payment Instrument.
(j) Taxation effect
The separately disclosed taxation charge of
£1.6m (H1 2023: credit of £0.8m) is in relation to the taxation
effect of the pre-tax separately disclosed items.
No dividends have been paid during, or declared
in respect of, the half-year ended 28 October 2023 or in respect of
the half-year ended 29 October 2022.
|
6 |
BUSINESS COMBINATIONS AND DISPOSALS |
No material business combinations or business
disposals were completed by the Group in the half-year to 28
October 2023.
Details of acquisitions and disposals completed
in earlier periods are given in the Group’s annual reports for the
relevant periods.
The movements in goodwill were as follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 |
Year to29 April 2023 |
|
|
£m |
£m |
£m |
|
Net book value at beginning of period |
92.1 |
51.9 |
51.9 |
|
Goodwill arising through acquisitions of businesses |
0.4 |
35.1 |
40.2 |
|
Net book value at end of period |
92.5 |
87.0 |
92.1 |
|
8 |
OTHER INTANGIBLE ASSETS |
The movements in other intangible assets were as
follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 |
Year to29 April 2023 |
|
|
£m |
£m |
£m |
|
Cost at beginning of period |
36.0 |
33.2 |
33.2 |
|
Acquired through business combinations |
0.2 |
3.5 |
2.2 |
|
Additions |
0.9 |
1.0 |
2.9 |
|
Disposals |
- |
(1.4) |
(2.3) |
|
Cost at end of period |
37.1 |
36.3 |
36.0 |
|
Accumulated amortisation at beginning of period |
(28.9) |
(28.9) |
(28.9) |
|
Amortisation charged to income statement |
(1.1) |
(0.9) |
(1.9) |
|
Impairment charged to income statement |
- |
- |
(0.3) |
|
Disposals |
- |
1.4 |
2.2 |
|
Accumulated amortisation at end of period |
30.0 |
(28.4) |
(28.9) |
|
Net book value at beginning of period |
7.1 |
4.3 |
4.3 |
|
Net book value at end of period |
7.1 |
7.9 |
7.1 |
|
9 |
PROPERTY, PLANT AND EQUIPMENT |
(a) Owned assets
The movements in property, plant and equipment
were as follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 |
Year to29 April 2023 |
|
|
£m |
£m |
£m |
|
Cost at beginning of period |
1,574.5 |
1,582.6 |
1,582.6 |
|
Additions |
65.0 |
8.8 |
66.5 |
|
Acquired through business combinations |
0.4 |
1.0 |
0.8 |
|
Transfers from right-of-use assets |
- |
- |
0.1 |
|
Transferred to assets held for sale |
(0.8) |
(0.1) |
(2.4) |
|
Disposals |
(35.9) |
(17.8) |
(73.1) |
|
Cost at end of period |
1,603.2 |
1,574.5 |
1,574.5 |
|
Depreciation at beginning of period |
(863.2) |
(850.5) |
(850.5) |
|
Depreciation charged to income statement |
(40.2) |
(38.5) |
(78.2) |
|
Impairment charged to income statement |
- |
- |
(3.0) |
|
Transfers from right-of-use assets |
- |
- |
(0.1) |
|
Transferred to assets held for sale |
0.3 |
- |
0.1 |
|
Disposals |
34.1 |
16.4 |
68.5 |
|
Depreciation at end of period |
(869.0) |
(872.6) |
(863.2) |
|
Net book value at beginning of period |
711.3 |
732.1 |
732.1 |
|
Net book value at end of period |
734.2 |
701.9 |
711.3 |
(b) Movements in right-of-use
assets
The movements in right-of-use assets were as
follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 (Restated) |
Year to29 April 2023 |
|
|
£m |
£m |
£m |
|
Cost at beginning of period |
148.0 |
126.7 |
126.7 |
|
Additions |
9.3 |
6.0 |
13.5 |
|
Acquired through business combinations |
- |
20.8 |
20.8 |
|
Transfers to owned property, plant and equipment |
- |
- |
(0.1) |
|
Disposals |
(14.9) |
(5.8) |
(12.9) |
|
Cost at end of period |
142.4 |
147.7 |
148.0 |
|
Depreciation at beginning of period |
(67.8) |
(51.8) |
(51.8) |
|
Depreciation charged to income statement |
(13.1) |
(13.8) |
(28.7) |
|
Transfers to owned property, plant and equipment |
- |
- |
0.1 |
|
Disposals |
14.8 |
5.5 |
12.6 |
|
Depreciation at end of period |
(66.1) |
(60.1) |
(67.8) |
|
Net book value at beginning of period |
80.2 |
74.9 |
74.9 |
|
Net book value at end of period |
76.3 |
87.1 |
80.2 |
|
10 |
INTERESTS IN JOINT VENTURES |
|
The movements in the carrying values of
interests in joint ventures were as follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 |
Year to29 April 2023 |
|
|
£m |
£m |
£m |
|
Net book value at beginning of period |
12.0 |
7.2 |
7.2 |
|
Increase in investment (see note 4(h)) |
- |
1.7 |
5.6 |
|
Share of recognised profit |
2.8 |
3.6 |
1.7 |
|
Dividends received in cash |
(0.3) |
(1.8) |
(2.5) |
|
Net book value at end of period |
14.5 |
10.7 |
12.0 |
A loan payable to joint venture, Scottish
Citylink Coaches Limited, of £7.8m (29 April 2023: £7.8m) is
included within current liabilities under the caption “Trade and
other payables”.
|
11 |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK
MANAGEMENT |
The Group is exposed to a variety of financial
risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk.
These condensed financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements. They
should be read in conjunction with the Group’s consolidated
financial statements for the year ended 29 April 2023.
There have been no material changes in any of the Group’s
significant financial risk management policies since 29 April
2023.
Liquidity risk
There have been no material changes since 29
April 2023 in the contractual undiscounted cash outflows for
financial liabilities.
Fair value estimation
Financial instruments that are measured in the
balance sheet at fair value are disclosed by level of the following
fair value measurement hierarchy.
Level
1 Quoted prices
(unadjusted) in active markets for identical assets or
liabilitiesLevel
2 Inputs other than
quoted prices included within Level 1 that are observable for the
asset or liability either directly (that is, as prices) or
indirectly (that is, derived from prices)Level
3 Inputs for the
assets or liabilities that are not based on observable market data
(that is, unobservable inputs)
The following table represents the Group’s
financial assets and liabilities that are measured at fair value
within the hierarchy at 28 October 2023.
|
|
|
Unaudited |
|
|
|
Level 2 |
Level 3 |
Total |
|
|
£m |
£m |
£m |
|
Assets |
|
|
|
|
Deferred Payment Instrument from disposal of subsidiaries |
- |
2.1 |
2.1 |
|
Financial derivatives |
34.5 |
- |
34.5 |
|
Total assets |
34.5 |
2.1 |
36.6 |
|
Liabilities |
|
|
|
|
Deferred consideration for acquisition of businesses |
- |
(7.2) |
(7.2) |
|
Financial derivatives |
(5.1) |
- |
(5.1) |
|
Total liabilities |
(5.1) |
(7.2) |
(12.3) |
The following table represents the Group’s
financial assets and liabilities that are measured at fair value
within the hierarchy at 29 April 2023.
|
|
|
Audited |
|
|
|
Level 2 |
Level 3 |
Total |
|
|
£m |
£m |
£m |
|
Assets |
|
|
|
|
Deferred Payment Instrument from disposal of subsidiaries |
- |
3.5 |
3.5 |
|
Financial derivatives |
25.4 |
- |
25.4 |
|
Total assets |
25.4 |
3.5 |
28.9 |
|
Liabilities |
|
|
|
|
Deferred consideration for acquisition of businesses |
- |
(9.6) |
(9.6) |
|
Financial derivatives |
(21.5) |
- |
(21.5) |
|
Total liabilities |
(21.5) |
(9.6) |
(31.1) |
|
11 |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(CONTINUED) |
Fair value estimation
(continued)
There were no transfers between levels during
the half-year ended 28 October 2023.
The Level 2 assets shown in the above tables
comprise financial derivatives. The fair value of each
financial derivative is determined by the third-party financial
institution with which the Group holds the instrument, in line with
the market value of similar financial instruments.
The Group applies relevant hedge accounting to
all financial derivatives outstanding as at 28 October 2023 and 29
April 2023. All designated hedge relationships were effective under
International Financial Reporting Standard 9 (“IFRS 9”), Financial
Instruments.
The consideration for the sale of the North
American business in April 2019 included a Deferred Payment
Instrument of US$65m. The Deferred Payment Instrument carries a
term of 66 months and a compounding payment in kind interest rate
of 6% per annum. It falls due for payment only on (a) 16 October
2024 or (b) in part, after distributions of US$30m have been made
to the purchaser and is secured by a pledge of shares held in the
underlying investment vehicle. Early repayment provisions apply in
the event that the purchaser sells all of its shareholding, albeit
still subject to the US$30m shareholder distribution priority and
in such circumstances, all or part of the Deferred Payment
Instrument may never be repaid. If the purchaser sells down below
50% but retains some shares, the whole outstanding amount becomes
immediately payable. The instrument is accounted for as fair value
through profit or loss and due to credit and other recoverability
risks associated with the instrument, its carrying value is at a
discount to its face value. The Group’s exposure to the purchaser
of the North American business ranks behind all of the secured
lenders. As a result, the discount rate applied to the Group’s
exposure on this instrument is higher than the cost of the Group’s
secured funding. The cost of second lien/mezzanine debt has been
considered a more approximate estimate for the credit risk of the
instrument. This has led to the carrying value of the instrument
being estimated to be £2.1m as at 28 October 2023 (29 April 2023:
£3.5m).
The North America business continues to operate
a variety of different types of transportation services over a wide
area of North America. The Group has no control or significant
influence over the North America business following its disposal on
16 April 2019.
The financial performance of the North America
business is influenced by various different factors, many of which
are specific to the individual markets and locations in which it
operates. Factors that can affect financial performance include the
extent and timing of how demand recovers from the COVID-19
situation; changes in local economies, local competition, fuel
prices, working patterns, shopping patterns, traffic conditions;
cost pressures including the availability of sufficient staff; and
regulatory change. The performance of the North America business
has a direct impact on the purchaser’s ability to settle the
instrument. The initial contractual value of the instrument was for
US$65m and the range of values that the Group could recover over
the 66 months of its term varies from US$Nil up to US$65m plus
interest.
No specific assumptions have been made regarding
climate change in valuing the Deferred Payment Instrument. While
climate change does present both opportunities and risks to the
North America business, we do not consider that climate change
considerations materially affect the fair value of the instrument
as at 28 October 2023, taking account of the approximate remaining
one-year term of the instrument.
|
11 |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(CONTINUED) |
Fair value estimation
(continued)
The carrying amounts of financial assets and
financial liabilities and their respective fair values were:
|
|
Carrying value |
Fair value |
|
|
28 October 2023Unaudited |
29 April 2023Audited |
28 October 2023Unaudited |
29 April 2023Audited |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
Financial assets measured at fair value through profit or
loss |
|
|
|
|
|
– Non-current
assets |
|
|
|
|
|
– Other
receivables - Deferred Payment Instrument |
- |
3.5 |
- |
3.5 |
|
– Current assets |
|
|
|
|
|
– Other
receivables - Deferred Payment Instrument |
2.1 |
- |
2.1 |
- |
|
Financial assets measured at amortised cost |
|
|
|
|
|
– Non-current
assets |
|
|
|
|
|
– Insurance
claim receivables |
10.6 |
8.9 |
10.6 |
8.9 |
|
– Other
receivables |
|
- |
|
- |
|
– Current
assets |
|
|
|
|
|
– Accrued
income |
44.4 |
29.9 |
44.4 |
29.9 |
|
– Trade
receivables, net of impairment |
35.4 |
29.2 |
35.4 |
29.2 |
|
– Other
receivables |
51.4 |
2.7 |
51.4 |
2.7 |
|
– Cash
and cash equivalents |
180.5 |
245.6 |
180.5 |
245.6 |
|
Total financial assets |
324.4 |
319.8 |
324.4 |
319.8 |
|
Financial liabilities |
|
|
|
|
|
Financial liabilities measured at amortised
cost |
|
|
|
|
|
– Non-current
liabilities |
|
|
|
|
|
– Borrowings |
(461.3) |
(467.4) |
(440.6) |
(445.3) |
|
– Deferred
consideration for business combinations |
(5.5) |
(8.0) |
(5.5) |
(8.0) |
|
– Current
liabilities |
|
|
|
|
|
– Trade
payables |
(33.1) |
(37.0) |
(33.1) |
(37.0) |
|
– Deferred
consideration for business combinations |
(1.7) |
(1.6) |
(1.7) |
(1.6) |
|
– Payables
for purchase of property, plant and equipment |
(3.5) |
(9.3) |
(3.5) |
(9.3) |
|
– Interest
payable |
(0.1) |
(0.4) |
(0.1) |
(0.4) |
|
– Accruals |
(144.8) |
(135.3) |
(144.8) |
(135.3) |
|
– Loan
from joint venture |
(7.8) |
(7.8) |
(7.8) |
(7.8) |
|
– Borrowings |
(22.1) |
(26.8) |
(22.1) |
(26.8) |
|
Total financial liabilities |
(679.9) |
(693.6) |
(659.2) |
(671.5) |
|
Net financial liabilities |
(355.5) |
(373.8) |
(334.8) |
(351.7) |
Financial derivatives with bank counterparties
are not shown in the above table.
The fair values of financial assets and
financial liabilities shown in the table are determined as
follows:
- The determination of the fair value
of the Deferred Payment Instrument is described earlier in this
note 11.
- The carrying value of cash and cash
equivalents, accrued income, trade receivables, insurance claim
receivables and other receivables is considered to be a reasonable
approximation of fair value. Given the short average time to
maturity, no specific assumptions on discount rates have been made.
The effect of credit losses not already reflected in the carrying
value as impairment losses is assumed to be immaterial.
- The fair value
of contingent consideration payable in respect of business
combinations is estimated with reference to the applicable
contractual terms and the expected outcomes on the contingent
elements, then discounted to present value.
- The carrying value of trade
payables, payables for purchase of property, plant and equipment,
interest payable, accruals and loans to/from joint ventures is
considered a reasonable approximation of fair value. Given the
relatively short average time to maturity, no specific assumptions
on discount rates have been made.
- The fair value of fixed-rate notes
(included in borrowings) that are quoted on a recognised stock
exchange is determined with reference to the “bid” price at the
balance sheet date.
- The fair value of leases is
presented above as being equal to their carrying value as
International Financial Reporting Standard 7 (“IFRS 7”), Financial
Instruments: Disclosure, does not require the disclosure of fair
values for leases.
(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 28 October 2023 |
As at 29 April 2023 |
|
|
£m |
£m |
|
Retirement benefit assets |
178.8 |
199.4 |
|
Retirement benefit obligations |
(3.3) |
(3.5) |
|
|
175.5 |
195.9 |
|
(c) |
Gross pension scheme assets and obligations |
The gross pension scheme assets and the present
value of obligations as at 28 October 2023 were as follows:
|
|
Unaudited |
|
|
Funded schemes |
|
|
|
|
|
|
|
|
|
|
|
SPS£m |
LGPS£m |
Other£m |
Unfunded plans£m |
Total£m |
|
Fair value of scheme assets |
1,277.7 |
143.9 |
16.0 |
- |
1,437.6 |
|
Present value of obligations |
(1,047.4) |
(121.3) |
(9.5) |
(3.3) |
(1,181.5) |
|
Pension asset/(liability) before withholding tax |
230.3 |
22.6 |
6.5 |
(3.3) |
256.1 |
|
Withholding tax payable on surplus |
(80.6) |
- |
- |
- |
(80.6) |
|
Net asset/(liability) |
149.7 |
22.6 |
6.5 |
(3.3) |
175.5 |
|
(d) |
Movements in net pre-tax retirement benefit
liabilities |
The movements for the half-year ended 28 October
2023 in the net pre-tax retirement benefit assets/liabilities
(excluding withholding tax on surpluses) recognised in the balance
sheet were as follows:
|
Unaudited |
SPS£m |
LGPS£m |
Other£m |
Unfunded plans£m |
Total£m |
|
Asset/(liability) at beginning of period |
162.9 |
29.7 |
6.8 |
(3.5) |
195.9 |
|
Current service cost |
(1.4) |
(0.1) |
- |
- |
(1.5) |
|
Administration costs |
(0.4) |
- |
- |
- |
(0.4) |
|
Net interest income |
6.0 |
0.7 |
0.6 |
- |
7.3 |
|
Employers’ contributions |
4.3 |
0.2 |
0.1 |
0.2 |
4.8 |
|
Recognised in the consolidated statement of comprehensive
income |
(21.8) |
(7.9) |
(1.0) |
- |
(30.7) |
|
Asset/(liability) at end of period |
149.7 |
22.6 |
6.5 |
(3.3) |
175.5 |
|
12 |
RETIREMENT BENEFITS (CONTINUED) |
(e) Scheme valuations
The Stagecoach Group Pension Scheme (“SPS”) is
the Group’s largest defined benefit scheme exposure comprising
almost 90% of the total retirement benefit obligations. In the
prior year, the Trustees took advantage of the exceptional rise in
gilt yields to transition from its equity and multi-asset led
growth strategy to a liability-driven investment (“LDI”) strategy,
locking in an overall funding surplus with hedging ratios achieved
of 96-97% of interest and inflation liabilities.
To update and to align to its new investment and
funding strategies, the Scheme undertook an out-of-cycle valuation
as at 31 October 2022. This showed a funding surplus of £87.3m,
being a further improvement on the 30 September 2021 out-of-cycle
valuation surplus of £48.7m. At 28 October 2023, taking the various
sections in aggregate, the Scheme was fully funded at around 109%
against its long term self-sufficiency target using a gilts plus
0.5% discount rate.
The latest actuarial valuations of the relevant
LGPS schemes were completed as at 31 March 2022. The combined
surplus across those schemes on the funding basis agreed by each of
the Administering Authorities was £0.3m, comprising scheme assets
of £197.8m less benefit obligations of £197.5m.
|
13 |
ORDINARY SHARE CAPITAL |
At 28 October 2023, there were 576,099,960
ordinary shares in issue (29 April 2023: 576,099,960).
This figure includes 14,143,274 (29 April 2023: 14,143,274)
ordinary shares held in treasury, which are treated as a deduction
from equity in the Group’s financial statements. The
shares held in treasury do not qualify for dividends.
|
14 |
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY
OPERATIONS |
The operating profit of Group companies reconciles
to cash generated by operations as follows:
|
|
Unaudited |
Unaudited |
|
|
Half-year to28
October2023 |
Half-year to29 October2022 (Restated) |
|
|
£m |
£m |
|
Operating profit of Group companies |
48.3 |
29.5 |
|
Separately disclosed items |
(7.8) |
13.8 |
|
Depreciation |
53.3 |
52.3 |
|
Software amortisation |
0.5 |
0.5 |
|
EBITDA of Group companies before separately disclosed items
(“Adjusted EBITDA from Group companies”) |
94.3 |
96.1 |
|
Cash effect of current period separately disclosed items |
4.5 |
(8.2) |
|
Loss/(gain) on disposal of property, plant and equipment |
0.4 |
(1.0) |
|
Capital grant amortisation |
(2.4) |
(1.2) |
|
Share based payment movements (excluding separately disclosed
items) |
- |
0.2 |
|
Operating cashflows before working capital movements |
96.8 |
85.9 |
|
Increase in inventories |
(1.7) |
(0.6) |
|
(Increase)/decrease in receivables |
(25.8) |
12.2 |
|
Increase in payables |
22.8 |
31.2 |
|
Decrease in provisions |
(8.2) |
(3.4) |
|
Differences between employer contributions and pension expense in
operating profit |
(3.0) |
(5.8) |
|
Cash generated by operations |
80.9 |
119.5 |
|
15 |
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT |
The movement in cash and cash equivalents
reconciles to the movement in net debt as follows:
|
|
|
Unaudited |
Unaudited |
|
|
|
Half-year to28
October2023 |
Half-year to29 October2022 |
|
|
Notes |
£m |
£m |
|
(Decrease)/increase in cash and cash equivalents |
|
(63.3) |
41.3 |
|
Cash flow from movement in borrowings |
|
12.6 |
13.7 |
|
|
|
(50.7) |
55.0 |
|
New leases in period |
|
(9.3) |
(6.0) |
|
Lease additions from business combinations |
|
- |
(20.8) |
|
Negotiated early termination of lease |
|
- |
0.3 |
|
Other movements |
|
(0.4) |
(0.4) |
|
(Increase)/decrease in net debt |
|
(60.4) |
28.1 |
|
Net debt at beginning of period |
16 |
(241.1) |
(224.3) |
|
Net debt at end of period |
16 |
(301.5) |
(196.2) |
|
16 |
NET DEBT AND CHANGES IN LIABILITIES ARISING FROM FINANCING
ACTIVITIES |
Changes in net debt (as defined in note 21) are
summarised below:
|
|
UnauditedHalf-year to 28 October
2023 |
|
|
Opening£m |
Cashflows£m |
New leases£m |
Charged to income
statement£m |
Closing£m |
|
Cash and cash equivalents |
243.8 |
(63.3) |
- |
- |
180.5 |
|
Gross debt – see split in following table |
(484.9) |
12.6 |
(9.3) |
(0.4) |
(482.0) |
|
Net debt |
(241.1) |
(50.7) |
(9.3) |
(0.4) |
(301.5) |
Liabilities arising from financing activities
include all liabilities that give rise to cash flows that are
classified as financing activities in the consolidated statement of
cash flows. They include borrowings (excluding bank overdrafts) and
loans from joint ventures. They also include certain interest rate
derivatives that are hedging instruments of liabilities that give
rise to financing cash flows.
The liabilities arising from financing
activities presented in the consolidated balance sheet are as
follows:
|
|
Unaudited |
Audited |
|
|
As at 28 October 2023£m |
As at 29 April 2023£m |
|
Current liabilities: borrowings |
(22.1) |
(26.8) |
- Less bank overdrafts shown in cash and
cash equivalents in this note
|
- |
1.8 |
|
Non-current liabilities: borrowings |
(461.3) |
(467.4) |
|
Current liabilities: interest rate derivatives included in
financial derivatives |
- |
(4.7) |
|
Current liabilities: loan from joint venture |
(7.8) |
(7.8) |
|
Total liabilities arising from financing activities |
(491.2) |
(504.9) |
|
16 |
NET DEBT AND CHANGES IN LIABILITIES ARISING FROM FINANCING
ACTIVITIES (CONTINUED) |
Changes in liabilities from financing activities
are presented in the table below.
|
|
UnauditedHalf-year to 28 October
2023 |
|
|
Opening£m |
Cashflows£m |
New leases£m |
Fair value movements on
hedge£m |
Charged to income
statement£m |
Closing£m |
|
Lease liabilities |
(85.3) |
12.6 |
(9.3) |
- |
- |
(82.0) |
|
Bonds |
|
|
|
|
|
|
|
- Principal |
(400.0) |
- |
- |
- |
- |
(400.0) |
|
- Unamortised costs & discounts on issue |
0.4 |
- |
- |
- |
(0.4) |
- |
|
Gross debt |
(484.9) |
12.6 |
(9.3) |
- |
(0.4) |
(482.0) |
|
Loan from joint venture |
(7.8) |
- |
- |
- |
- |
(7.8) |
|
Accrued interest on bonds |
(9.4) |
16.0 |
- |
- |
(8.0) |
(1.4) |
|
Effect of fair value hedges on carrying value of borrowings |
1.9 |
- |
- |
(1.9) |
- |
- |
|
Interest rate derivatives that hedge liabilities from financing
activities |
(4.7) |
4.9 |
- |
1.9 |
(2.1) |
- |
|
Total liabilities arising from financial activities |
(504.9) |
33.5 |
(9.3) |
- |
(10.5) |
(491.2) |
As explained in note 4(h), the Group disposed of
businesses in the half-year ended 29 October 2022 in exchange for
non-cash consideration in the form of shares in its joint venture,
Scottish Citylink Coaches Limited. The estimated fair value of the
shares received by the Group was £1.7m.
The Group’s provisions at each of 29 April 2023
and 28 October 2023 principally relate to claims provisions for
estimated liabilities on incurred incidents up to the balance sheet
date.
The total claims provisions of £99.7m (29 April
2023: £100.6m) have decreased during the half-year, reflecting the
latest assessment of the required provision for claims on major
incidents. These provisions contain £11.6m (29 April
2023: £8.9m) which is recoverable from insurance companies and is
included within other receivables. The Group engages
with third party actuarial professionals to assist in the
calculation of these provisions.
|
19 |
COMMITMENTS AND CONTINGENCIES |
|
(i) |
Capital commitmentsCapital commitments contracted for the purchase
of property, plant and equipment but not provided for at 28 October
2023 were £181.4m (29 April 2023: £42.6m) and primarily relate to
the commitment to purchase zero emission electric buses. The figure
of £181.4m excludes the benefit of any government funding expected
to be received in respect of these committed purchases. |
|
(ii) |
Legal actionsOn 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 £38m (excluding
interest).In October 2021, the CAT granted the collective
proceedings order (“CPO”) sought by the proposed class
representative. The proceedings have been split into three trials,
the first two of which have been set for June 2024 and June 2025
respectively, with no date currently set for the final trial.The
claim is disputed in respect of its technical merits. No provision
is held as at 28 October 2023 (29 April 2023: £Nil) for any damages
or settlement payable in respect of this matterThe Group and the
Company are from time to time party to other legal actions arising
in the ordinary course of business. Liabilities have
been recognised in the financial statements for the best estimate
of the expenditure required to settle obligations arising under
such legal actions. As at 28 October 2023, the
liabilities in the consolidated financial statements for such
matters total £0.5m (29 April 2023: £0.6m) in addition to those
covered by the claims provisions. |
|
19 |
COMMITMENTS AND CONTINGENCIES (CONTINUED) |
|
(iii) |
Contingent liabilities re former North America Division |
|
|
As explained in note 28(iii) to the Group’s consolidated financial
statements for the year ended 29 April 2023, the Group has certain
contingent liabilities in respect of claims from third parties
against its former North American business. The estimated amount of
those contingent liabilities has reduced from £19.1m as at 29 April
2023 to £14.4m as at 28 October 2023. |
|
20 |
RELATED PARTY TRANSACTIONS |
During the half-year ended 28 October 2023 the
Group made a loan of £50.0m to its immediate parent, Inframobility
UK Bidco Limited. The loan is interest bearing with an interest
rate of 7.4% and is repayable in May 2024. At 28 October 2023 the
loan of £50.0m is outstanding along with related interest
receivable of £1.1m.
(a) Alternative performance
measures
The Group uses a number of alternative
performance measures in this document to help explain the financial
performance and financial position of the Group. More
information on the definition of these alternative performance
measures and how they are calculated is provided below.
All of the alternative performance measures explained below have
been calculated consistently for the half-year ended 28 October
2023 and for comparative amounts shown in this document for prior
periods.
Like-for-like amountsLike-for-like amounts are
derived by comparing the relevant year-to-date amount with the
equivalent prior year amount for those businesses and individual
operating units that have been part of the Group throughout both
periods.
Like-for-like revenue growth for the half-year
ended 28 October 2023 is calculated by comparing the revenue for
the current and comparative periods, each adjusted as described
above. The revenue of each segment is shown in note
3(a) to the condensed financial statements. Where
applicable, the reconciliation to the adjusted revenue figures for
the purposes of calculating like-for-like revenue growth is shown
below:
|
|
|
|
Unaudited |
|
|
|
|
Half-year to 28 October 2023 |
|
|
|
Reported revenue |
Exclude effect of acquisitions |
Exclude effect of disposals |
Exclude expired rail franchises |
Like-for-like revenue |
|
UK Bus (regional operations) |
£m |
584.7 |
(0.5) |
- |
- |
584.2 |
|
UK Bus (London) |
£m |
179.8 |
(36.3) |
- |
- |
143.5 |
|
UK Rail |
£m |
8.7 |
- |
- |
- |
8.7 |
|
|
|
|
Unaudited |
|
|
|
|
Half-year to 29 October 2022 |
|
|
|
Reported revenue |
Exclude effect of acquisitions |
Exclude effect of disposals |
Exclude expired rail franchises |
Like-for-like revenue |
|
UK Bus (regional operations) |
£m |
508.1 |
- |
(11.1) |
- |
497.0 |
|
UK Bus (London) |
£m |
154.4 |
(17.4) |
- |
- |
137.0 |
|
UK Rail |
£m |
7.1 |
- |
- |
(0.4) |
6.7 |
LiquidityReferences to liquidity mean the
aggregate amount of cash and cash equivalents (net of bank
overdrafts in bank offset arrangements), money market deposits and
undrawn committed headroom under bank facilities, adjusted to
exclude: (i) foreign currency bank and cash balances, (ii) petty
cash balances, (iii) cash in transit and (iv) cash pledged as
collateral in respect of liabilities for loan
notes.
Operating profit Operating profit for the Group
as a whole is profit before non-operating separately disclosed
items, finance costs, finance income, taxation and non-controlling
interest. Operating profit of Group companies is operating profit
on that basis, excluding the Group’s share of joint ventures’
profit/loss after taxation. Both total operating profit and
operating profit of Group companies are shown on the face of the
consolidated income statement.
Operating profit (or loss) for a particular
business unit or segment within the Group refers to profit (or
loss) before net finance income/costs, taxation and non-controlling
interest, separately disclosed items and restructuring
costs. The operating profit (or loss) for each segment
is directly identifiable from note 3(b) to the condensed financial
statements.
|
21 |
DEFINITIONS (CONTINUED) |
(a) Alternative performance measures
(continued)
Adjusted operating profit Adjusted operating
profit for the Group as a whole is operating profit before all
separately disclosed items as shown on the face of the consolidated
income statement.
Operating margin Operating margin for a
particular business unit or segment within the Group means
operating profit (or loss) as a percentage of revenue.
The revenue and operating profit (or loss) for each segment is
directly identifiable from the financial statements – see notes
3(a) and 3(b) to the condensed financial statements.
The revenue, operating profit (or loss) and operating margin for
each segment are also shown on page 4 of this document.
Adjusted EBITDAAdjusted EBITDA is earnings
before interest, taxation, depreciation, software amortisation and
separately disclosed items.
A reconciliation of adjusted EBITDA for the
half-year ended 28 October 2023, and the comparative prior year
period, to the condensed financial statements is shown on page 6 of
this document.
Adjusted EBITDA is also presented for the year
to 28 October 2023. That, and the constituent elements of the
reconciliation for that year, are determined by adding the amounts
for the half-year ended 28 October 2023 to the amounts for the year
ended 29 April 2023, and deducting the amounts for the half-year
ended 29 October 2022.
Adjusted EBITDA from Group companiesAdjusted
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 costsNet finance costs are finance
costs less finance income, each as shown on the face of the
consolidated income statement.
Adjusted net finance costsAdjusted 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 expenditureNet capital expenditure
is the impact of purchases, new leases, lease disposals and sales
of property, plant and equipment, and the impact of capital grants
received, on net debt. Its reconciliation to the
condensed financial statements is explained on page 8 of this
document.
Net debt plus train operating company
liabilitiesNet 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 28 October
2023£m |
As at 29 April 2023£m |
|
Net debt as shown in note 16 |
301.5 |
241.1 |
|
Net train operating company liabilities as shown in note 3(d) |
24.2 |
24.7 |
|
Net debt plus train operating company liabilities |
325.7 |
265.8 |
|
21 |
DEFINITIONS (CONTINUED) |
(b) Other definition
The following other definition is also used in
this document:
Separately disclosed itemsSeparately disclosed
items means:
- Non-software intangible asset
amortisation;
- Items which individually or, if of a
similar type, in aggregate need to be separately disclosed by
virtue of their nature, size or incidence in order to allow a
proper understanding of the underlying financial performance of the
Group; and
- Changes in the fair value of the
Deferred Payment Instrument received in relation to the sale of the
North America Division in April 2019 (see note 4(i)).
Changes in the fair value of the Deferred
Payment Instrument may occur in several consecutive financial years
until the issuer of the instrument discharges it in
full. The Deferred Payment Instrument is part of
the consideration received for the sale of a business and it does
not relate to the ongoing operating activities of the
Group. The Directors therefore consider that it is
helpful for understanding the Group’s financial performance to
disclose separately changes in the fair value of the Deferred
Payment Instrument.
Separately disclosed items can include both
pre-tax and tax-related items.
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