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3. Operating and Financial Review 3. Operating and Financial Review 3.1 Introduction 3.3.2 North America The Directors are pleased to present their report on the Group for the year Stagecoach, principally through its Coach USA and Coach Canada brands, is a ended 30 April 2007. major provider of transport services in North America. Our businesses include commuter services, tour and charter, sightseeing and school bus This section 3 contains the Operating and Financial Review, which includes operations. the information that the Group is required to produce to meet the need for a business review in accordance with section 234ZZB of the Companies Act The United States business is headed by a Chief Operating Officer. 1985. The Operating and Financial Review also provides significant Stagecoach operates approximately 2,500 vehicles in the United States where information over and above the statutory minimum. Biographies of each our operations are mainly in the states of New York, New Jersey, Pennsylvania, director are contained in section 4 of this Annual Report and the remainder West Virginia, Ohio, Indiana, Illinois and Wisconsin. Our services operate in of the Directors’ report is set out in section 5. major cities such as New York City, Newark, Pittsburgh, Chicago and Milwaukee. The Operating and Financial Review that follows is intended largely to reflect the recommendations of the Accounting Standards Board’s 2006 reporting In Canada, we own two operating companies, which together operate around statement of best practice on the Operating and Financial Review. We 500 vehicles in the Provinces of Quebec and Ontario. The Canadian business continue to monitor developments in best practice with a view to further is also headed by a Chief Operating Officer. tailoring our Operating and Financial Review to enhance its usefulness to readers of the Annual Report. 3.3.3 UK Rail Stagecoach Group has major rail operations and has an involvement in 3.2 Cautionary statement operating around a quarter of the UK passenger rail network. The UK rail The Operating and Financial Review has been prepared for the shareholders of market is split into a number of separate franchises, which are awarded by the the Company, as a body, and no other persons. Its purpose is to assist Government for set time periods to a specification set by the DfT on the basis shareholders of the Company to assess the strategies adopted by the Company of bids by train operators. and the potential for those strategies to succeed and for no other purpose. Our principal wholly-owned rail business is South Western, which This Operating and Financial Review contains forward looking statements that incorporates the South West Trains and Island Line networks. South West are subject to risk factors associated with, amongst other things, the economic Trains runs around 1,600 train services a day in south-west England out of and business circumstances occurring from time to time in the countries, London Waterloo railway station, while Island Line operates on the Isle of sectors and markets in which the Group operates. It is believed that the Wight. The South Western franchise is expected to run until February 2017. expectations reflected in these statements are reasonable but they may be We also operate Supertram, a 28km light rail network incorporating three affected by a wide range of variables which could cause actual results to differ routes in the city of Sheffield, on a concession running until 2024. In May materially from those currently anticipated. No assurances can be given that 2007, we signed a contract with Greater Manchester Passenger Transport the forward-looking statements in this Operating and Financial Review will be Executive (“GMPTE”) to operate and maintain the Manchester Metrolink tram realised. The forward-looking statements reflect the knowledge and network and expect to commence operations under the 10-year contract in information available at the date of preparation. July 2007. 3.3 Description of the business The division will also commence operations of the new East Midlands Stagecoach Group is a leading international public transportation group, with franchise in November 2007, which combines mainline services from London extensive operations in the UK, United States and Canada. The Group employs St. Pancras railway station with regional services in the East Midlands region. around 27,000 people, and operates bus, coach, rail, and tram services. The The new franchise will run until 1 April 2015 assuming the Group meets Group has three main divisions – UK Bus, UK Rail and North America. agreed performance targets. Stagecoach Group plc is a public limited company that is incorporated, Stagecoach Group’s rail division is headed by a Chief Executive, who reports domiciled and has its registered office in Scotland. Its ordinary shares are directly to the Group Chief Executive. South West Trains and Supertram each publicly traded and it is not under the control of any single shareholder. has a Managing Director, who reports to the Chief Executive of the Group’s rail division, who is also Chairman of the South Western franchise. Throughout this Annual Report, Stagecoach Group plc is referred to as “the Company” and the group headed by it is referred to as “Stagecoach” or “the 3.3.4 Joint Ventures Group”. 3.3.4.1 Virgin Rail Group Stagecoach Group has a 49% shareholding in Virgin Rail Group (“VRG”), 3.3.1 UK Bus which operates the West Coast and CrossCountry rail franchises. The other Our UK Bus division connects communities in more than 100 towns and shareholder in VRG is the Virgin Group of Companies. The Chief Executive of cities across the UK on networks stretching from the Highlands of Scotland to Stagecoach Group’s rail division is Joint Chairman of VRG. The joint venture south-west England. These include major city bus operations in Liverpool, has submitted a bid for a new expanded Cross Country franchise, which is Newcastle, Hull, Manchester, Oxford, Sheffield and Cambridge. being tendered by the Government and will run from November 2007. New commercial terms for the West Coast franchise were agreed in December Our UK Bus division operates a fleet of almost 7,000 buses across a number of 2006 and the renegotiated franchise runs through until 2012. VRG has a regional operating units. Each regional operating unit is managed Chief Executive, who reports to the VRG board, which includes Stagecoach independently and is led by a Managing Director, reporting directly to the Group representatives. head of the UK Bus division. Stagecoach operates express coach services linking major towns within its 3.3.4.2 Scottish Citylink Coaches Limited regional operating company areas. The Group also runs the market-leading In Scotland, Stagecoach has a joint venture (Scottish Citylink Coaches budget inter-city coach service, megabus.com, which has a network covering Limited) with international transport group, ComfortDelGro, to operate around 40 locations. Our joint venture with ComfortDelGro to provide inter megabus.com and Scottish Citylink coach services. Stagecoach owns 35% of city coach services in Scotland has attracted a significant number of new the share capital of Scottish Citylink Coaches Limited and ComfortDelGro passengers, following the introduction of an improved network of services. owns the remaining 65%. The joint venture is the leading provider of express coach services in Scotland. Stagecoach is responsible for the day-to-day In August 2006, Stagecoach completed the sale of its London bus operations operational management of the business, which is overseen by a joint board. to Macquarie Bank Limited. The sale of the London bus business will allow the UK Bus division to focus on its successful growth strategy outside London. 3.3.4.3 New York Splash Tours Following the sale of the Group’s London bus operations, our local and In North America, Stagecoach has a joint venture, New York Splash Tours LLC, express bus services on average carry around 2 million passengers a weekday. with Port Imperial Duck Charters, LLC. Splash Tours began operating Stagecoach’s bus and coach services in the UK are operated on a commercial sightseeing tours in May 2007 using amphibious vehicles. The vehicles basis in a largely deregulated market. We also operate tendered services, operate in the Hudson River and on land in the city of New York. Splash Tours including schools contracts, on behalf of local authorities. complements the Group’s wholly owned New York sightseeing tours business, Grayline New York. page 4 | Stagecoach Group plc 3.4 Resources and relationships • Customer Interest Groups – our businesses have a regular and ongoing 3.4.1 Resources dialogue with bus and rail user groups. This includes presentations from Stagecoach Group has a range of resources that underpin its business and senior managers on detailed aspects of our service as well as consultation support its strategy. These assist in giving the Group a competitive and information sharing on particular issues. advantage in the markets in which it operates. We continue to invest in the • Government – senior executives have an ongoing dialogue with national areas listed below to maintain our position among the market leaders in the and local government in all our countries of operation to ensure the public transportation sector. effective delivery of government transport policy and to assist in meeting wider objectives. In the UK, we work closely with the Department for 3.4.1.1 Employees Transport (‘DfT’), the Scottish Executive, Transport Scotland, the Welsh Stagecoach Group’s most important resource is its employees. We seek to Assembly, and Transport for London (‘TfL’). recruit and retain the best employees in our sector, offering an excellent package of benefits, which allows us to deliver good customer service to our • Transport Authorities – we work closely with local authorities, including passengers.
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