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Railhub Archive
2000-09-08 STG-001
Stagecoach Group


Extract of speech by Brian Souter chairman of Stagecoach Group plc

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Stagecoach Group

Extract of speech by Brian Souter chairman of Stagecoach Group plc

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8 September 2000
source Stagecoach Group
type Speech (excerpt)

At the 20th Annual General Meeting of the Company Held at the Lesser City Hall, Perth on Friday 8 September 2000

In a year of considerable corporate activity, which included the acquisition of Coach USA, and the disposals of Swebus and Porterbrook, we sharpened our focus on our core rail and bus businesses and achieved a good underlying financial performance.

2000 highlights
We increased profit before tax, exceptional items and goodwill amortisation to £244.3 million, from £220.1 million in the previous year, an increase of 11%. Earnings per share on an equivalent basis rose 6% to 13.4 pence and the total dividend for the year is 3.6 pence per share, up 20%. The company has now reported growth in dividend per share every year since flotation and, subject to unforeseen circumstances, it is our intention to continue to increase dividends per share going forward.

Basic earnings per share fell to 9.4 pence from 12.0 pence in the prior year after taking account of goodwill amortisation and a number of exceptional items which amounted to 3.3 pence per share.

Key highlights of the last twelve months included:

o The acquisition of Coach USA, establishing Stagecoach as the second largest bus operator in North America, with 12,000 employees operating in 35 US states and in Canada.

o A strategic review of our UK Bus division, including the establishment of UK Bus division headquarters in Perth under the leadership of Executive Director, Brian Cox.

o Continuing strong revenue growth at both South West Trains and Virgin Rail Group, our joint venture with Virgin, including steady improvements in operational performance and customer service on all three franchises.

o Two competitive and innovative bids for new rail franchises,both of which have been shortlisted, one to renew our South West Trains franchise, and the other, jointly with Virgin, for East Coast Main Line.

o The sale of Porterbrook, our train leasing business, to Abbey National, for a gain of £135.5 million, realising £773.3 million of cash proceeds for the group, in addition to a reduction in net debt of £361.6 million.

o The sale of Swebus following a strategic review which indicated, because of fundamental structural issues in the Swedish marketplace, limited prospects in the medium term.

Current trading
Taken overall, the trading of the Group is in line with our expectations.

At South West Trains we are seeing record growth in passenger numbers and related revenues in the first three months of the year. We are now optimistic that this will continue for the rest of the financial year.

At Virgin Rail we continue to see revenue growth despite ongoing business interruptions as a result of the Railtrack upgrade to Euston station. The business is performing in line with our expectations.

Our UK Bus division is now seeing the financial effects of trends that we identified last year. Organic growth and new business from quality partnerships in the Southern regions of the UK is not compensating for a further reduction in passenger volumes in Northern regions. As we highlighted in our June statement, in common with much of our industry, we are experiencing a difficult industrial relations climate in parts of our business which will have some financial impact in the current year.

Our businesses in Hong Kong and New Zealand are achieving organic volume growth and, with the full benefits of the restructuring programme now in place, we remain encouraged by the outlook for these businesses. Our other overseas operations in Australia, mainland China and Portugal are performing well.

At Coach USA we continue to see some revenue growth although the growth rate has slowed in certain parts of the US as the tight labour market continues to reduce the availability of drivers to meet additional work commitments. Our restructuring programme in the North East Region is progressing in line with the plan we set out in our June statement but, as previously announced, the higher cost base of the business in the current financial year means that we do not anticipate realising the benefit of significant cost reductions until next financial year. We continue to pursue a focused bolt-on acquisition strategy in the US and we are encouraged by the performance of acquisitions made during our period of ownership.

Management changes
There have been a number of board changes in the last twelve months which have given us the opportunity to appoint new management to take the business forward. Keith Cochrane has made a substantial contribution to the group over the last seven years and is well qualified to face the challenge of his new role as Chief Executive. Martin Griffiths, who has worked in a number of strategic roles for the group in the past three years became our Group Finance Director, and is already playing a key role across the Group's operations. Frank Gallagher became Chief Executive Officer of Coach USA and I can also announce that we have now shortlisted candidates for the position of Chief Operating Officer of Coach USA. Graham Eccles, who will take up his position as Executive Director, Rail Operations on 11 September, brings a lifetime of experience in the rail industry to our Board at this important time in the rail franchising process. Ann Gloag has relinquished her executive responsibilities, and I would like to express my thanks for her major contribution and support over the last 20 years and I am pleased that she will be continuing as a non-executive director. Finally, I am delighted to welcome Russell Walls, Finance Director of BAA plc, to the board as a non-executive director.

Future Strategy
Our industry is currently facing a number of challenges and our core bus businesses in the UK and the USA are operating in a tightening labour market and where, in the medium term, there is additional uncertainty surrounding the price of crude oil. Our principal focus remains the restructuring, integration and further development and growth of Coach USA, the delivery of passenger volume and revenue growth within UK Bus and success in the rail refranchising process. Our strategy remains focused on our core bus and rail operations where we believe there are significant opportunities to generate shareholder value.

The last few months have been a period of great and sometimes difficult change for the Stagecoach group. However, I am confident that we now have the right management and financial resources to support the development of the group and to implement our future strategy. I would like to record my sincere thanks to all our staff for their individual contributions and unwavering commitment during the last year. Together we are committed to tackling the challenges ahead and to delivering value for shareholders.

Railhub Archive ::: 2000-09-08 STG-001


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