23 Jun 2010 07:00
23 June 2010
Stagecoach Group plc - Preliminary results for the year ended 30 April 2010
Highlights
| ·; | Good results in challenging environment |
| ·; | Revenue growth in bus and rail operations in UK and recent improving revenue trends in UK Rail and North America |
| ·; | Sector-leading profit margin at UK Bus |
| ·; | High operational performance and customer satisfaction in UK Rail |
| ·; | Positive outcome from South Western Trains arbitration |
| ·; | Further passenger growth at Virgin Rail Group from improved high frequency timetable |
| ·; | Group in good financial health - successful issue of £400m seven-year bonds |
| ·; | Full year dividend up 8.3% at 6.5p |
Financial summary
| Year ended 30 April | Results excluding intangible asset expenses and exceptional items* | Reported results | ||
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| 2010 | 2009 | 2010 | 2009 |
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| Revenue (£m) | 2,164.4 | 2,103.3 | 2,164.4 | 2,103.3 |
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| Total operating profit (£m) | 192.0 | 227.8 | 179.1 | 202.4 |
| Non-operating exceptional items (£m) | - | - | (2.0) | (0.2) |
| Net finance costs (£m) | (30.7) | (31.4) | (51.2) | (31.4) |
| Profit before taxation - continuing operations (£m) | 161.3 | 196.4 | 125.9 | 170.8 |
| Discontinued operations (£m) | - | - | 3.9 | - |
| Profit before taxation (£m) | 161.3 | 196.4 | 129.8 | 170.8 |
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| Earnings per share (pence) | 18.7p | 22.9p | 15.6p | 18.7p |
| Proposed final dividend (pence) | Nil | 4.2p | Nil | 4.2p |
| Full year dividend (pence) | 6.5p | 6.0p | 6.5p | 6.0p |
* See definitions in note 21 to the preliminary financial information
Commenting on the results, Stagecoach Group Chief Executive, Brian Souter, said:
"These are a good set of results and we have met the challenges of a difficult trading year. We are now in an excellent position to benefit from the increasing signs of economic recovery and capitalise on opportunities to grow our business.
"The Group has solid business fundamentals, a strong financial position and a management team focused on innovation and cost control. We are providing our customers with an unrivalled package of safe, high quality, value-for-money bus and rail travel, matched by high performance and customer satisfaction.
"Our UK Bus business has remained robust and continues to deliver a sector-leading operating margin. We are pleased with the improving revenue growth in our UK Rail division and we welcomed the outcome of our contractual dispute with the Department for Transport in relation to South Western Trains. In North America, we are benefiting from improving revenue trends. Our joint venture, Virgin Rail Group, has achieved further passenger growth from the high frequency timetable.
"We have made a good start to the new financial year and current trading remains in line with management expectations. The Group has delivered consistent sector-leading returns for our shareholders over several years. We believe the prospects for our greener, smarter bus and rail services are positive and we look forward with confidence."
Enquiries to: Martin Griffiths, Stagecoach Group, tel: +44 (0) 1738 442111
Steven Stewart, Stagecoach Group, tel: +44 (0) 1738 442111 or +44 (0)7764774680
John Kiely, Smithfield Consultants, tel: +44 (0) 20 7360 4900
NOTES TO EDITORS
·; Stagecoach Group is a leading international public transport group, with extensive operations in the UK, United States and Canada. The Group employs around 30,000 people, and operates bus, coach, rail, and tram services.
·; High resolution photographs are available to the media free of charge at: www.newscast.co.uk (telephone +44 (0) 207 608 1000).
Chairman's statement
I am pleased to report that we have achieved a strong set of results in a challenging business climate and we are well placed to benefit from the improving economic environment.
We have a clear strategy, strong business fundamentals and excellent relationships with key stakeholders. These strengths provide a good platform for continued growth in our greener, smarter bus and rail services. We look forward to working with the new UK Government with a view to capitalising on the potential of public transport to help combat the threat of climate change and to further contribute to the economy.
Our Group is in good financial health. Our relatively low net debt gives us the flexibility to respond to changing conditions and to capitalise on suitable growth opportunities. Although as a whole we are less susceptible than many other businesses to changes in the economic environment, we took decisive, early management action to reduce costs and improve efficiency as economic conditions weakened. We are now seeing improvement in revenue trends consistent with economic recovery and the actions we have taken leave us well positioned to benefit from the improving conditions.
The overall profitability of the Group has continued to be strong. The Group has achieved further revenue growth despite the challenging macro-economic environment and the severe weather in early 2010 which affected the transport sector. Positive recent trading trends, coupled with the benefit of ongoing cost control, give us confidence moving forward. Revenue for the 12 months ended 30 April 2010 was £2,164.4m (2009: £2,103.3m). Total operating profit (before intangible asset expenses and exceptional items) was £192.0m (2009: £227.8m). Earnings per share before intangible asset expenses and exceptional items was 18.7p (2009: 22.9p).
On 12 February 2010, the Group declared a second interim dividend of 4.5p per ordinary share in addition to the first interim dividend of 2.0p per share declared in December 2009. In light of this, the Group is not proposing a final dividend in respect of the year ended 30 April 2010. The total dividend for the year was up 8.3% on the previous year.
We have made a good start to the new financial year to 30 April 2011 and current trading remains in line with our expectations. We are seeing improvement in revenue trends, and whilst the sustainability and pace of economic recovery remains uncertain, the outlook for the Group is positive. Coupled with the anticipated reduction in its fuel costs and the availability of revenue support at South Western Trains, the Group is well placed to deliver increased earnings in the year to 30 April 2011.
Iain Duffin and Janet Morgan are standing down as Directors after nine years of distinguished service, and I would like to thank them for their tremendous contributions to the Company. They each leave with the appreciation and best wishes of the Board. We have been fortunate to find able replacements with the appointments of Helen Mahy and Phil White as new non-executive directors. Both bring extensive experience across a wide range of business sectors and they will complement the Board's skills and knowledge.
Finally, I would like to thank our employees at all levels of our business for their contribution to the successful delivery of the Group's strategy over the past year. They have continued to put our passengers first. I am positive about the outlook for our business and confident we will deliver increased value to our shareholders and provide greener, smarter bus and rail services for our customers.
Robert Speirs
Chairman
23 June 2010
Chief Executive's review
Financial overview
Stagecoach Group has achieved continued strong financial and operational performance for the year ended 30 April 2010.
Revenue by division is summarised below:
| REVENUE | 2010 | 2009 | Functional currency | 2010 | 2009 | Growth |
| £m | £m |
| Functional currency (m) | % | ||
| Continuing Group operations |
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| UK Bus | 875.4 | 830.8 | £ | 875.4 | 830.8 | 5.4% |
| North America | 266.1 | 297.7 | US$ | 426.3 | 499.5 | (14.7)% |
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| UK Rail | 1,026.7 | 977.7 | £ | 1,026.7 | 977.7 | 5.0% |
| Intra-Group revenue | (3.8) | (2.9) | £ | (3.8) | (2.9) | 31.0% |
| Group revenue | 2,164.4 | 2,103.3 |
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Operating profit by division is summarised below:
| OPERATING PROFIT | 2010 | 2009 |
| 2010 | 2009 | ||
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| £m | % margin | £m | % margin | Functional currency | Functional currency (m) | |
| Continuing Group operations UK Bus |
126.1 |
14.4% |
125.6 |
15.1% |
£ |
126.1 |
125.6 |
| North America | 9.1 | 3.4% | 25.2 | 8.5% | US$ | 14.6 | 42.3 |
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| UK Rail | 41.6 | 4.1% | 55.7 | 5.7% | £ | 41.6 | 55.7 |
| Group overheads | (11.6) |
| (11.5) |
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| Restructuring costs | (1.2) |
| (2.5) |
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| Total operating profit from continuing Group operations | 164.0 |
| 192.5 |
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Joint ventures - share of profit/(loss) after tax |
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| Virgin Rail Group | 19.2 |
| 34.0 |
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| Citylink | 1.2 |
| 1.0 |
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| New York Splash Tours | (0.9) |
| (0.6) |
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| Twin America | 8.5 |
| 0.9 |
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| Total operating profit before intangible asset expenses and exceptional items | 192.0 |
| 227.8 |
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| Intangible asset expenses | (11.1) |
| (13.4) |
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| Exceptional items | (1.8) |
| (12.0) |
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| Total operating profit: Group operating profit and share of joint ventures' profit after taxation | 179.1 |
| 202.4 |
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The Group has met the challenges of a difficult trading year and is in a strong position to achieve our strategic objective of further organic growth in our bus and rail businesses.
We are seeing signs of economic recovery in both the UK and North America and, while the sustainability and pace of economic recovery remains unclear, the outlook for the Group is positive.
The efficiency measures we put in place early in the global economic slowdown have ensured we have a low-cost business model that will allow the Group to move quickly to capitalise on the opportunities ahead.
We believe the environment and outlook for public transport is positive. Our smarter travel services can play a significant role in helping people lead greener lifestyles and delivering a low carbon economy. We look forward to working with the new UK Government to maximise the huge potential of public transport.
The Group has launched an ambitious new sustainability strategy with a five-year plan to reduce further the carbon emissions from our transport operations. It is supported by an £11m investment programme and a range of stretching targets for our bus and rail businesses. As well as making our business more efficient, we believe this will support our strategy of investing for long-term growth.
As a Group, we will continue to consider all opportunities in the transport sector to create additional shareholder value. We are in a strong financial position and believe we are well positioned to take advantage of any emerging opportunities.
Last year, I predicted 2009-10 would be a difficult year, but that Stagecoach Group was better placed than most to come through the global recession. We have done so impressively and we can look forward with confidence with our strong portfolio of flexible bus and rail businesses. I would like to thank our people right across the Group for their key role in making that happen and delivering for our customers and our shareholders.
UK Bus
Our UK Bus Division connects communities in more than 100 towns and cities across the UK on networks stretching from the Highlands and Islands of Scotland to south-west England.
Financial performance
The financial performance of the UK Bus division for the year ended 30 April 2010 is summarised below:
| UK Bus Division: financial performance | |||||
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| 2010 | 2009 | Change | ||
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| £m | £m | % | ||
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| Revenue | 875.4 | 830.8 | 5.4% | ||
| Like-for-like revenue* | 839.5 | 805.9 | 4.2% | ||
| Operating profit | 126.1 | 125.6 | 0.4% | ||
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| % | % | % | ||
| Operating margin | 14.4% | 15.1% | (0.7)% | ||
The small reduction in margin reflects the increased operating costs, including a £21.7m increase in fuel costs and a £6.4m increase in pension costs. Despite these headwinds, operating profit was maintained at around its 2008/9 level.
Passenger revenue growth
We have delivered further passenger revenue growth at our UK Bus Division, which has achieved consistent sector-leading results over several years. Despite tough economic conditions, the adverse effect of severe weather and significant increases in operating costs, our business has remained robust. Like-for-like passenger volumes, incorporating full-fare and concessionary travel, were approximately the same as for the equivalent prior year period.
Pricing strategy
Stagecoach has consistently offered good value travel and we have now been officially recognised as offering the best value local bus fares of any major operator in Britain. Independent transport consultant, TAS, has found that Stagecoach offers significantly lower commuter, leisure and shopping fares than the UK's other major transport groups. TAS found that average prices paid by Stagecoach customers were up to 30% less than those charged by the other major UK bus operators and we regularly offered lower prices than independent operators.
Our market-leading position on low fares is despite significant increases in bus industry costs. Separate analysis published in December in the 2009 edition of the TAS Bus Industry Performance report found that rises in wages, fuel and pensions costs have meant bus operating costs have risen by more than 19% above inflation in five years.
Business development
During the year, the Competition Commission cleared our acquisitions of Eastbourne Buses and Cavendish Motor Services. We have brought significant new investment to bus services in the Eastbourne area, ensuring local people have access to a sustainable, comprehensive high quality and affordable bus network, and we look forward to building on these improvements. In December 2009, we appealed the Competition Commission's decision ordering the divestment of the Preston bus business, which we acquired during the year ended 30 April 2009. We fundamentally disagreed with the Commission's decision, which in our view, was not in the best interests of bus passengers or employees. The Competition Appeal Tribunal ("CAT") ruled in May 2010, that a number of the Commission's findings were not supported by the evidence in the case. We are in discussions with the Competition Commission regarding the implications of the CAT decision.
Outside London, the local bus market in the UK is vibrant and highly competitive and has seen substantial investment in recent years. The Competition Commission investigation into the market has been an unnecessary and expensive distraction for our management teams. However we are confident that common sense will prevail, never forgetting that the motor car is the ultimate competitor and that our business strategy in recent years has been all about converting car users to bus users. We look forward to an early resolution to the investigation that will highlight all of the positive existing qualities of the market and this will then allow us to focus once again on maximising the benefits for our customers.
Outlook
Given the uncertainty on the sustainability and pace of economic recovery in the UK and our continued objective to offer good-value services, we are planning for relatively modest fare and revenue increases over the next year in the UK Bus division. The division will benefit from lower fuel costs in the year to 30 April 2011 because of the phasing of our fuel hedging, although these cost reductions could reverse the following year. We generally expect other costs to be subject to some increases in the year ahead. We remain alert to the potential direct and indirect effects of any government spending cuts on the UK Bus Division. On balance, we believe that the division is well placed to increase profit in the year to 30 April 2011.
North America
Stagecoach's Coach USA and Coach Canada businesses provide transport services in North America where we operate a fleet of around 2,700 vehicles. Our businesses include the budget coach brand, megabus.com, commuter/transit services, inter-city services, tour, charter, sightseeing and school bus operations.
Financial performance
The financial performance of the North America division and North America joint ventures for the year ended 30 April 2010 is summarised below:
| North America: financial performance | |||||
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| 2010 | 2009 | Change | ||
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| US$m | US$m | % | ||
| Revenue |
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| Wholly owned | 426.3 | 499.5 | (14.7)% | ||
| Share of joint ventures | 64.1 | 9.6 | 567.7% | ||
| Total | 490.4 | 509.1 | (3.7)% | ||
| Like-for-like revenue | 417.7 | 432.3 | (3.4)% | ||
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| Operating profit |
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| Wholly owned | 14.6 | 42.3 | (65.5)% | ||
| Share of joint ventures | 12.8 | 0.5 |
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| Total | 27.4 | 42.8 | (36.0)% | ||
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| % | % | % | ||
| Operating margin | 5.6% | 8.4% | (2.8)% | ||
As expected, high levels of unemployment have impacted our bus and coach operations in North America where our business is more susceptible to changes in the economy than our bus operations in the UK. Performance has also been impacted by severe weather in February 2010. However, we have a flexible business model and have taken action to reduce costs and miles operated.
megabus.com
During the year, we expanded further our market-leading budget coach service, megabus.com, capitalising on the demand for low-cost travel. Revenue for megabus.com in North America was US$45.1m (2009: US$32.8m) in the year ended 30 April 2010. We have added new destinations in the US states of Pennsylvania and Iowa, and locations in Canada. We have also invested in new double-decker vehicles to improve the product and add capacity. Our market research has found that 92% of megabus.com customers travel with us over other forms of transport to save money. We have seen a rapid increase in ticket sales during the year against a background of decline in the wider economy.
Outlook
We are expecting any revenue growth in the North America division to be modest in the year ahead, but the division will benefit from reduced fuel costs.
UK Rail
Stagecoach Group has major rail operations in the UK, operating the South Western and East Midlands rail franchises. South Western incorporates the South West Trains and Island Line networks. South West Trains runs around 1,700 train services a day in south-west England out of London Waterloo station, while Island Line operates on the Isle of Wight. The South Western franchise is expected to run until February 2017. The East Midlands Trains franchise comprises main line train services running to London St Pancras, regional rail services in the East Midlands and inter-regional services between Norwich and Liverpool. The franchise will run until 31 March 2015 assuming the Group meets agreed performance targets. Stagecoach is also Britain's biggest light rail operator. The Group runs the Supertram light rail network in Sheffield on a concession running until 2024. We also operate and maintain the Manchester Metrolink tram network under a 10-year contract with Greater Manchester Passenger Transport Executive ("GMPTE"), which started in July 2007.
Financial performance
The financial performance of the UK Rail division for the year ended 30 April 2010 is summarised below:
| UK Rail division: financial performance | |||||
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| 2010 | 2009 | Change | ||
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| £m | £m | % | ||
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| Revenue | 1,026.7 | 977.7 | 5.0% | ||
| Like-for-like revenue, excluding tram |
968.9 |
932.4 |
3.9% | ||
| Operating profit | 41.6 | 55.7 | (25.3)% | ||
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| % | % | % | ||
| Operating margin | 4.1% | 5.7% | (1.6)% | ||
The operating profit and margin in our UK Rail division has fallen because the growth in passenger revenue has not kept pace with the underlying growth in payments to the Department for Transport. Nevertheless, we are pleased with the financial performance. As a result of our cost reduction programme and improving revenue trends, the UK Rail operating profit has exceeded the expectations we had at the start of the financial year. We now have a new low-cost model for our rail operations whilst maintaining our management teams' focus on good customer service.
Operational performance
Across our rail portfolio, we have further improved passenger service, delivering above industry average levels of punctuality at both our South Western Trains and East Midlands Trains rail franchises. South Western Trains' punctuality1 for the year to 1 May 2010 was 93.0%, compared with 91.5% for all London and South East operators and 91.5% for all UK franchised operators. East Midlands Trains achieved 92.5% punctuality compared with an average of 88.9% for all long distance operators.
Customer satisfaction
Passenger satisfaction with our East Midlands Trains and South Western Trains services remains at a high level. The latest National Passenger Survey, which covers Spring 2010, shows overall passenger satisfaction of 85% at South Western Trains, above the national average of 83% and the London and South East average of 82%, making it the top commuter franchise south of the Thames. As one of the UK's largest and most complex passenger rail franchises, this is a particularly impressive achievement and we will continue to work hard to ensure that satisfaction amongst our passengers continues to grow. The investment and improvements we are making at East Midlands Trains is also flowing through into higher customer satisfaction. Overall passenger satisfaction has risen to 86%, a 5% year on year increase.
South Western Trains arbitration
As previously reported, South Western Trains was in dispute with the Department for Transport ("DfT") over the determination of franchise payments, including revenue support payments. The disputes were submitted to arbitration under the Railway Industry Dispute Resolution and on 17 June 2010, we welcomed the arbitrator's decision.
There were two disputes that were subject to arbitration: one related to the period considered when calculating revenue support and the other related to the treatment of certain elements of car park revenue in determining franchise payments. The arbitrator ruled in favour of South Western Trains on the key issue of revenue support timing. The Arbitrator ruled in favour of the DfT in respect of the matter related to car park revenue.
South Western Trains will not receive the first revenue support amount until March 2011. Therefore, there will be an adverse working capital movement in the period to March 2011 that will reverse by April 2011.
The availability of revenue support for South Western Trains in respect of the period from April 2010 should enable the Group's UK Rail Division to remain profitable in the year ending 30 April 2011. The loss of the "car park revenue" dispute will, all other things being equal, mean that South Western Trains future profits will be less than they would otherwise have been. In the year ending 30 April 2011, the Group estimates this will affect pre-tax profit (of each of South Western Trains, the UK Rail Division and the Group) by around £8m.
We are pleased at the outcome of the arbitration process, which has ruled in our favour on the central issue of revenue support. We believed this was a matter of integrity over a contract signed in good faith and we had strong legal advice in support of our position.
Rail franchising
The Group has a good record of high operational performance, successful project management and major investment to improve services for passengers across our existing rail networks, and we will continue to evaluate franchise opportunities as they emerge. However, we believe improvements must be made to the existing rail franchising model. There is an opportunity to give greater freedom to operators to invest in improving services for passengers, reduce the burden on taxpayers, cut unnecessary micro-management by government and better protect services in challenging economic times. We believe that the emphasis should be on targeting the achievement of high levels of customer satisfaction, with each train operating company given the latitude to determine the best way of achieving that objective. All of this can be achieved whilst ensuring a sensible risk transfer to the private sector which allows for shareholder returns commensurate with performance and capital put at risk. The current revenue share and revenue support arrangements do not work either for operators or the taxpayer and the model needs to better reflect the risks and responsibilities that the different parties have control over and are best able to manage.
Light rail
Stagecoach is Britain's biggest tram operator and we are continuing to work with our Passenger Transport Executive partners to improve the quality of public transport on the Sheffield Supertram and Manchester Metrolink systems. Passengers have responded well to our refreshed tram fleet in Sheffield. In Manchester, we completed significant track renewals in the city centre and also carried out a major renewal programme on the Bury line between Radcliffe and Whitefield stations. We have been working with the police, Greater Manchester Passenger Transport Executive ("GMPTE") and other agencies on targeted operations to improve safety and security for customers using the Metrolink network.
Outlook
The outlook for the UK Rail division has improved as the rate of underlying revenue growth has accelerated in recent months. Also, as explained earlier, it has been confirmed that revenue support is now available to South Western Trains. The UK Rail Division is therefore well positioned for the year ending 30 April 2011, to deliver another year of good profitability.
Joint Ventures
Virgin Rail Group
Stagecoach Group has a 49% shareholding in Virgin Rail Group ("VRG"), which operates the West Coast Trains rail franchise. The other shareholder in VRG is the Virgin Group of Companies. The current franchise runs through until 2012.
Financial performance
The financial performance of Virgin Rail Group for the year ended 30 April 2010 is summarised below:
| Virgin Rail Group: financial performance | |||
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| 2010 | 2009 | Change |
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| £m | £m | % |
| 49% share of: |
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| Revenue | 355.3 | 322.3 | 10.2% |
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| Operating profit | 25.5 | 42.7 | (40.3)% |
| Net finance income | 0.2 | 2.3 | (91.3)% |
| Taxation | (6.5) | (11.0) | (40.9)% |
| Profit after tax | 19.2 | 34.0 | (43.5)% |
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| % | % | % |
| Operating margin | 7.2% | 13.2% | (6.0)% |
Virgin Rail Group has performed strongly during the year, with further growth in revenue. As we expected, profit has reduced, reflecting a step-up in costs after increasing capacity by around 30% and lower yield-per-journey as a result of weaker economic conditions during the year.
Passenger trends and operational performance
We are pleased with the continuing positive passenger trends at the West Coast franchise. Passenger volumes over the last financial year increased by around 20% with nearly 27 million journeys on VRG's trains. Effective marketing campaigns, competitive advance ticketing, the significant improvements to weekend travel through improved schedules, and reduced disruption caused by engineering work have resulted in further growth in the leisure market. VRG's share of the rail/air market on the Manchester/London route is over 80%, and on Glasgow/London has doubled in less than two years to 17% as customers have switched away from domestic air travel and turned to trains instead. Performance has steadied over the year, with almost 90% of trains now regularly running within 10 minutes of schedule. However, punctuality for VRG is below the national average and VRG is continuing to monitor Network Rail's performance on infrastructure availability as part of its drive to deliver a more reliable railway to its customers.
Passenger improvements and customer satisfaction
Customers continue to respond well to the package of benefits introduced as part of the full high frequency timetable from February 2009. This has included extra trains and faster schedules across the network. The London to Manchester and London to Birmingham routes now have a train every 20 minutes. Wi-Fi services for customers are now available on all VRG's trains, which is a huge benefit for business travellers who can now work online during their journeys. A new improved website has been launched, offering a range of useful features, including an easier booking process, best fare finder, and handy time-saving tools. VRG has also expanded the number of spaces at key car parks and became one of the first flagship Bike 'n' Ride train companies by helping provide an additional 540 cycle storage spaces at stations. Customer satisfaction with VRG's services has increased to 90%, compared to an average of 87% for long distance operators, making it the top scoring major long distance operator.
Scottish Citylink Coaches
In Scotland, Stagecoach has a joint venture (Scottish Citylink Coaches Limited) with international transport group, ComfortDelGro, to operate megabus.com and Scottish Citylink coach services. Stagecoach owns 35% of the share capital of Scottish Citylink Coaches Limited and ComfortDelGro owns the remaining 65%. The joint venture is the leading provider of express coach services in Scotland.
Our share of Scottish Citylink's profit after tax for the year ended 30 April 2010 was £1.2m (2009: £1.0m). Scottish Citylink has achieved further passenger growth on its inter-city coach services, with particular emphasis on marketing the benefits of coach travel to music festivals, concerts and sporting events. The joint venture has teamed up with the Scottish Football Association to introduce a series of new direct services to Hampden Park for Scotland fans attending the National Stadium on international match-days. Scottish Citylink offers a comprehensive network of extensive connections, faster services and low fares and has also added new journeys under the Scottish Government's national concessionary travel scheme.
Twin America
On 18 March 2009, the Group entered into an agreement with Citysights NY to create a joint venture, Twin America LLC, to operate the sightseeing services of the Group's Gray Line New York business and the business of Citysights NY. The Group holds 50% of the voting rights and 60% of the economic rights in the joint venture with Citysights NY holding the remaining voting rights and economic rights. Twin America commenced trading on 31 March 2009.
Our share of Twin America's profit after tax for the 12-month period ended 30 April 2010 was US$13.6m (one-month period ended 30 April 2009: US$1.5m). The tax treatment of our share of profit is such that the joint venture's own profit is partially taxed but an additional tax charge falls on the joint venture partners and the effect of that on the Group is included within "taxation" in the consolidated income statement.
Depreciation and intangible asset expenses
Earnings before interest, taxation, depreciation, intangible asset expenses and exceptional items (pre-exceptional EBITDA) amounted to £283.9m (2009: £300.1m) including the Group's share of its joint ventures' profit after tax. Depreciation, including non-exceptional impairment charges, for the year was £91.9m (2009: £72.3m). The income statement charge for intangible assets decreased from £13.4m to £11.1m, of which £5.1m (2009: £5.1m) related to joint ventures. The year on year decrease reflects certain intangible assets becoming fully amortised.
Exceptional items
The following exceptional items, before taxation, arose in the year ended 30 April 2010:
·; An expense of £2.6m, being the cost to the Group, predominantly professional fees and consultancy fees, of its participation in the ongoing Competition Commission study of the UK local bus market.
·; A £0.8m operating gain in relation to an unutilised restructuring provision that was released in the year but originally recorded as an exceptional cost in the previous year.
·; A gain of £4.3m in relation to the disposal of properties across the Group.
·; A loss of £0.8m in relation to the planned exit from certain operations in North America.
·; A loss of £3.2m in relation to the disposal of certain operations in North America.
·; An expense of £2.3m in relation to the aborted proposal to acquire certain National Express Group plc businesses from the CVC-Cosmen consortium, and in relation to the aborted proposal to merge with National Express Group plc.
·; An expense of £20.5m in relation to certain interest rate swaps becoming ineffective following the Group issuing a £400m 5.75% bond in December 2009.
·; A gain of £2.5m on the release of a liability related to previous disposals of businesses.
·; A gain of £1.4m arising from the receipt of previously unrecognised contingent consideration related to disposals of businesses.
The net effect of exceptional items was a pre-tax charge of £20.4m (2009: £12.2m), of which a gain of £3.9m (2009: £Nil) was reported as profit from discontinued operations. A tax credit of £7.4m (2009: charge of £6.5m) arose in respect of exceptional items resulting in a net after-tax effect of exceptional items of £13.0m (2009: £18.7m).
Net finance costs
Pre-exceptional net finance costs decreased from £31.4m to £30.7m. The ratio of pre-exceptional EBITDA to net finance costs was 9.2 times for the year ended 30 April 2010 (2009: 9.6 times), reflecting decreased profit.
Taxation
The tax charge is analysed below. In the year ended 30 April 2009, a one-off exceptional tax charge of £10.6m was recognised in relation to an increase in the UK deferred tax liability arising on the abolition of Industrial Buildings Allowances ("IBAs"). This exceptional tax charge did not result in any immediate cash outflow.
| Year ended 30 April 2010 | Year ended 30 April 2009 | |||||
|
| Pre-tax profit £m | Tax £m | Rate % | Pre-tax profit £m | Tax £m | Rate % |
| Excluding intangible asset expenses and exceptional items | 168.7 | (34.6) | 20.5% | 207.8 | (44.4) | 21.4% |
| Intangible asset expenses | (11.1) | 1.7 | 15.3% | (13.4) | 2.2 | 16.4% |
|
| 157.6 | (32.9) | 20.9% | 194.4 | (42.2) | 21.7% |
| Exceptional items | (24.3) | 7.4 | 30.5% | (12.2) | (6.5) | n/a |
|
| 133.3 | (25.5) | 19.1% | 182.2 | (48.7) | 26.7% |
| Reclassify joint venture taxation for reporting purposes | (7.4) | 7.4 | n/a | (11.4) | 11.4 | n/a |
| Reported in income statement | 125.9 | (18.1) | 14.4% | 170.8 | (37.3) | 21.8% |
Earnings per share
Earnings per share before intangible asset expenses and exceptional items was 18.7p, compared to 22.9p in 2009. Basic earnings per share decreased from 18.7p to 15.6p.
Fuel Costs
The Group's operations as at 30 April 2010 consume approximately 326m litres of diesel fuel per annum. As a result, the Group's profit is exposed to movements in the underlying price of fuel.
The proportion of the Group's projected fuel usage that is currently hedged using fuel swaps is as follows:
| Year ending 30 April: | 2011 | 2012 |
|
|
|
|
| UK Bus | 98% | 60% |
| North America | 83% | 77% |
| UK Rail | 77% | 50% |
The Group has no fuel hedges in place for periods beyond 30 April 2012.
The Group's fuel costs include the costs of delivery and duty as well as the costs of the underlying product. Accordingly, not all of the cost varies with movements in oil prices.
The Group's like-for-like diesel fuel costs for the year ending 30 April 2011 are likely to be below 2009/10 costs because after taking account of the fuel hedges in place, the average fuel cost per litre will be less. If market fuel prices remain at current levels, the Group's fuel costs are likely to rise in the year to 30 April 2012 as the average cost per litre of the underlying product and the rate of duty are expected to be higher.
Cash flows
The strong cash generative nature of the Group is once again highlighted by net cash from operating activities after tax of £216.4m (2009: £277.8m) with the year-on-year reduction principally due to the lower operating profit and the significant increase in payables in the prior year. Net cash outflows from investing activities were £37.2m (2009: £101.6m) and net cash used in financing activities was £79.9m (2009: £168.7m).
Net debt
Net debt reduced from £340.1m at 30 April 2009 to £296.7m at 30 April 2010, even after £76.7m of dividends paid to shareholders.
The closing net debt of £296.7m was lower than our recent expectations, principally because the cash held by train operating companies included amounts that were expected to have been paid to the Department for Transport prior to 30 April 2010 as a result of a delay in agreeing the industry arrangements for the change from Rail Industry Control Period 3 to Control Period 4.
The Group's net debt at 30 April 2010 is further analysed below:
|
| Fixed rate £m | Floating rate £m | Total £m |
| ||
| Unrestricted cash | Nil | 127.1 | 127.1 | |||
| Cash held within train operating companies | Nil | 182.8 | 182.8 | |||
| Restricted cash | Nil | 65.8 | 65.8 | |||
| Total cash and cash equivalents | Nil | 375.7 | 375.7 | |||
| Sterling bond* | (252.4) | (150.0) | (402.4) | |||
| Sterling hire purchase | (9.4) | (176.0) | (185.4) | |||
| US dollar finance leases | (51.2) | Nil | (51.2) | |||
| Canadian dollar finance leases | (3.9) | Nil | (3.9) | |||
| Loan notes | Nil | (26.2) | (26.2) | |||
| Preference shares | Nil | (3.3) | (3.3) | |||
| Net debt | (316.9) | 20.2 | (296.7) | |||
* The split between fixed rate and floating rate sterling bonds is after taking account of the effects of interest rate derivatives that synthetically convert fixed rate debt to floating rate debt.
Net cash from operating activities before tax for the year ended 30 April 2010 was £217.1m (2009: £281.5m) and can be further analysed as follows:
|
| 2010 £m | 2009 £m |
|
|
|
|
| Operating profit of Group companies | 156.2 | 172.2 |
| Depreciation | 77.2 | 72.1 |
| Intangible asset expenses | 6.0 | 8.3 |
| Impairment of plant and equipment | 14.7 | 0.2 |
| EBITDA of Group companies before exceptionals | 254.1 | 252.8 |
| Loss on disposal of plant and equipment | 2.0 | 2.0 |
| Equity-settled share based payment expense | 6.3 | 3.1 |
| Working capital movements | (10.7) | 43.7 |
| Net interest paid | (53.1) | (33.0) |
| Dividends from joint ventures | 35.7 | 44.9 |
| Net cash from operating activities before excess pension contributions | 234.3 | 313.5 |
| Pension contributions in excess of pension costs | (17.2) | (32.0) |
| Net cash inflow from operating activities before taxation | 217.1 | 281.5 |
The impact of purchases of property, plant and equipment for the year on net debt was £154.9m (2009: £183.5m). This comprised cash outflows of £89.2m (2009: £94.9m) and new hire purchase and finance lease debt of £65.7m (2009: £88.6m). £53.0m (2009: £12.8m) was received from the disposal of property, plant and equipment.
Liquidity
The Group has comfortably complied with all of its banking covenants throughout the financial year. The Group is subject to certain market standard banking covenants, which include a limit on the level of net debt compared to EBITDA, and a minimum level of EBITDA to interest, in each case as defined in the relevant agreements.
As a result of its strong financial position, the Group has not been subject to any significant problems arising from the difficulties in the banking and credit markets. Our strong financial position is evidenced by:
·; The ratio of net debt at 30 April 2010 to pre-exceptional EBITDA for the year ended 30 April 2010 was 1.0 times (2009: 1.1 times).
·; Pre-exceptional EBITDA for the year ended 30 April 2010 was 9.2 times (2009: 9.6 times) pre-exceptional net finance costs.
·; The successful issue of a £400m 5.75% 7-year bond in December 2009, which was substantially oversubscribed.
·; After taking account of bank facilities that the Group cancelled following the successful bond issue, undrawn, committed bank facilities totalled £345.9m at 30 April 2010 (2009: £508.0m). This included £24.9m (2009: £17.0m) that is only available for non-cash utilisation. In addition, the Group continues to secure new asset finance.
·; The three main credit rating agencies continue to assign investment grade credit ratings to the Group.
·; The Group is cash generative and has the flexibility to vary capital expenditure and other cash outflows where appropriate.
Capital expenditure
Additions to property, plant and equipment for the year were:
|
| 2010 £m | 2009 £m |
|
|
|
|
| UK Bus | 97.1 | 113.8 |
| North America | 14.5 | 36.7 |
| UK Rail | 45.1 | 37.8 |
|
|
|
|
|
| 156.7 | 188.3 |
The differences between the amounts shown above and the impact of capital expenditure on net debt arose from movements in fixed asset deposits and creditors.
Acquisitions
The UK Bus Division made one small acquisition during the year ended 30 April 2010. The acquisition is immaterial to the Group.
Shares in issue
The weighted average number of ordinary shares during the year used to calculate basic earnings per share was 716.2m (2009: 714.5m). The number of ordinary shares ranking for dividend at 30 April 2010 was 717.8m (2009: 715.0m), with a further 2.3m (2009: 4.5m) of ordinary shares held by employee trusts and not ranking for dividend.
Net assets
Net assets at 30 April 2010 were £12.7m (2009: net liabilities of £9.6m) with the increase primarily reflecting the strong results for the year and movements on cash flow hedges of £72.1m after tax, partly offset by actuarial losses on Group defined benefit pension schemes of £99.9m after tax.
Retirement benefits
The reported net assets of £12.7m (2009: net liabilities of £9.6m) that are shown on the consolidated balance sheet are after taking account of net retirement benefit liabilities of £202.1m (2009: £80.6m).
The values of financial investments have risen significantly in the year ended 30 April 2010 but the reported net retirement benefit liabilities have nevertheless increased due to the reduction in the discount rate applied to the liabilities. The Group recognised pre-tax actuarial losses of £138.7m (2009: £144.5m), on Group defined benefit pension schemes in the year ended 30 April 2010.
Current trading and outlook
Our Group has made a good start to this financial year to 30 April 2011 and current trading remains in line with our expectations. We have a strong portfolio of bus and rail businesses, and a robust financial position. Our strategy remains centred on organic growth and capitalising on targeted acquisition opportunities. We are looking to maximise the opportunities from consumer demand for good value products and sustainable forms of transport.
The Group is seeing improvement in revenue trends, consistent with economic recovery in both the UK and North America. Whilst the sustainability and pace of economic recovery remains uncertain, the outlook for the Group is positive. Coupled with the anticipated reduction in its fuel costs and the availability of revenue support at South Western Trains, the Group is well placed to deliver increased earnings in the year to 30 April 2011.
Brian Souter
Chief Executive
23 June 2010
CONSOLIDATED INCOME STATEMENT
|
|
| Audited | Audited | ||||
|
|
| Year ended 30 April 2010 | Year ended 30 April 2009 | ||||
|
|
| Performance pre intangibles and exceptional items | Intangibles and exceptional items (note 4) | Results for the year | Performance pre intangibles and exceptional items | Intangibles and exceptional items (note 4) | Results for the year |
|
| |
|
|
|
|
|
|
|
| Notes | £m | £m | £m | £m | £m | £m |
| CONTINUING OPERATIONS |
|
|
|
|
|
|
|
| Revenue | 3(A) | 2,164.4 | Nil | 2,164.4 | 2,103.3 | Nil | 2,103.3 |
| Operating costs |
| (1,947.2) | (7.8) | (1,955.0) | (1,933.0) | (20.3) | (1,953.3) |
| Other operating (expense)/income | 5 | (53.2) | Nil | (53.2) | 22.2 | Nil | 22.2 |
| Operating profit of Group companies | 3(B) | 164.0 | (7.8) | 156.2 | 192.5 | (20.3) | 172.2 |
| Share of profit of joint ventures after finance income and taxation | 3(C) | 28.0 | (5.1) | 22.9 | 35.3 | (5.1) | 30.2 |
| Total operating profit: Group operating profit and share of joint ventures' profit after taxation |
3(B) | 192.0 | (12.9) | 179.1 | 227.8 | (25.4) | 202.4 |
| Non-operating exceptional items | 4 | Nil | (2.0) | (2.0) | Nil | (0.2) | (0.2) |
| Profit before interest and taxation |
| 192.0 | (14.9) | 177.1 | 227.8 | (25.6) | 202.2 |
| Finance costs | 6 | (41.5) | (20.5) | (62.0) | (38.9) | Nil | (38.9) |
| Finance income | 6 | 10.8 | Nil | 10.8 | 7.5 | Nil | 7.5 |
| Profit before taxation |
| 161.3 | (35.4) | 125.9 | 196.4 | (25.6) | 170.8 |
| Taxation | 7 | (27.2) | 9.1 | (18.1) | (33.0) | (4.3) | (37.3) |
| Profit for the year from continuing operations |
| 134.1 | (26.3) | 107.8 | 163.4 | (29.9) | 133.5 |
| DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
| Profit for the year from discontinued operations |
| Nil | 3.9 | 3.9 | Nil | Nil | Nil |
| TOTAL OPERATIONS |
|
|
|
|
|
|
|
| Profit after taxation for the year attributable to equity shareholders of the parent |
| 134.1 | (22.4) | 111.7 | 163.4 | (29.9) | 133.5 |
| Earnings per share from continuing and discontinued operations |
|
|
|
|
|
|
|
| - Adjusted basic/Basic | 9 | 18.7p |
| 15.6p | 22.9p |
| 18.7p |
| - Adjusted diluted/Diluted | 9 | 18.5p |
| 15.4p | 22.7p |
| 18.5p |
| Earnings per share from continuing operations |
|
|
|
|
|
|
|
| - Adjusted basic/Basic | 9 | 18.7p |
| 15.1p | 22.9p |
| 18.7p |
| - Adjusted diluted/Diluted | 9 | 18.5p |
| 14.9p | 22.7p |
| 18.5p |
| Dividends per ordinary share |
|
|
|
|
|
|
|
| - Interim paid | 8 |
|
| 6.5p |
|
| 1.8p |
| - Final proposed | 8 |
|
| Nil |
|
| 4.2p |
The accompanying notes form an integral part of this consolidated income statement.
Interim dividends of £46.6m were paid during the year ended 30 April 2010 (2009: £12.9m). No final dividend has been proposed in respect of the year ended 30 April 2010 (2009: £30.0m).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
| Audited Year ended 30 April 2010 £m | Audited Year ended 30 April 2009 £m |
| Profit for the year attributable to equity shareholders of the parent | 111.7 | 133.5 |
|
|
|
|
| Other comprehensive income/(expense) |
|
|
| Foreign exchange differences on translation of foreign operations (net of hedging) |
6.0 |
(4.6) |
| Actuarial losses on Group defined benefit pension schemes | (138.7) | (144.5) |
| Share of actuarial gains on joint ventures' defined benefit pension schemes | 0.2 | 2.9 |
| Share of fair value gains on joint ventures' cash flow hedges | 1.8 | Nil |
| Net fair value gains/(losses) on cash flow hedges | 38.3 | (97.4) |
| Net fair value losses on available for sale investments | (0.2) | (0.4) |
|
| (92.6) | (244.0) |
| Transfers to the income statement |
|
|
| Cash flow hedges reclassified and reported in profit for the year | 61.8 | (11.2) |
|
|
|
|
| Tax on items taken directly to or transferred from equity |
|
|
| Tax on foreign exchange differences on translation of foreign operations (net of hedging) |
Nil |
(0.9) |
| Tax effect of actuarial losses on Group defined benefit pension schemes | 38.8 | 40.4 |
| Tax effect of share of actuarial gains on joint ventures' defined benefit pension schemes |
(0.1) |
(0.8) |
| Tax effect of share of fair value gains on joint ventures' cash flow hedges | (0.5) | Nil |
| Tax effect of share based payments | 0.7 | (0.5) |
| Tax effect of cash flow hedges | (28.0) | 31.9 |
|
| 10.9 | 70.1 |
|
|
|
|
| Total comprehensive income/(expense) for the year attributable to equity shareholders of the parent |
91.8 |
(51.6) |
CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
|
| Notes | Audited As at 30 April 2010 £m | Audited As at 30 April 2009 £m |
| ASSETS |
|
|
|
| Non-current assets |
|
|
|
| Goodwill |
| 99.4 | 99.9 |
| Other intangible assets |
| 16.1 | 24.5 |
| Property, plant and equipment |
| 796.2 | 785.7 |
| Interests in joint ventures |
| 56.7 | 68.7 |
| Available for sale and other investments |
| 1.9 | 1.5 |
| Derivative instruments at fair value |
| 5.5 | 0.5 |
| Deferred tax asset |
| 1.3 | 5.3 |
| Other receivables |
| 17.6 | 6.8 |
|
|
| 994.7 | 992.9 |
| Current assets |
|
|
|
| Inventories |
| 24.1 | 22.0 |
| Trade and other receivables |
| 200.3 | 212.4 |
| Derivative instruments at fair value |
| 25.7 | 3.1 |
| Foreign tax recoverable |
| 1.4 | Nil |
| Cash and cash equivalents |
| 375.7 | 277.3 |
| Assets classified as held for sale |
| Nil | 2.4 |
|
|
| 627.2 | 517.2 |
|
Total assets |
|
1,621.9 |
1,510.1 |
|
|
|
|
|
| LIABILITIES |
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables |
| 524.6 | 530.2 |
| Current tax liabilities |
| 19.1 | 15.0 |
| Foreign tax liabilities |
| Nil | 0.8 |
| Borrowings |
| 50.8 | 279.5 |
| Derivative instruments at fair value |
| 4.0 | 68.2 |
| Provisions |
| 46.6 | 56.7 |
|
|
| 645.1 | 950.4 |
| Non-current liabilities |
|
|
|
| Other payables |
| 20.4 | 24.2 |
| Borrowings |
| 626.1 | 347.4 |
| Derivative instruments at fair value |
| 7.3 | 14.4 |
| Deferred tax liabilities |
| 19.2 | 19.5 |
| Provisions |
| 89.0 | 83.2 |
| Retirement benefit obligations | 11 | 202.1 | 80.6 |
|
|
| 964.1 | 569.3 |
|
Total liabilities |
|
1,609.2 |
1,519.7 |
|
|
|
|
|
| Net assets/(liabilities) |
| 12.7 | (9.6) |
|
|
|
|
|
| EQUITY |
|
|
|
| Ordinary share capital | 12 | 7.1 | 7.1 |
| Share premium account |
| 9.8 | 9.5 |
| Retained earnings |
| (433.5) | (374.9) |
| Capital redemption reserve |
| 415.6 | 413.5 |
| Own shares |
| (13.3) | (13.9) |
| Translation reserve |
| 7.1 | 1.1 |
| Available for sale reserve |
| Nil | 0.2 |
| Cash flow hedging reserve |
| 19.9 | (52.2) |
| Total equity |
| 12.7 | (9.6) |
The retained earnings deficit of £433.5m (2009: £374.9m) is the consolidated position. The holding company's distributable reserves as at 30 April 2010 under UK GAAP were £376.8m (2009: £322.7m).
The accompanying notes form an integral part of this consolidated balance sheet.
Consolidated statement of changes in equity
|
| Notes | Ordinary share capital
£m | Share premium account
£m | Retained earnings
£m | Capital redemption reserve
£m | Own shares
£m | Translation reserve
£m | Available for sale reserve
£m | Cash flow hedging reserve
£m | Total equity
£m |
| Balance at 30 April 2008 and 1 May 2008 |
| 7.0 | 8.0 | (363.6) | 410.8 | (12.6) | 5.7 | 0.6 | 24.5 | 80.4 |
| Profit for the year |
| - | - | 133.5 | - | - | - | - | - | 133.5 |
| Foreign exchange differences on translation of foreign operations (net of hedging) |
|
- |
- | - |
- | - | (4.6) | - | - |
(4.6) |
| Actuarial losses on Group defined benefit pension schemes |
| - | - | (144.5) | - | - | - | - | - | (144.5) |
| Share of actuarial gains on joint ventures' defined benefit pension schemes |
|
- |
- | 2.9 | - | - | - | - | - | 2.9 |
| Net fair value losses on cash flow hedges |
| - | - | - | - | - | - | - | (97.4) | (97.4) |
| Net fair value losses on available for sale investments |
| - | - | - | - | - | - | (0.4) | - | (0.4) |
| Cash flow hedges reclassified and reported in profit for the year |
| - | - | - | - | - | - | - | (11.2) | (11.2) |
| Tax on items taken directly to equity (for split see Consolidated statement of recognised income and expense) |
| - | - | 38.2 | - | - | - | - | 31.9 | 70.1 |
| Own ordinary shares purchased |
| - | - | - | - | (2.8) | - | - | - | (2.8) |
| Own shares sold |
| - | - | - | - | 1.5 | - | - | - | 1.5 |
| Preference shares redeemed |
| - | - | (2.7) | 2.7 | - | - | - | - | - |
| Arising on new ordinary share issues |
| 0.1 | 1.3 | - | - | - | - | - | - | 1.4 |
| VAT recovered on professional fees previously applied to share premium account |
| - | 0.2 | - | - | - | - | - | - | 0.2 |
| Credit in relation to equity-settled share based payments |
| - | - | 3.1 | - | - | - | - | - | 3.1 |
| Dividends paid on ordinary shares | 8 | - | - | (41.8) | - | - | - | - | - | (41.8) |
| Balance at 30 April 2009 and 1 May 2009 |
| 7.1 | 9.5 | (374.9) | 413.5 | (13.9) | 1.1 | 0.2 | (52.2) | (9.6) |
| Profit for the year |
| - | - | 111.7 | - | - | - | - | - | 111.7 |
| Foreign exchange differences on translation of foreign operations (net of hedging) |
|
- |
- | - |
- | - | 6.0 | - | - |
6.0 |
| Actuarial losses on Group defined benefit pension schemes |
| - | - | (138.7) | - | - | - | - | - | (138.7) |
| Share of actuarial gains on joint ventures' defined benefit pension schemes |
|
- |
- | 0.2 | - | - | - | - | - | 0.2 |
| Share of fair value gains on joint ventures' cash flow hedges |
| - | - | 1.8 | - | - | - | - | - | 1.8 |
| Net fair value gains on cash flow hedges |
| - | - | - | - | - | - | - | 38.3 | 38.3 |
| Net fair value losses on available for sale investments |
| - | - | - | - | - | - | (0.2) | - | (0.2) |
| Cash flow hedges reclassified and reported in profit for the year |
| - | - | - | - | - | - | - | 61.8 | 61.8 |
| Tax on items taken directly to equity (for split see Consolidated statement of comprehensive income) |
| - | - | 38.9 | - | - | - | - | (28.0) | 10.9 |
| Own ordinary shares purchased |
| - | - | - | - | (0.2) | - | - | - | (0.2) |
| Own shares sold |
| - | - | - | - | 0.8 | - | - | - | 0.8 |
| Preference shares redeemed |
| - | - | (2.1) | 2.1 | - | - | - | - | - |
| Arising on new ordinary share issues |
| - | 0.3 | - | - | - | - | - | - | 0.3 |
| Credit in relation to equity-settled share based payments |
| - | - | 6.3 | - | - | - | - | - | 6.3 |
| Dividends paid on ordinary shares | 8 | - | - | (76.7) | - | - | - | - | - | (76.7) |
| Balance at 30 April 2010 |
| 7.1 | 9.8 | (433.5) | 415.6 | (13.3) | 7.1 | - | 19.9 | 12.7 |
The accompanying notes form an integral part of this consolidated statement of changes in equity.
CONSOLIDATED STATEMENT OF CASH FLOWS
|
| Notes | Audited Year ended 30 April 2010 £m | Audited Year ended 30 April 2009 £m |
|
|
|
|
|
| Cash flows from operating activities |
|
|
|
| Cash generated by operations | 13 | 234.5 | 269.6 |
| Interest paid |
| (58.5) | (41.7) |
| Interest received |
| 5.4 | 8.7 |
| Dividends received from joint ventures |
| 35.7 | 44.9 |
| Net cash flows from operating activities before tax |
| 217.1 | 281.5 |
| Tax paid |
| (0.7) | (3.7) |
| Net cash from operating activities after tax |
| 216.4 | 277.8 |
| Cash flows from investing activities |
|
|
|
| Acquisition of subsidiaries, net of cash acquired | 10 | (2.5) | (19.0) |
| Disposals and closures of subsidiaries and other businesses, net of cash disposed of |
|
1.6 |
0.3 |
| Purchase of property, plant and equipment |
| (89.2) | (94.9) |
| Disposal of property, plant and equipment |
| 53.0 | 12.8 |
| Purchase of intangible assets |
| (0.9) | (0.4) |
| Purchase of other investments |
| (0.6) | Nil |
| Movement in loans to joint ventures |
| 1.4 | (0.4) |
| Net cash outflow from investing activities |
| (37.2) | (101.6) |
| Cash flows from financing activities |
|
|
|
| Issue of ordinary shares for cash |
| 0.3 | 1.4 |
| VAT recovered on professional fees previously applied to share premium |
| Nil | 0.2 |
| Redemption of 'B' shares |
| (2.1) | (2.7) |
| Investment in own ordinary shares by employee share ownership trusts |
| (0.2) | (2.8) |
| Sale of own ordinary shares by employee share ownership trusts |
| 0.8 | 1.5 |
| Repayments of hire purchase and lease finance |
| (58.7) | (47.5) |
| Proceeds of sale and leaseback transaction |
| 3.6 | 20.3 |
| Movement in other borrowings |
| 53.3 | (96.5) |
| Dividends paid on ordinary shares | 8 | (76.7) | (41.8) |
| Sale of tokens |
| 3.2 | 4.5 |
| Redemption of tokens |
| (3.4) | (5.3) |
| Net cash used in financing activities |
| (79.9) | (168.7) |
| Net increase in cash and cash equivalents |
| 99.3 | 7.5 |
| Cash and cash equivalents at the beginning of the year |
| 277.3 | 261.6 |
| Exchange rate effects |
| (0.9) | 8.2 |
| Cash and cash equivalents at the end of the year |
| 375.7 | 277.3 |
Cash and cash equivalents for the purposes of the consolidated cash flow statement comprise cash at bank and in hand and other short-term highly liquid investments with maturities at the balance sheet date of three months or less.
The accompanying notes form an integral part of this consolidated cash flow statement.
NOTES
| 1 | BASIS OF PREPARATION |
These results are extracts of consolidated financial statements that have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union (that therefore comply with Article 4 of the EU IAS Regulation), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies and methods of computation adopted are consistent with those used in the last set of published financial statements, with the exception of those highlighted below.
The following new accounting standards and amendments to standards are mandatory for the first time for the financial year beginning 1 May 2009:
·; IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.
Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).
·; IFRS 2 (amended), 'Share-based payments - vesting conditions and cancellations'. The amendment clarifies that only service and performance conditions are vesting conditions. Any other conditions are non-vesting conditions, which have to be taken into account to determine the fair value of the equity instruments granted. In the case that the award does not vest as the result of a failure to meet a non-vesting condition that is within the control of either the entity or the counterparty, this must be accounted for as a cancellation.
The main impact of this amendment for the Group arises from cancellations by employees of contributions to the Group's Save as You Earn (SAYE) scheme; in the event of a cancellation the Group must recognise immediately the amount of the expense that would have otherwise been recognised over the remainder of the vesting period.
The amendment is to be applied retrospectively, however no adjustment has been made to prior year comparatives as the adjustment would be immaterial.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 May 2009, but do not have any significant effect on the Group:
·; IFRS 1 (revised November 2008), 'First-time adoption of international financial reporting standards'
·; IFRS 7 (amended), 'Financial instruments: disclosures'
·; IAS 1 (amendment relating to disclosure of puttable instruments and obligations arising on liquidation), 'Presentation of Financial Statements'
·; IAS 23 (revised March 2007), 'Borrowing costs'
·; IAS 27 (amendment relating to cost of an investment on first-time adoption), 'Consolidated and Separate Financial Statements'
·; IAS 32 (amendment relating to puttable instruments and obligations arising on liquidation), 'Financial instruments - presentation'
·; IAS 39 (amendment for embedded derivatives), 'Financial instruments - recognition and measurement'
·; IAS 39 (amendment in relation to reclassification of financial assets), 'Financial instruments - recognition and measurement'
·; IFRIC 9 (amended), 'Embedded derivatives'
·; IFRIC 13, 'Customer loyalty programmes'
| 1 | BASIS OF PREPARATION (CONTINUED) |
·; IFRIC 15, 'Agreements for the construction of real estate'
·; IFRIC 16, 'Hedges of a net investment in a foreign operation'
Where appropriate, comparative figures for the previous year have been adjusted to conform to changes in presentation. These changes have no impact on the consolidated income statement or on consolidated net assets.
The Board of Directors approved this announcement on 23 June 2010.
| 2 | FOREIGN CURRENCIES |
The principal rates of exchange used to translate the results of foreign operations are as follows:
| Principal rates of exchange | 2010 | 2009 |
| US Dollar: |
|
|
| Year end rate | 1.5307 | 1.4818 |
| Average rate | 1.6020 | 1.6780 |
| Canadian Dollar: |
|
|
| Year end rate | 1.5504 | 1.7605 |
| Average rate | 1.7189 | 1.8955 |
| 3 | SEGMENTAL INFORMATION |
Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Group is managed, and reports internally, on a basis consistent with its three continuing operating segments, being UK Bus, North America and UK Rail. The Group's IFRS accounting policies are applied consistently, where appropriate, to each segment.
The segmental information provided in this note is on the basis of three operating segments as follows:
| Segment name | Service operated | Country of operations |
| UK Bus | Coach and bus operations | United Kingdom |
| North America | Coach and bus operations | USA and Canada |
| UK Rail | Rail operations | United Kingdom |
UK Bus and North America provide coach and bus services while UK Rail provides rail services.
The Group has interests in four joint ventures: Virgin Rail Group that operates in UK Rail, Citylink that operates in UK Bus and New York Splash Tours LLC and Twin America LLC that both operate in North America. The results of these joint ventures are shown separately in note 3(C).
| 3 | SEGMENTAL INFORMATION (CONTINUED) |
| (A) | REVENUE |
Due to the nature of the Group's business, the origin and destination of revenue is the same in all cases. As the Group 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.
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
|
| £m | £m |
|
|
|
|
| Continuing operations |
|
|
| UK Bus | 875.4 | 830.8 |
| North America | 266.1 | 297.7 |
| Total bus continuing operations | 1,141.5 | 1,128.5 |
| UK Rail | 1,026.7 | 977.7 |
| Total Group revenue | 2,168.2 | 2,106.2 |
| Intra-Group revenue | (3.8) | (2.9) |
| Reported Group revenue | 2,164.4 | 2,103.3 |
| (B) | OPERATING PROFIT |
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
| |||||
|
| Notes | Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year | Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year | |
|
|
|
|
|
|
|
|
| |
|
|
| £m | £m | £m | £m | £m | £m | |
| Continuing operations |
|
|
|
|
|
|
| |
| UK Bus |
| 126.1 | (2.6) | 123.5 | 125.6 | Nil | 125.6 | |
| North America |
| 9.1 | Nil | 9.1 | 25.2 | Nil | 25.2 | |
| Total bus continuing operations |
| 135.2 | (2.6) | 132.6 | 150.8 | Nil | 150.8 | |
| UK Rail |
| 41.6 | Nil | 41.6 | 55.7 | Nil | 55.7 | |
| Total continuing operations |
| 176.8 | (2.6) | 174.2 | 206.5 | Nil | 206.5 | |
| Group overheads |
| (11.6) | Nil | (11.6) | (11.5) | Nil | (11.5) | |
| Intangible asset expenses |
| Nil | (6.0) | (6.0) | Nil | (8.3) | (8.3) | |
| Restructuring costs | (1.2) | 0.8 | (0.4) | (2.5) | (12.0) | (14.5) | ||
| Total operating profit of continuing Group companies |
| 164.0 | (7.8) | 156.2 |
192.5 |
(20.3) |
172.2 | |
| Share of profit of joint ventures after finance income and taxation |
3(C) |
28.0 |
(5.1) |
22.9 |
35.3 |
(5.1) |
30.2 | |
| Total operating profit: Group operating profit and share of joint ventures' profit after taxation |
|
192.0 |
(12.9) |
179.1 |
227.8 |
(25.4) |
202.4 | |
| 3 | SEGMENTAL INFORMATION (CONTINUED) |
| (C) | JOINT VENTURES |
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 | ||||
|
| Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year | Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year |
|
|
|
|
|
|
|
|
|
| £m | £m | £m | £m | £m | £m |
| Continuing |
|
|
|
|
|
|
| Virgin Rail Group (UK Rail) |
|
|
|
|
|
|
| Operating profit | 25.5 | Nil | 25.5 | 42.7 | Nil | 42.7 |
| Finance income (net) | 0.2 | Nil | 0.2 | 2.3 | Nil | 2.3 |
| Taxation | (6.5) | Nil | (6.5) | (11.0) | Nil | (11.0) |
|
| 19.2 | Nil | 19.2 | 34.0 | Nil | 34.0 |
| Goodwill charged on investment in continuing joint ventures | Nil | (5.1) | (5.1) | Nil | (5.1) | (5.1) |
|
| 19.2 | (5.1) | 14.1 | 34.0 | (5.1) | 28.9 |
| Citylink (UK Bus) |
|
|
|
|
|
|
| Operating profit | 1.7 | Nil | 1.7 | 1.4 | Nil | 1.4 |
| Taxation | (0.5) | Nil | (0.5) | (0.4) | Nil | (0.4) |
|
| 1.2 | Nil | 1.2 | 1.0 | Nil | 1.0 |
| New York Splash Tours LLC (North America) |
|
|
|
|
|
|
| Operating loss | (0.9) | Nil | (0.9) | (0.6) | Nil | (0.6) |
|
| (0.9) | Nil | (0.9) | (0.6) | Nil | (0.6) |
| Twin America LLC (North America) |
|
|
|
|
|
|
| Operating profit | 8.9 | Nil | 8.9 | 0.9 | Nil | 0.9 |
| Taxation | (0.4) | Nil | (0.4) | Nil | Nil | Nil |
|
| 8.5 | Nil | 8.5 | 0.9 | Nil | 0.9 |
|
|
|
|
|
|
|
|
| Share of profit of joint ventures after finance income and taxation | 28.0 | (5.1) | 22.9 | 35.3 | (5.1) | 30.2 |
| 3 | SEGMENTAL ANALYSIS (CONTINUED) |
| (D) | GROSS ASSETS AND LIABILITIES |
|
| As at 30 April 2010 | ||||
|
| Gross assets | Gross liabilities excluding retirement benefit obligations | Net assets / (liabilities) excluding retirement benefit obligations | Retirement benefit obligations | Net assets / (liabilities) |
|
|
|
|
|
|
|
|
| £m | £m | £m | £m | £m |
|
|
|
|
|
|
|
| UK Bus | 693.3 | (172.8) | 520.5 | (151.1) | 369.4 |
| North America | 271.7 | (80.8) | 190.9 | (2.9) | 188.0 |
| UK Rail | 196.6 | (375.8) | (179.2) | (40.8) | (220.0) |
|
| 1,161.6 | (629.4) | 532.2 | (194.8) | 337.4 |
| Central functions | 25.2 | (62.5) | (37.3) | (7.3) | (44.6) |
| Joint ventures | 56.7 | Nil | 56.7 | Nil | 56.7 |
| Borrowings and cash | 375.7 | (676.9) | (301.2) | Nil | (301.2) |
| Taxation | 2.7 | (38.3) | (35.6) | Nil | (35.6) |
| Total | 1,621.9 | (1,407.1) | 214.8 | (202.1) | 12.7 |
|
| As at 30 April 2009 | ||||
|
| Gross assets | Gross liabilities excluding retirement benefit obligations | Net assets / (liabilities) excluding retirement benefit obligations | Retirement benefit obligations | Net assets / (liabilities) |
|
|
|
|
|
|
|
|
| £m | £m | £m | £m | £m |
|
|
|
|
|
|
|
| UK Bus | 630.7 | (140.4) | 490.3 | (27.3) | 463.0 |
| North America | 278.2 | (102.6) | 175.6 | (3.6) | 172.0 |
| UK Rail | 234.9 | (385.0) | (150.1) | (47.4) | (197.5) |
|
| 1,143.8 | (628.0) | 515.8 | (78.3) | 437.5 |
| Central functions | 15.0 | (148.9) | (133.9) | (2.3) | (136.2) |
| Joint ventures | 68.7 | Nil | 68.7 | Nil | 68.7 |
| Borrowings and cash | 277.3 | (626.9) | (349.6) | Nil | (349.6) |
| Taxation | 5.3 | (35.3) | (30.0) | Nil | (30.0) |
| Total | 1,510.1 | (1,439.1) | 71.0 | (80.6) | (9.6) |
Central assets and liabilities include the token provision, interest payable and receivable and other net assets of the holding company.
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, borrowings, interest payable, interest receivable, retirement benefit obligations and the token provision.
| 4 | EXCEPTIONAL ITEMS AND INTANGIBLE ASSET EXPENSES |
The Group highlights amounts before intangible asset expenses and exceptional items as well as clearly reporting the results in accordance with IFRS. Exceptional items are as defined in note 21.
The items shown in the column headed "Intangibles and exceptional items" on the face of the consolidated income statement for the year ended 30 April 2010 can be further analysed as follows:
|
| Audited | ||
|
| Year ended 30 April 2010 | ||
|
| Exceptional items £m | Intangible asset expenses £m | Intangibles and exceptional items £m |
| Operating costs |
|
|
|
| Restructuring costs - release of unutilised provision | 0.8 | Nil | 0.8 |
| Cost of participation in the Competition Commission study of the UK local bus market |
(2.6) |
Nil |
(2.6) |
| Intangible asset expenses | Nil | (6.0) | (6.0) |
|
| (1.8) | (6.0) | (7.8) |
| Share of profit of joint ventures |
|
|
|
| Goodwill charged on investment in joint ventures | Nil | (5.1) | (5.1) |
|
|
|
|
|
| Non operating exceptional items - continuing operations |
|
|
|
| Gain on sale of properties | 4.3 | Nil | 4.3 |
| Loss on disposal of operations | (3.2) | Nil | (3.2) |
| Loss on exit from certain operations | (0.8) | Nil | (0.8) |
| Expenses incurred in relation to proposal to acquire certain businesses of, or merge with, National Express Group plc |
(2.3) |
Nil |
(2.3) |
| Non operating exceptional items - continuing operations | (2.0) | Nil | (2.0) |
|
|
|
|
|
| Exceptional finance costs |
|
|
|
| Loss on ineffective interest rate swaps following issuance of sterling bond |
(20.5) |
Nil |
(20.5) |
|
|
|
|
|
| Intangible asset expenses and exceptional items - continuing operations |
(24.3) |
(11.1) |
(35.4) |
| Tax effect of intangible asset expenses and exceptional items - continuing operations |
7.4 |
1.7 |
9.1 |
| Intangible asset expenses and exceptional items after taxation - continuing operations |
(16.9) |
(9.4) |
(26.3) |
|
|
|
|
|
| Resolution of certain liabilities re disposals - discontinued operations |
3.9 |
Nil |
3.9 |
| 4 | EXCEPTIONAL ITEMS AND INTANGIBLE ASSET EXPENSES (CONTINUED) |
The items shown in the column headed "Intangibles and exceptional items" on the face of the consolidated income statement for the prior year comparatives can be further analysed as follows:
|
| Audited | ||
|
| Year ended 30 April 2009 | ||
|
| Exceptional items £m | Intangible asset expenses £m | Intangibles and exceptional items £m |
| Operating costs |
|
|
|
| Intangible asset expenses | Nil | (8.3) | (8.3) |
| Restructuring costs | (12.0) | Nil | (12.0) |
|
| (12.0) | (8.3) | (20.3) |
| Share of profit of joint ventures |
|
|
|
| Goodwill charged on investment in joint ventures | Nil | (5.1) | (5.1) |
|
|
|
|
|
| Non operating exceptional items - continuing operations |
|
|
|
| Impairment charge on properties | (2.4) | Nil | (2.4) |
| Resolution of certain liabilities re acquisitions and disposals | 2.2 | Nil | 2.2 |
|
| (0.2) | Nil | (0.2) |
|
|
|
|
|
| Intangible asset expenses and exceptional items | (12.2) | (13.4) | (25.6) |
| Tax effect of intangible asset expenses and exceptional items | 4.1 | 2.2 | 6.3 |
| Exceptional tax charge: |
|
|
|
| Deferred tax charge re abolition of the Industrial Buildings Allowance |
(10.6) |
Nil |
(10.6) |
| Intangible asset expenses and exceptional items after taxation | (18.7) | (11.2) | (29.9) |
| 5 | OTHER OPERATING EXPENSE/INCOME |
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
|
| £m | £m |
|
|
|
|
| Miscellaneous revenue | 87.7 | 88.6 |
| Rail franchise support | Nil | 31.5 |
| Rail franchise premia | (148.7) | (97.9) |
| Rail revenue support | 7.8 | Nil |
|
| (53.2) | 22.2 |
Miscellaneous revenue comprises revenue incidental to the Group's principal activities. It includes commissions receivable, advertising income, maintenance income, railway station access income, railway depot access income, fuel sales and property income.
Rail franchise support is the amount of financial support receivable from the Department for Transport ("DfT") in respect of the operation of UK passenger rail franchises. Rail franchise premia is the amount of financial premia payable to the DfT in respect of the operation of UK passenger rail franchises.
Rail revenue support is the amount of additional financial support receivable from the DfT in certain circumstances where a train operating company's revenue is below target.
| 6 | FINANCE COSTS AND INCOME |
|
| Audited Year ended 30 April 2010 £m | Audited Year ended 30 April 2009 £m |
| Finance costs: |
|
|
| Interest payable and other facility costs on bank loans, loan notes and overdrafts | 4.5 | 9.8 |
| Hire purchase and finance lease interest payable | 7.3 | 7.8 |
| Interest payable on bonds | 16.1 | 15.1 |
| 'B' share dividends | Nil | 0.2 |
| Fair value losses on financial instruments not qualifying as hedges |
|
|
| - Foreign exchange derivative contracts | 5.1 | Nil |
| Unwinding of discount on provisions | 3.7 | 3.6 |
| Interest payable on interest rate swaps qualifying as cashflow hedges | 4.8 | 2.4 |
|
| 41.5 | 38.9 |
| Finance income: |
|
|
| Interest receivable | (4.0) | (7.5) |
| Interest receivable on interest rate swaps qualifying as fair value hedges | (1.3) | Nil |
| Exchange gain on retranslation of US$ bonds | (5.5) | Nil |
|
| (10.8) | (7.5) |
| Net finance costs before exceptional items | 30.7 | 31.4 |
| Exceptional item: |
|
|
| Ineffective interest rate swaps | 20.5 | Nil |
| Net finance costs | 51.2 | 31.4 |
No interest (2009: £Nil) was capitalised during the year.
At 30 April 2009, the US$293.1m of US$ notes, and a US$20.0m foreign currency derivative contract, were designated as a hedge of overseas net investments. On 7 July 2009, this hedge relationship was de-designated. On the same day, the Group took out US$ derivative contracts, with notional amounts totalling US$342.0m, to give certainty of the sterling value of the redemption payment that would be made by the Group when the US$ notes matured on 16 November 2009. Exchange gains on the US$ notes in the period from 7 July 2009 to 16 November 2009 of £5.5m are included within finance income above. The notional value of the derivative contracts exceeded the outstanding US$ notes in order to take account of the tax effect of the transactions.
| 7 | TAXATION |
The taxation charge comprises:
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 209 | ||||
|
| Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year | Performance pre intangibles and exceptional items | Intangibles and exceptional items | Results for the year |
|
| £m | £m | £m | £m | £m | £m |
|
|
|
|
|
|
|
|
| Current tax: |
|
|
|
|
|
|
| UK corporation tax at 28% (2009: 28%) | 12.7 | (9.1) | 3.6 | 19.9 | (4.1) | 15.8 |
| Prior year over provision for corporation tax | (0.9) | Nil | (0.9) | (0.5) | Nil | (0.5) |
| Foreign tax (current year) | 0.4 | Nil | 0.4 | 0.8 | Nil | 0.8 |
| Foreign tax (adjustments in respect of prior years | 1.0 | Nil | 1.0 | Nil | Nil | Nil |
| Total current tax | 13.2 | (9.1) | 4.1 | 20.2 | (4.1) | 16.1 |
| Deferred tax: |
|
|
|
|
|
|
| Origination and reversal of temporary differences |
14.9 |
Nil |
14.9 |
13.4 |
(2.2) |
11.2 |
| Exceptional charge re abolition of Industrial Buildings Allowances |
Nil |
Nil |
Nil |
Nil |
10.6 |
10.6 |
| Adjustments in respect of prior years | (0.9) | Nil | (0.9) | (0.6) | Nil | (0.6) |
| Total deferred tax | 14.0 | Nil | 14.0 | 12.8 | 8.4 | 21.2 |
| Total tax on profit | 27.2 | (9.1) | 18.1 | 33.0 | 4.3 | 37.3 |
| 8 | DIVIDENDS |
Dividends payable in respect of ordinary shares are shown below. Dividends payable in respect of 'B' shares are included as an expense in finance costs and shown separately in note 6.
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 | Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
|
| pence per share | pence per share | £m | £m |
| Amounts recognised as distributions in the year |
|
|
|
|
| Dividends on ordinary shares |
|
|
|
|
| Final dividend in respect of the previous year | 4.20 | 4.05 | 30.1 | 28.9 |
| Interim dividend in respect of the current year | 6.50 | 1.80 | 46.6 | 12.9 |
| Amounts recognised as distributions to equity holders in the year | 10.70 | 5.85 | 76.7 | 41.8 |
|
|
|
|
|
|
| Dividends proposed but neither paid nor included as liabilities in the financial statements |
|
|
|
|
| Dividends on ordinary shares |
|
|
|
|
| Final dividend in respect of the current year | Nil | 4.20 | Nil | 30.0 |
The Company declared and paid two interim dividends in respect of the year ended 30 April 2010, totalling 6.5 pence per share. In light of this, no final dividend is proposed in respect of the year ended 30 April 2010.
The dividends proposed or declared and the actual dividends recognised as distributions can differ slightly due to the number of shares at the balance sheet date being different to the number outstanding at the record date.
| 9 | EARNINGS PER SHARE |
Basic earnings per share ("EPS") have been calculated by dividing the profit attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year, excluding any ordinary shares held by employee share ownership trusts.
The diluted earnings per share was calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares in relation to share options and long-term incentive plans. In respect of share options, a calculation was done to determine the number of ordinary shares that could have been acquired at fair value (determined based on the average annual market share price of the Company's ordinary shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of ordinary shares calculated as above is compared with the number of ordinary shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration and no adjustment is made to earnings (numerator).
| 9 | EARNINGS PER SHARE (CONTINUED) |
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
|
| No. of shares million | No. of shares million |
|
|
|
|
| Basic weighted average number of ordinary shares | 716.2 | 714.5 |
| Dilutive ordinary shares |
|
|
| - Executive Share Option Scheme | 0.6 | 1.3 |
| - Employee SAYE Scheme | Nil | 0.1 |
| - Long Term Incentive Plan | 3.1 | 2.4 |
| - Executive Participation Plan | 3.7 | 2.8 |
| Diluted weighted average number of ordinary shares | 723.6 | 721.1 |
|
| £m | £m |
|
|
|
|
|
|
|
|
| Profit after taxation including discontinued operations (for basic EPS calculation) |
111.7 |
133.5 |
| Intangible asset expenses (see note 4) | 11.1 | 13.4 |
| Exceptional items before tax (see note 4) | 24.3 | 12.2 |
| Tax effect of intangible asset expenses and exceptional items (see note 4) | (9.1) | 4.3 |
| Profit for the year from discontinued operations (see note 4) | (3.9) | Nil |
| Profit for adjusted EPS calculation | 134.1 | 163.4 |
|
| Earnings per share pence | Earnings per share pence |
|
|
|
|
|
|
|
|
| Basic | 15.6 | 18.7 |
| Adjusted basic | 18.7 | 22.9 |
| Diluted | 15.4 | 18.5 |
| Adjusted diluted | 18.5 | 22.7 |
| 9 | EARNINGS PER SHARE (CONTINUED) |
Earnings per share before intangible asset expenses and exceptional items is calculated by adding back intangible asset expenses and exceptional items after taking account of taxation, as shown on the consolidated income statement. This has been presented to allow shareholders to gain a further understanding of the underlying performance. The basic and diluted earnings per share can be further analysed as follows:
|
| Audited | Audited | ||||
|
| Year ended 30 April 2010 | Year ended 30 April 2009 | ||||
|
| Earnings | Weighted average number of shares | Earnings per share | Earnings | Weighted average number of shares | Earnings per share |
|
| £m | Million | pence | £m | Million | pence |
|
|
|
|
|
|
|
|
| Basic |
|
|
|
|
|
|
| - Continuing operations | 107.8 | 716.2 | 15.1 | 133.5 | 714.5 | 18.7 |
| - Discontinued operations | 3.9 | 716.2 | 0.5 | Nil | 714.5 | Nil |
|
| 111.7 | 716.2 | 15.6 | 133.5 | 714.5 | 18.7 |
| Adjusted basic |
|
|
|
|
|
|
| - Continuing operations | 134.1 | 716.2 | 18.7 | 163.4 | 714.5 | 22.9 |
| - Discontinued operations | Nil | 716.2 | Nil | Nil | 714.5 | Nil |
|
| 134.1 | 716.2 | 18.7 | 163.4 | 714.5 | 22.9 |
| Diluted |
|
|
|
|
|
|
| - Continuing operations | 107.8 | 723.6 | 14.9 | 133.5 | 721.1 | 18.5 |
| - Discontinued operations | 3.9 | 723.6 | 0.5 | Nil | 721.1 | Nil |
|
| 111.7 | 723.6 | 15.4 | 133.5 | 721.1 | 18.5 |
| Adjusted diluted |
|
|
|
|
|
|
| - Continuing operations | 134.1 | 723.6 | 18.5 | 163.4 | 721.1 | 22.7 |
| - Discontinued operations | Nil | 723.6 | Nil | Nil | 721.1 | Nil |
|
| 134.1 | 723.6 | 18.5 | 163.4 | 721.1 | 22.7 |
| 10 | ACQUISITIONS |
During the year one small acquisition was concluded for a total consideration of £1.5m in cash and the Group acquired 100% of the voting rights. Revenue and operating profit of the acquired business from 1 May 2009 to the date of acquisition was not material to the Group.
|
| 2010 | 2009 |
|
| £m | £m |
| Fair value to Group |
|
|
| Intangible fixed assets (excluding goodwill) | 0.5 | 7.1 |
| Property, plant and equipment | 1.1 | 14.6 |
| Other net liabilities | (1.8) | (12.9) |
| Net (liabilities)/assets | (0.2) | 8.8 |
| Goodwill | 1.7 | 10.3 |
| Consideration | 1.5 | 19.1 |
| Costs of acquisitions in year | 0.1 | 0.3 |
| Less: deferred consideration outstanding | Nil | (1.5) |
| Add: deferred consideration paid in respect of businesses acquired in prior years | 0.6 | 0.7 |
| Less: net cash and cash equivalents acquired (including overdrafts) | 0.3 | 0.4 |
| Net cash outflow | 2.5 | 19.0 |
The goodwill arising on the acquisitions is attributable to the value of the workforce, transport timetables, rosters, other business information and other potential economic benefits expected to be derived from the acquired businesses.
Further details of the acquisitions made during the year ended 30 April 2010 are provided below.
|
| Initial book value | Restatement to fair value | Fair value to the Group |
|
| £m | £m | £m |
|
|
|
|
|
| Intangible fixed assets (excluding goodwill) | Nil | 0.5 | 0.5 |
| Property, plant and equipment | 1.3 | (0.2) | 1.1 |
| Trade and other receivables | 0.3 | Nil | 0.3 |
| Trade and other payables | (0.9) | Nil | (0.9) |
| Bank overdrafts | (0.3) | Nil | (0.3) |
| Hire purchase liabilities | (0.4) | Nil | (0.4) |
| Provisions | (0.3) | (0.2) | (0.5) |
| Net liabilities acquired | (0.3) | 0.1 | (0.2) |
| Goodwill arising on acquisition | Nil | 1.7 | 1.7 |
| Total consideration (to be settled in cash) | (0.3) | 1.8 | 1.5 |
| 11 | RETIREMENT BENEFITS |
The Group contributes to a number of pension schemes. The principal defined benefit occupational schemes are as follows:
·; The Stagecoach Group Pension Scheme ("SGPS");
·; The South West Trains section of the Railways Pension Scheme ("RPS");
·; The Island Line section of the Railways Pension Scheme ("RPS");
·; The East Midlands Trains section of the Railways Pension Scheme ("RPS"); and
·; A number of UK Local Government Pension Schemes ("LGPS");
The Directors believe that separate consideration should be given to RPS as the Group has no rights or obligations in respect of sections of the scheme following expiry of the related franchises. In addition, under the terms of the RPS, any fund deficit or surplus is shared by the employers (60%) and the employees (40%) in accordance with the shared cost nature of the RPS. The employees' share of the deficit (or surplus) is reflected as an adjustment to the RPS liabilities (or assets). Therefore the liability (or asset) recognised for the relevant sections of RPS reflects that part of the net deficit (or surplus) of each section that the employer is obliged to fund (or expected to recover) over the life of the franchise to which the section relates. The "franchise adjustment" is the portion of the deficit that is expected to exist at the end of the franchise and for which the Group will not be obliged to fund.
In addition, the Group contributes to a number of defined contribution schemes covering UK and non-UK employees.
The movements in the net pre-tax retirement benefit assets/(liabilities) recognised in the balance sheet were as follows:
|
|
SGPS £m |
RPS £m |
LGPS £m |
Other £m | Unfunded Plans £m |
Total £m |
| At 1 May 2008 | 27.3 | 19.5 | (8.2) | (1.0) | (4.4) | 33.2 |
| Acquisitions | Nil | Nil | (0.9) | Nil | Nil | (0.9) |
| Current service cost | (20.5) | (19.1) | (2.4) | Nil | Nil | (42.0) |
| Curtailments | Nil | 1.0 | Nil | Nil | Nil | 1.0 |
| Interest cost | (38.6) | (23.2) | (16.3) | (0.1) | Nil | (78.2) |
| Expected return on plan assets | 44.9 | 29.5 | 18.2 | 0.1 | Nil | 92.7 |
| Employers' contributions and settlements | 31.0 | 22.2 | 5.0 | Nil | 0.3 | 58.5 |
| Actuarial losses | (55.7) | (58.1) | (29.3) | (1.1) | (0.3) | (144.5) |
| Foreign exchange movements | Nil | Nil | Nil | (0.4) | Nil | (0.4) |
| As at 30 April 2009 and 1 May 2009 | (11.6) | (28.2) | (33.9) | (2.5) | (4.4) | (80.6) |
| Current service cost | (19.3) | (20.6) | (1.7) | (0.6) | Nil | (42.2) |
| Curtailments | Nil | 0.7 | Nil | Nil | Nil | 0.7 |
| Interest cost | (40.3) | (23.5) | (16.8) | (0.2) | Nil | (80.8) |
| Expected return on plan assets | 42.0 | 21.9 | 16.0 | 0.1 | Nil | 80.0 |
| Unwinding of franchise adjustment | Nil | 2.7 | Nil | Nil | Nil | 2.7 |
| Employers' contributions and settlements | 27.6 | 24.8 | 4.1 | Nil | 0.3 | 56.8 |
| Actuarial losses | (94.5) | (16.7) | (27.3) | 0.3 | (0.5) | (138.7) |
| At 30 April 2010 | (96.1) | (38.9) | (59.6) | (2.9) | (4.6) | (202.1) |
| 12 | SHARE CAPITAL |
|
| Audited | Audited |
|
| As at 30 April 2010 £m | As at 30 April 2009 £m |
|
|
|
|
| Authorised ordinary share capital |
|
|
| 1,221,428,571 (2009: 936,428,571) ordinary shares of 56/57 pence each |
12.0 |
9.2 |
|
| 2010 | 2009 | ||
|
| No. of shares | £m | No. of shares | £m |
| Allotted, called-up and fully-paid |
|
|
|
|
| ordinary shares of 56/57 pence each |
|
|
|
|
| At beginning of year | 719,478,434 | 7.1 | 718,145,299 | 7.0 |
| Allotted to employees and former employees under share option schemes | 587,752 | - | 1,333,135 | 0.1 |
| At end of year | 720,066,186 | 7.1 | 719,478,434 | 7.1 |
The balance on the share capital account shown above represents the aggregate nominal value of all ordinary shares in issue.
The Group operates two Employee Share Ownership Trusts: the Stagecoach Group Qualifying Employee Share Ownership Trust ("QUEST") and the Stagecoach Group Employee Benefit Trust ("EBT"). Shares held by these trusts are treated as a deduction from equity in the Group's financial statements. Other assets and liabilities of the trusts are consolidated in the Group's financial statements as if they were assets and liabilities of the Group. As at 30 April 2010, the QUEST held 333,372 (2009: 333,372) ordinary shares in the Company and the EBT held 2,003,075 (2009: 4,153,370) ordinary shares in the Company. The trusts have waived dividends on the shares they hold.
The Group had 5,187,055 (2009: 8,527,488) redeemable 'B' shares of 63 pence each at 30 April 2010. Each holder of 'B' shares has the right to redeem the 'B' shares held on 31 May and 30 November each year. The Group also now has the right to redeem all of the remaining 'B' shares at any time. The 'B' shares are entitled to receive a dividend at the rate of 70% of six month LIBOR, payable in arrears on the par value of 63 pence per 'B' share. The 'B' shares do not carry any rights to vote at a general meeting.
The 'B' shares that remain in issue are classified as liabilities and the dividends payable on such shares are classified in the consolidate income statement within finance costs.
| 13 | RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY OPERATIONS |
|
| Audited Year ended 30 April 2010 | Audited Year ended 30 April 2009 |
|
| £m | £m |
|
|
|
|
| Operating profit of Group companies | 156.2 | 172.2 |
| Depreciation | 77.2 | 72.1 |
| Loss on disposal of plant and equipment | 2.0 | 2.0 |
| Intangible asset expenses | 6.0 | 8.3 |
| Impairment of plant and equipment | 14.7 | 0.2 |
| Equity-settled share based payment expense | 6.3 | 3.1 |
| Operating cashflows before working capital movements | 262.4 | 257.9 |
| Increase in inventories | (1.9) | Nil |
| Decrease/(increase) in receivables | 0.5 | (25.9) |
| (Decrease)/increase in payables | (7.4) | 63.9 |
| (Decrease)/increase in provisions | (1.9) | 5.7 |
| Differences between employer pension contributions and amounts recognised in the income statement |
(17.2) |
(32.0) |
| Cash generated by operations | 234.5 | 269.6 |
During the year, the Group entered into hire purchase and finance lease arrangements in respect of new assets with a total capital value at inception of the contracts of £62.3m (2009: £92.2m). After taking account of deposits paid up-front and other financing transactions of £3.6m (2009: £20.3m), new hire purchase and finance lease liabilities of £69.3m (2009: £108.9m) were recognised.
| 14 | RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT |
|
| Audited | Audited |
|
| Year ended 30 April 2010 £m | Year ended 30 April 2009 £m |
| Increase in cash | 99.3 | 7.5 |
| Cash inflow from movement in borrowings | 3.9 | 126.4 |
|
| 103.2 | 133.9 |
| New hire purchase and finance leases | (65.7) | (88.6) |
| Debt of acquired subsidiaries | (0.4) | (6.8) |
| Foreign exchange movements | 7.1 | (58.3) |
| Other movements | (0.8) | (0.6) |
| Increase in net debt | 43.4 | (20.4) |
| Opening net debt (as defined in note 21) | (340.1) | (319.7) |
| Closing net debt (as defined in note 21) | (296.7) | (340.1) |
| 15 | ANALYSIS OF NET DEBT |
The analysis provided below shows an analysis of net debt as defined in note 21. The analysis below further shows the other items classified as net borrowings in the consolidated balance sheet.
|
| Opening | Cashflows | New hire purchase/ finance leases | Acquisitions | Foreign exchange movements | Other movements | Closing |
|
| £m | £m | £m | £m | £m | £m | £m |
|
|
|
|
|
|
|
|
|
| Cash | 198.7 | 112.1 | Nil | Nil | (0.9) | Nil | 309.9 |
| Cash collateral | 78.6 | (12.8) | Nil | Nil | Nil | Nil | 65.8 |
| Hire purchase and finance lease obligations | (230.6) | 55.1 | (65.7) | (0.4) | 1.1 |
Nil | (240.5) |
| Bank loans and loan stock | (183.7) | 161.9 | Nil | Nil | (3.9) | (0.5) | (26.2) |
| Bonds | (197.7) | (215.2) | Nil | Nil | 10.8 | (0.3) | (402.4) |
| 'B' preference shares | (5.4) | 2.1 | Nil | Nil | Nil | Nil | (3.3) |
| Net debt | (340.1) | 103.2 | (65.7) | (0.4) | 7.1 | (0.8) | (296.7) |
| Accrued interest on bonds and preference shares | (7.9) | 15.9 | Nil |
Nil | 0.5 | (17.1) | (8.6) |
| Effect of fair value hedges on carrying value of borrowings | Nil | Nil | Nil |
Nil | Nil | (1.3) | (1.3) |
| Unamortised gain on early settlement of interest rate swaps | (1.6) | Nil | Nil |
Nil | Nil | 1.6 | Nil |
| Foreign exchange derivatives not included in borrowings in balance sheet | Nil | Nil | Nil | Nil | 5.4 | Nil | 5.4 |
| Net borrowings (IFRS) | (349.6) | 119.1 | (65.7) | (0.4) | 13.0 | (17.6) | (301.2) |
The cash collateral balance as at 30 April 2010 of £65.8m (2009: £78.6m) comprises balances held in respect of insurance provision letters of credit of £40.2m (2009: £44.9m), balances held in trust in respect of loan notes of £23.8m (2009: £31.4m), and North America restricted cash balances of £1.8m (2009: £2.3m). In addition, cash includes train operating company cash of £182.8m (2009: £142.3m). Under the terms of the franchise agreements, train operating companies can only distribute cash out of retained earnings and only to the extent they do not breach franchise liquidity ratios.
The cash amounts shown above include £169.0m on 3 month deposit maturing by June 2010, £32.0m deposited on 30 day notice accounts and £10.4m deposited in a 7 day notice account (2009: £10.0m on six month deposit maturing by July 2009, £40.0m on three month deposit maturing by June 2009 and £3.0m on two month deposit maturing by May 2009). The remaining amounts are accessible to the Group within one day (2009: one day).
| 16 | CONTINGENT LIABILITIES |
| (i) | The following bonds and guarantees were in place relating to the Group's rail operations:
These contingent liabilities are not expected to crystallise, except that the inter-company loan facilities will be used from time to time but eliminate on consolidation. | |||||||||||||||||||||||||||||||||
|
(ii) |
The Group and its joint venture, Virgin Rail Group Holdings Limited, have in the normal course of business, entered into a number of long-term supply contracts. The most significant of these relate to track, station and depot access facilities, together with new train lease and maintenance arrangements. | |||||||||||||||||||||||||||||||||
|
(iii) |
Under UK Rail franchise agreements, the Group and its joint venture, Virgin Rail Group Holdings Limited, have agreed with the UK's Department for Transport annual amounts receivable or payable in respect of the operation of rail franchises for future periods. Under these agreements, there is a requirement to comply with a number of obligations. Failure to comply with these obligations would be a breach of the relevant franchise. The Group has assessed whether a provision for onerous contracts is required in respect of its rail franchises. The Group has discounted the expected future cash flows related to its rail franchises to determine whether it is probable that the benefits to be derived by the Group from the franchises will be lower than the unavoidable costs of meeting its obligations under the franchises. Estimates of cash flows are consistent with management's plans and forecasts. The Group has determined that no provision is necessary. The estimate of future cash flows and the discount rate involves a significant degree of judgement. Actual results can differ from those assumed and there can be no absolute assurance that the assumptions used will hold true. | |||||||||||||||||||||||||||||||||
|
(iv) |
The Group and the Company are from time to time party to 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 30 April 2010, the accruals in the consolidated financial statements for such claims total £5.4m (2009: £10.1m). | |||||||||||||||||||||||||||||||||
|
(v) |
The Group provides details of guarantees and other financial commitments in its Annual Report. |
| 17 | CAPITAL COMMITMENTS |
Capital commitments are as follows:
|
| Audited | Audited |
|
| As at 30 April 2010 £m | As at 30 April 2009 £m |
| Contracted for but not provided: For delivery in one year |
11.1 |
116.9 |
| 18 | RELATED PARTY TRANSACTIONS |
Details of major related party transactions during the year ended 30 April 2010 are provided below, except for those relating to the remuneration of the Directors and management.
| (i) | Virgin Rail Group Holdings Limited - Non-Executive Directors |
|
|
Two of the Group's managers are non-executive directors of Virgin Rail Group Holdings Limited. During the year ended 30 April 2010, the Group earned fees of £60,000 (2009: £60,000) from Virgin Rail Group Holdings Limited in this regard. |
|
(ii) |
West Coast Trains Limited |
|
|
West Coast Trains Limited is a subsidiary of Virgin Rail Group. For the year ended 30 April 2010, East Midlands Trains had purchases totalling £0.8m (2009: £0.6m) and sales totalling £0.5m (2009: £0.8m) from/to West Coast Trains Limited. East Midlands Trains has a payable of £27,000 (2009: receivable of £400,000) owed to West Coast Trains Limited as at 30 April 2010. |
|
(iii) |
Noble Grossart Limited |
|
|
Ewan Brown (Non-Executive Director) is a former executive director and current non-executive director of Noble Grossart Limited that provided advisory services to the Group during the year. Total fees payable to Noble Grossart Limited in respect of the year ended 30 April 2010 amounted to £13,333 (2009: £20,000). At 30 April 2010, Noble Grossart Investments Limited, a subsidiary of Noble Grossart Limited, held 4,084,999 (2009: 4,084,999) ordinary shares in the Company, representing 0.6% (2009: 0.6%) of the Company's issued ordinary share capital. |
|
(iv) |
Alexander Dennis Limited |
|
| Brian Souter (Chief Executive) and Ann Gloag (Non-Executive Director) collectively hold 37.9% (2009: 37.9%) of the shares and voting rights in Alexander Dennis Limited. Noble Grossart Investments Limited (see (iii) above) controls a further 28.4% (2009: 28.4%) of the shares and voting rights of Alexander Dennis Limited. None of Brian Souter, Ann Gloag or Ewan Brown is a director of Alexander Dennis Limited nor do they have any involvement in the management of Alexander Dennis Limited. Furthermore, they do not participate in deciding on and negotiating the terms and conditions of transactions between the Group and Alexander Dennis Limited.
For the year ended 30 April 2010, the Group purchased £48.9m (2009: £61.1m) of vehicles from Alexander Dennis Limited and £3.4m (2009: £2.8m) of spare parts and other services. As at 30 April 2010, the Group had £0.4m (2009: £0.3m) payable to Alexander Dennis Limited. |
| 18 | RELATED PARTY TRANSACTIONS (CONTINUED) |
|
(v) |
Pension Schemes |
|
| Details of contributions made to pension schemes are contained in note 11. |
|
(vi) |
Robert Walters plc |
|
| Martin Griffiths (Finance Director) became a non-executive director of Robert Walters plc in July 2006 and received remuneration of £56,120 (2009: £47,200) in respect of his services for the year ended 30 April 2010. Martin Griffiths holds 20,000 (2009: 12,000) shares in Robert Walters plc, which represents 0.03% (2009: 0.01%) of the issued share capital. |
|
(vii) |
Troy Income & Growth Trust plc |
|
| Martin Griffiths (Finance Director) became a non-executive director of Troy Income & Growth Trust plc (formerly Glasgow Income Trust plc) on 8 November 2007 and received £14,000 (2009: £14,000) in respect of his services for the year ended 30 April 2010. He holds 50,000 (2009: 28,000) shares in Troy Income & Growth Trust plc representing 0.04% (2009: 0.02%) of the issued share capital. |
|
(viii) |
Loan to New York Splash Tours LLC |
|
| A net interest bearing long-term loan of £3.1m (2009: £2.7m) was outstanding from New York Splash Tours LLC as at 30 April 2010. |
|
(ix) |
Scottish Citylink Coaches Limited |
|
| A non interest bearing loan of £1.7m (2009: £Nil) was due to Scottish Citylink Coaches Limited as at 30 April 2010. The Group received £14.9m (2009: £14.0m) in the year ended 30 April 2010 in respect of the operation of services subcontracted by Scottish Citylink Coaches Limited. As at 30 April 2010, the Group had a net £3.6m (2009: £3.7m) receivable from Scottish Citylink Coaches Limited, excluding the loan referred to above. |
|
(x) |
Argent Energy Group Limited |
|
| Brian Souter (Chief Executive) and Ann Gloag (Non-Executive Director) collectively hold 39.3% (30 April 2009: Nil) of the shares and voting rights in Argent Energy Group Limited. Neither Brian Souter nor Ann Gloag is a director of Argent Energy Group Limited nor do they have any involvement in the management of Argent Energy Group. Furthermore, they do not participate in deciding on and negotiating the terms and conditions of transactions between the Group and Argent Energy Group.
For the year ended 30 April 2010, the Group purchased £0.4m (2009: £0.2m) of biofuel from Argent Energy Group. As at 30 April 2010, the Group had £Nil (2009: £13,000) payable to Argent Energy Group. |
| 19 | POST BALANCE SHEET EVENTS |
Holders of 723,770 redeemable 'B' preference shares elected to have these shares redeemed on 31 May 2010, leaving 4,463,285 redeemable 'B' preference shares in issue.
In the 2010 budget on 22 June 2010, the UK Government announced its intention to reduce the UK corporate income tax rate from 28% to 24% by 1% per annum over a four-year period. At 30 April 2010, no change in the rate of tax was substantively in law, but a 1% decrease in the rate to 27% is expected to be enacted in the year ending 30 April 2011. Had this change of rate to 27% been substantively enacted as of the balance sheet date, the estimated impact on the balance sheet would be a reduction in deferred tax liabilities of £0.7m, from £19.2m to £18.5m.
| 20 | STATUTORY FINANCIAL STATEMENTS |
The financial information set out in the preliminary announcement does not constitute the Group's statutory financial statements for the year ended 30 April 2010 within the meaning of section 434 of the Companies Act 2006 and has been extracted from the full financial statements for the years ended 30 April 2010 and 30 April 2009 respectively.
Statutory financial statements for the year ended 30 April 2009, which received an unqualified audit report, have been delivered to the Registrar of Companies.
The reports of the auditors on the financial statements for each of the years ended 30 April 2009 and 2010 were unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the year ended 30 April 2010 will be delivered to the Registrar of Companies and forwarded to all shareholders in due course. These financial statements will also be available on the Group's website and from the registered office of the Company at 10 Dunkeld Road, Perth PH1 5TW.
The Board of Directors approved this announcement on 23 June 2010.
| 21 | DEFINITIONS |
The following definitions are used in this document:
·; Like-for-like amounts are derived, on a constant currency basis, by comparing the relevant year-to-date amount with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods.
·; Operating profit for a particular business unit or division within the Group refers to profit before net finance income/costs, taxation, intangible asset expenses, exceptional items and restructuring costs.
·; Operating margin for a particular business unit or division within the Group means operating profit as a percentage of revenue.
·; Exceptional items means items which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their nature, size or incidence in order to allow a proper understanding of the underlying financial performance of the Group.
·; Gross debt is borrowings as reported on the consolidated balance sheet, adjusted to exclude accrued interest, deferred gains on derivatives and the effect of fair value hedges on the carrying value of borrowings, and to include the effect of foreign exchange derivatives that synthetically convert an element of borrowings from one currency to another.
·; Net debt (or net funds) is the net of cash and gross debt.