Interim Results For the six months ended 31 October 2010 8 December 2010

Interim ResultsInterim ResultsFor the six months ended 31 October 2010For the six months ended 31 October 2010

8 December 20108 December 2010

Interim Results 2010

Cautionary statement

This document is solely for use in connection with a briefing on Stagecoach Group plc (“the Group”).

This document contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements in this presentation will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation.

This document is not a full record of the presentation because it does not include comments made verbally by Stagecoach Group management or by others.

Robert SpeirsRobert Speirs

ChairmanChairman

Highlights

Adjusted earnings per share up 35.6%

Revenue and operating profit growth in all divisions

Strong organic growth with improving market conditions

Excellent operational performance and customer satisfaction

Interim dividend of 2.2p, up 10%

Positive outlook

Martin GriffithsMartin Griffiths

Finance DirectorFinance Director

Summary income statement

UK Bus (regional) operating profit

UK Bus (London) operating loss

North America operating profit incl megabus

North America joint ventures’ profit after tax

UK Rail operating profit

Virgin Rail Group profit after tax

Restructuring costs, group overheads and other items

Operating profit

Finance charges (net)

Tax

Profit excluding intangibles and exceptionals

Intangibles and exceptionals, net of tax

Reported profit from continuing operations

31 Oct 10£m

31 Oct 09£m

73.3

(0.1)

15.1

8.8

22.9

10.0

(5.3)

124.7

(16.0)

(21.5)

87.2

(1.2)

86.0

58.9

Nil

8.3

7.4

14.9

9.3

(5.3)

93.5

(18.0)

(11.1)

64.4

(7.7)

56.7

Change£m

14.4

(0.1)

6.8

1.4

8.0

0.7

Nil

31.2

2.0

(10.4)

22.8

6.5

29.3

UK Bus (regional operations)

Revenue (£m)

Like-for-like revenue (£m)

Operating profit (£m)

Operating margin (%)

Estimated like-for-like passenger journeys* (m)

Like-for-like vehicle miles operated (m)

31 Oct 10 31 Oct 09

445.1

438.9

73.3

16.5%

334.7

163.2

433.0

429.2

58.9

13.6%

330.5

167.1

Change

2.8%

2.3%

24.4%

290bp

1.3%

(2.3)%

First half performance Outlook

Modest fare rises, as planned Return to passenger volume growth Reduced fuel costs Other costs closely managed Sector-leading operating margin

Modest revenue growth in second half Higher fuel costs in 2011/12 BSOG reduction in 2012/13 Flexible services and cost base Positive prospects notwithstanding short-term

risks re government funding

* Excludes inter-city coach services operated as a sub-contractor

Government spending & regulationBus

Revenue/BSOG

recognised in 2009/10

£m

Area Developments Reaction

80.0 + London 20.0

Bus Services Operators Grant (“BSOG”)

20% cut in England from April 2012 Rate held for at least three years thereafter No change as yet in Scotland/Wales

Better than some feared Hedged fuel further out to protect

“net” fuel costs Factor into decisions on contract

bids, fares and mileage

230.0 UK Bus concessionary fares

No change to “no better or worse off” requirement

Government commitment to schemes New DfT guidance in England and target to

save costs Likely downward pressure on

reimbursement

Responded to consultation Challenge insufficient

reimbursement rates Factor into decisions on contract

bids, fares and mileage

106.3 Tendered bus services

Squeeze on local authority funding Some authorities already planning cuts

Reduce costs where tendered revenue lost

n/a Competition Commission market study

Provisional findings expected January 2011 Co-operating with study

North America


megabus.com revenue over 80% up Stable revenue from other businesses Reduced fuel costs

Higher fuel costs in 2011/12 Further megabus.com growth

opportunities Ongoing recovery in other businesses

Revenue – wholly owned (US$m)

Revenue – joint ventures (US$m)

Revenue – total (US$m)

Operating profit – wholly owned (US$m)

Operating profit – joint ventures (US$m)

Operating profit – total (US$m)


31 Oct 10 31 Oct 09

237.3

45.4

282.7

23.1

13.9

37.0

13.1%

221.4

41.0

262.4

13.5

12.0

25.5

9.7%

Change

7.7%

45.1%

340bp

UK Rail (wholly-owned)

Revenue (£m)

Like-for-like revenue excluding tram (£m)

Operating profit (£m)


Estimated passenger miles - South Western Trains (m)

Estimated passenger miles - East Midlands Trains (m)

31 Oct 10 31 Oct 09

525.0

505.6

22.9

4.4%

1,708.4

647.6

512.9

475.0

14.9

2.9%

1,635.6

584.8

Change

2.4%

6.4%

53.7%

150bp

4.5%

10.7%


Passenger volume growth in line with recovering economy

Revenue support at South Western Trains Excellent punctuality and customer satisfaction

Awaiting final conclusions of rail refranchising review and McNulty study

No material financial effect on Group expected from change to RPI+3% fares regulation

East Midlands Trains revenue support from November 2011

Could see reduced profit in subsequent years

Government spending & regulationRail

Area Developments Reaction

Future of rail franchising

Strategy for implementing franchise reform announced 7 December 2010

Announcements made on plans for specific franchises

Proposals for industry reform expected by November 2011

Responded to consultation Evaluating prospects

McNulty study Interim conclusions published 7 December 2010 Final report expected April 2011

Responded to consultation Working with McNulty team Supportive of efforts to reduce

industry costs Supportive of greater alignment of

track and train Analysing interim conclusions

Fares regulation Cap on increases in basket of regulated fares Generally RPI + 1% moving to RPI + 3% for three

years from 2012

Agree changes to franchise payments with DfT

Not expected to have material financial effect on Group

Virgin Rail Group

Revenue - 49% share (£m)

Operating profit - 49% share (£m)


Dividends received (£m)

Estimated Passenger miles (millions)

31 Oct 10 31 Oct 09

195.6

13.7

7.0%

7.3

1,790.5

170.4

12.8

7.5%

8.6

1,594.6

Change

14.8%

7.0%

(50)bp

(15.1)%

12.3%


Strong revenue growth Improved Network Rail operational

performance but still variable by day Disappointment at Government decision

not to extend franchise by two years

Good profit to franchise-end in March 2012

Focus on bidding for new West Coast franchise – subject to understanding the detailed proposition from Government

Miscellaneous income statement items

31 Oct 10 31 Oct 09 Change

Citylink joint venture (£m)

Group overheads (£m)

Restructuring costs (non-exceptional) (£m)

Intangible asset expenses (£m)

Post-tax exceptional items (£m)

1.1

(5.4)

(1.0)

(5.3)

(4.4)

21.2

0.9

(5.8)

(0.4)

(5.3)

(5.7)

1.0

0.2

0.4

(0.6)

Nil

1.3

20.2

Exceptional items:

£18.5m pre-tax gain – release of liabilities related to past business disposals

£4.6m pre-tax gain – pre-acquisition insurance provision no longer expected to be settled

£0.6m pre-tax loss – London Bus acquisition costs

Finance charges and credit ratios

Net Group finance charges, including net finance income from joint ventures (£m)

EBITDA from continuing operations and joint ventures* (£m)

- last six months

- last twelve months

Period-end net debt (£m)

Net Debt/EBITDA (12 months)*

EBITDA*/Net finance charges (including net finance income from joint ventures)

31 Oct 10 31 Oct 09

(15.9)

171.7

314.9

(313.4)

1.0x

10.8x

(17.9)

147.9

300.9

(343.1)

1.1x

8.3x

Change

(11.2)%

16.1%

4.7%

(8.7)%

(0.1)x

2.5x

* excluding exceptional items

Strong financial position

Ongoing evaluation of capital structure

Taxation

Excluding intangible asset expenses and exceptional itemsIntangible asset expensesExceptional items

Reclassify joint venture taxation for reporting purposes

Reported in income statement

Cash tax paid (net)

Pre-taxProfit£m

Tax£m

113.2(4.4)4.0

112.8(4.5)

108.3

(26.0)0.5

(1.3)(26.8)

4.5

(22.3)

5.8

Rate%

23.0%11.4%32.5%23.8%

20.6%

31 Oct 2010

31 Oct 10£m

Movement in net debt

EBITDA from Group companies before exceptional itemsLoss on disposal of plant and equipmentEquity-settled share based paymentDividends from joint venturesMovement in retirement benefit obligationsWorking capital movementsNet interest paidTax paidNet cash from operating activitiesNet capital expenditure including new hire purchase and finance leasesAcquisitions /disposals of businesses, intangibles and investmentsToken sales and redemptions/othersCash generationForeign exchange/income statement movementsShare capital movementsIncrease in net debtOpening net debtClosing net debt

147.40.72.3

15.5(9.2)

(35.0)(5.1)(5.8)

110.8(73.7)(56.8)

(0.9)(20.6)

5.7 (1.8)

(16.7)(296.7)(313.4)

5.3--5.3

53.110.919.383.3

(1.4)(1.4)(6.8)(9.6)

51.79.5

12.573.7

47.810.919.378.0

Capital expenditure

UK Bus/CentralNorth AmericaUK Rail

New hire purchase

and finance leases

£m

Impact ofcapex onnet debt

£m

Disposalproceeds

£mNet£m

Cash spent on capex

£m

Pensions

UK Bus/CentralNorth AmericaUK Rail

9.40.5

12.222.1

31 Oct 2010Pensionexpense

£m

31 Oct 2009Pension expense

£m

31 Oct 2010Cash

contributions £m

11.80.68.1

20.5

16.60.5

14.231.3

Post-tax deficit of £80.6m (April 2010: £145.7m)

Accounting value of pension assets, liabilities and costs will continue to vary with market fluctuations and assumptions

Rail – risks mitigated with obligations limited to contributions payable over duration of franchises. Increase in contributions and expense reflects introduction of salary sacrifice scheme (with a corresponding reduction in salary costs)

Bus – schemes closed to new entrants and contributions have stabilised

31 Oct 2009Cash

contributions £m

16.70.5

11.228.4

Summary

Strong performance from all divisions

Reflected in adjusted earnings per share up 35.6% and dividend up 10.0%

Management action and financial discipline underpin a strong business emerging from recession

Positive outlook for second half of financial year

Brian SouterBrian Souter

Chief ExecutiveChief Executive

Overview

Strong financial position Strong organic growth across Group portfolio Improving economic environment Clearer picture on UK public sector spending Opportunities ahead:

Maximise opportunities from commercial bus model Rail regulatory reform megabus.com expansion in North America

Growth strategy at UK Bus

Strong industry-leading margins and passenger growth UK leader on commercial smartcard development Turnaround plans at London bus

Overhead reductions Business review Efficiency improvements

Rail recovery and reform

Strong revenue growth across all franchises Cost control, operating performance and customer

satisfaction Significant opportunities from radical industry reform and

better franchising

megabus.com: North America growth engine

Growing footprint and volumes in US and Canada

Focus of investment and redeployment of resources

Extension of successful hub concept

Stabilisation of non-megabus.com revenue

Current trading and outlook

Current trading in line with management expectations Improving trends continue Continued focus on organic growth and shareholder

value



Appendices

Divisional income statementsSix months ended 31 October 2010

UK Rail£m

525.0

41.5

(131.7)

37.2

(133.7)

(16.7)

(2.7)

(1.7)

(94.4)

(1.4)

(103.4)

(17.0)

(12.6)

(14.9)

(50.6)

22.9

UK Bus(regional)

£mNorth America

£m

445.1

-

-

7.8

(220.0)

(55.5)

(16.4)

(29.7)

-

(5.3)

-

-

-

(17.2)

(35.5)

73.3

155.1

-

-

2.1

(63.3)

(15.7)

(13.7)

(10.7)

-

(3.8)

-`

-

-

(10.8)

(24.1)

15.1

VRG (100%)£m

399.2

11.8

(59.2)

13.2

(68.3)

(9.7)

(1.7)

(1.3)

(105.8)

-

(79.3)

(5.0)

(23.2)

(0.7)

(42.0)

28.0

Revenue

Rail revenue support

Rail franchise support

Other operating income

Staff costs

Fuel costs (i.e. diesel)

Insurance and claims costs

Depreciation

Rolling stock costs – lease & maintenance

Other operating leases

Network Rail

Electricity for trains

Commissions payable

Material & consumables

Other costs

Operating profit

UK Bus Revenue

Like-for-like

Acquisitions:Islwyn Borough Transport (acquired January 2010)

Start-ups:Rail replacement South (started May 2009)

Preston Bus

Total reported

Change%

2.3%

2.8%

31 Oct 2010£m

31 Oct 2009£m

438.9

1.0

0.6

4.6

445.1

429.2

-

0.5

3.3

433.0

Scheduled service/line run/commuterCharterSchool bus & contractSightseeing & tourLike-for-like revenue excl megabusClosed operations and foreign exchange movementsTotal North America excl megabusmegabusTotal North America incl. megabus60% share of Twin AmericaTotal North America incl Twin

31 Oct 10US$m

31 Oct 09US$m

96.748.338.015.0

198.03.0

201.036.3

237.345.4

282.7

94.349.639.614.3

197.83.5

201.320.1

221.441.0

262.4

% Growth

2.5%(2.6)%(4.0)%4.9%0.1%

(14.3)%(0.1)%80.6%7.2%

10.7%7.7%

North America revenue breakdown

Rail subsidy/(premia) profiles

2010

2011

2012

2013

2014

2015

2016

2017

South Western

£m

East Midlands

£m

(161.6)

(224.9)

(309.6)

(394.9)

(448.6)

(526.4)

(609.2)

(582.4)

3.8

(33.5)

(81.8)

(117.3)

(124.8)

(186.3)

-

-

West Coast£m

(101.0)

(147.8)

(206.9)

-

-

-

-

-

Year to 31 March:

The above amounts are subject to future adjustment for: (1) various inflation measures (2) risks borne by the Department for Transport (3) called options and (4) changes in regulated Network Rail charges. The amounts shown above are based on estimated inflation and options called to date.

The amounts shown above reflect estimated changes arising from changes to Network Rail charges for Control Period 4, which began on 1 April 2009. These changes to the rail subsidy/premia amounts are not yet finalised.

Fuel Hedging

2009/10 - average effective price (per litre)

2010/11 - % of forecast consumption hedged

- average hedge price (per litre)







Market price (per litre)

UK Bus(regional)

North America

45.4p

98%

36.0p

78%

40.6p

50%

42.5p

-

-

41.3p

76.6 cents

82%

50.5 cents

77%

57.7 cents

5%

62.4 cents

-

-

61.2 cents

UK Rail32.5p

77%

31.3p

75%

40.4p

28%

41.0p

-

-

40.0p

Market prices are as at 30 November 2010

Prices excludes delivery margins, duty, taxes and Bus Services Operators Grant

UK Bus(London)

n/a

-

-

38%

41.5p

25%

42.4p

13%

43.5p

41.3p

(184.8)

77.0

(24.5)

9.7

(29.9)

(6.2)

(21.4)

(180.1)

(196.8)

76.2

(46.0)

17.9

(32.4)

(6.4)

(25.8)

(213.3)

(199.0)

65.1

(46.1)

14.4

(33.5)

(6.4)

(25.7)

(231.2)

Fuel costsLatest forecasts

UK Bus (regional), excluding BSOG*

UK Bus (regional), BSOG*

UK Bus (London), excluding BSOG*

UK Bus (London), BSOG*

North America

South Western Trains

East Midlands Trains

Total

2010/11Forecast

£m

2011/12Forecast

£m

2012/13Forecast

£m

Fuel costs

(201.2)

80.0

-

-

(38.7)

(5.0)

(21.3)

(186.2)

2009/10Actual

£m

Market prices are as at 30 November 2010, when Brent Crude was US$86 per barrel

Forecast costs for the unhedged element of fuel are based on 30 November 2010 spot prices

Above costs include delivery margins, duty and taxes (duty forecast at current levels) and exclude 3rd party fuel costs

* Bus Services Operators Grant (“BSOG”) represents a rebate of an element of fuel duty costs in respect of certain UK Bus Services. The forecasts are based on the latest announced BSOG rates and in the absence of any announcements, BSOG rates are assumed to remain constant.

(197.8)

65.1

(46.1)

14.4

(33.5)

(6.4)

(25.6)

(229.9)

2013/14Forecast

£m

192.7

-

45.0

-

69.1

12.4

49.2

368.4

2011/12 ForecastLitres m

Volumes

Exchange rates

US$C$

Closing rate Average rate

1.64841.7756

1.62071.7885

October 2009

Closing rate Average rate

1.59881.6270

1.53011.5851

October 2010

Definitions 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/charges, 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.



Documents

Interim Results For the six months ended 31 October 2010 8 December 2010