Chairman's statement
I am pleased to report another year of excellent progress.
Turnover has increased by 15% to »1,548.4 million
(1998 ^ »1,347.0 million) and profit before tax,
exceptional items and goodwill amortisation, is up 39%
to »219.9 million (1998 ^ »158.3 million). Earnings per
share on an equivalent basis rose 32% to 12.7 pence
(1998 ^ 9.6 pence) with basic earnings per share rising
26% to 12.0 pence (1998 ^ 9.5 pence). These results
represent strong underlying performances across all our
divisions as well as contributions from our acquisitions
of the Yellow Bus Company and Fuller's Ferries in New
Zealand, Citybus in Hong Kong and our strategic
investments in Road King and Virgin Rail.
A final dividend of 2 pence per share (1998 ^ 1.6
pence) is proposed and is payable to shareholders on
the register at 13 August 1999 and will be paid on
14 October 1999. The total dividend for the year is
3 pence per share, up 25% and is covered 3.9 times.
It is also intended that we will introduce a Dividend
Reinvestment Plan in the current year to replace the
scrip dividend programme we have implemented over
recent years.
For the sixth successive year our UK bus division has
delivered organic growth with our passenger volumes
growing 0.7% on a like-for-like basis. Underlying
margins have also improved significantly from 14.8%
to 15.8% as a result of revenue growth and further
cost savings.
Our overseas bus division has also improved
margins in all business units. At Swebus, despite the
continued adverse revenue effect of low inflation
on turnover, margins improved from 5.3% to 6.3%.
This improvement has been achieved despite costs
associated with the national bus strike that took
place in early spring. Without the effect of the strike
the operating margin would have been 6.7%. Our
Swebus Express business was extended following
deregulation of long distance services in January
1999 and is showing year on year passenger
growth of 12%.
South West Trains (SWT) has continued to carry more
passengers and we have increased services by more
than 10% since privatisation. Despite this increased
volume of services, reliability on both mainline
and suburban services is now at record levels and
punctuality is also improving with the best levels
recorded since privatisation over the last 3 months.
Given the improved operational performance, our
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STAGECOACH HOLDINGS PLC
commitment to new train investment and new services,
we believe that we have established a strong case to
support franchise extension and we will be submitting
proposals to the Government in the near future.
Porterbrook has continued to win new orders and
currently has an order book totalling »420 million.
The first orders since privatisation have been delivered
with the remainder due over the next 18 months.
Porterbrook has also been successful in introducing
innovative new maintenance arrangements including
contracts with Midland Mainline under which
maintenance responsibility is passed to the train
operating company and with Thameslink where
Porterbrook has taken full responsibility for all rolling
stock maintenance. Looking forward, we believe that
franchise extension opportunities and continued
increases in passenger volumes will result in further
growth in rolling stock opportunities for Porterbrook.
Our Prestwick Airport operation has shown a good,
first full year contribution to group results, with record
freight tonnage and the introduction of additional
passenger services.
The results also include the first contributions from
our two strategic investments, Road King Infrastructure
and Virgin Rail Group, which have contributed »10.7
million and »11.2 million respectively to pre-tax
profits, before goodwill amortisation.
At Road King, toll road volume growth of 48% was
achieved and the company reported record profits of
»38.4 million for the year ended 31 December 1998.
We continue to work closely with management to
assess further opportunities as existing privately
owned toll roads consolidate and a wide range
of new projects arise in China.
Virgin Rail Group has had strong volume and revenue
growth during the year. In addition, the first phase
of the major upgrade plans has been completed, with
financing in place for both CrossCountry and West
Coast rolling stock. A new Chief Executive has been
appointed for the Virgin Rail Group and renewed focus
is being placed on the operational performance of the
business, and already improvements in reliability and
punctuality are being delivered. Despite a variable
operational performance, passenger volumes on West
Coast grew by 8%, reflecting a strong economy and
the chronic congestion being experienced by road
``We are now in a
new phase with the
emergence of truly
global transport
groups.''
Brian Souter
Chairman
users. We are confident that there is substantial latent
passenger demand and we note that inter-city
passenger numbers are growing organically at
very high rates across Northern Europe.
Over the last 12 months the group has added over
»425 million of annualised turnover through the
acquisition of Yellow Bus/Fuller's Ferries in Auckland,
Citybus in Hong Kong and our investment in Virgin
Rail Group. Each of these businesses has significant
potential to contribute to group performance; Yellow
Bus now gives us critical mass in New Zealand and an
overall 64% market share ; Citybus, the second largest
bus operator in Hong Kong, with a very modern fleet,
firmly establishes us in this important growth market
in the Pacific Rim; Virgin Rail Group provides long
term revenue and profit potential from the substantial
infrastructure and rolling stock upgrade taking place
on the West Coast mainline which will create a
railway for the 21st century.
We are now in a new phase with the emergence
of truly global transport groups. Most significant
vehicle manufacturers are responding to the changing
environment and are now represented in all the main
industrial markets and international procurement
savings are becoming increasingly important for all
operators. Few countries are still ideologically opposed
to the concept of privatisation of transport resources
and market testing but the speed of change will
continue to be determined by political will. The
majority of markets are now open to private sector
investment and the restrictions on foreign ownership
are fast disappearing. The menu of opportunities is
greater and wider than ever before and our aim
is to identify the correct diet and concentrate our
management time and shareholder funds on the
best returns and lowest risks.
Our present portfolio uniquely qualifies us to work
with other strategic partners and governments to
develop transport solutions. These special relationships
are continuing to provide value enhancing
opportunities throughout our businesses. The fruits of
this approach can be seen in the last 14 months where
only one of the last six transactions has been secured
through an open tender. Indeed, a further example of
this is our recent strategic investment, whereby we
have conditionally acquired a 35% stake in Sogin
Group, the largest privately managed bus and coach
operator in Italy. Our strong brand and reputation for
innovation and straight dealing continues to be our
greatest strength.
These results are the first to reflect our new
management structure implemented following the
appointment of Mike Kinski as Group Chief Executive
in April 1998 and demonstrate our strong focus on
operational performance and organic growth as well
as value enhancing new acquisitions. Our strong
management team is well positioned for further organic
growth and to exploit new acquisition opportunities.
I would like to thank all our employees for their
support and commitment over the last 12 months.
The success and growth of the group depends on
the commitment and support of our staff and it is
encouraging to hear anecdotal reports from visitors
who have found friendly staff as well as quality
services with Stagecoach companies around the world.
The current year has started satisfactorily and each of
our existing businesses is well positioned for continued
organic growth. We are continuing to assess a wide
range of business development opportunities within
our core disciplines and look forward to another
exciting year of progress and sustainable growth.
An early start has been made to this process following
our announcement of the proposed acquisition of
Coach USA, Inc. which provides us with an exciting
platform for growth in the North American market.
Brian Souter
Chairman
30 June 1999
STAGECOACH HOLDINGS PLC
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