East Coast fiasco sends Stagecoach to 9-year low
STAGECOACH shares came off the rails as investors took a dim view of the firm’s fiasco on the East Coast line.
The company got its sums wrong, Transport Secretary Chris Grayling explained to MPs, and is nursing a £200m loss as a result.
Its joint vehicle with Virgin Trains, 90pc owned by Stagecoach, will lose the East Coast franchise within months.
‘There is no question of anyone receiving a bail-out,’ Grayling said. ‘Stagecoach will be held to all its contractual obligations in full.’
Investors were unimpressed. In early trading Stagecoach shares tumbled 14pc. The company has pointed the finger at publicowned infrastructure firm Network Rail, which promised railway upgrades but failed to deliver – supposedly stopping passenger numbers hitting predictions. It said its net debt could be £19m higher than predicted as a result.
Martin Griffiths, Stagecoach Group’s boss, added: ‘Contrary to much misinformed recent comment, we have neither walked away from the East Coast franchise nor asked for or received any special treatment. We are continuing our discussions with the Department for Transport about new contractual arrangements.’
One possible option could see Stagecoach run the franchise temporarily until 2020.
It has just won a separate joint contract with Virgin to run the West Coast line franchise.
Shares in Stagecoach were down 5.7pc, or 8.3p, to 137p when markets closed, a nine-year low.
It proved a rough day for Petrofac as well, in what looked like a delayed response to Monday’s announcement that fraud investigators were widening their probe into the company’s affairs. More directors at the embattled oil and gas producer will be interviewed by the Serious Fraud Office, which is looking into allegations of bribery, money laundering and corruption.
Some will be interviewed under caution – meaning there are grounds to suspect them of committing criminal offences.
It comes after Ayman Asfari, Petrofac’s chief executive, and chief operating officer Marwan Chedid were arrested and questioned last year.
The investigation was launched after allegations that Monacobased consultancy Unaoil, which worked for Petrofac, paid bribes on behalf of oil companies. Unaoil has denied the claims. Petrofac shares sunk 7.1pc, or 36p, yesterday to 467p. The company said it is co-operating with the SFO.
Gloom dominated the FTSE 100, which dropped 2.64pc, or 193.6, to 7141.4 amid a global sell- off in stock markets. Supermarket giant
Tesco and no-frills airline EasyJet were the only risers, up 0.6pc (1.15p to 199.9p) and 0.1pc (1.5p to 1643p) respectively. Meanwhile financial stocks, including Schroders (down 5pc or 184p to 3451p), Hargreaves Lansdown (down 5.4pc or 99p to 1732.5p), Standard
Life Aberdeen (down 5.1pc or 21.3p to 396p) and Prudential (down 4pc or 73.5p to 1772p), were among those that took a beating. On the FTSE 250 hedge fund
Man Group dropped 6.5pc, or 13.5p, to 194.4p.
There was better news at outsourcer Capita, which rose after reports yesterday highlighted Neil Woodford’s bullish view of the stock. Its shares crashed 47.5pc in a day last week after bosses said it was too stretched and announced a major overhaul.
But Woodford, whose fund has an 8.5pc stake in Capita, said he supported the ‘complete reset’.
Writing on his blog, he added: ‘I am not trying to make a silk purse out of a sow’s ear – this has been a poor investment, but it is one that has the capacity to become a significantly better one from here.’
Capita was up 13.4pc, or 23.35p, to 197.45p yesterday.