Stagecoach shares rev up despite revenue dip

TRANSPORT: Profits up for Perth-based group for first six months of the year

Profits in Perth-based transport group Stagecoach increased by 8% in the first six months of this year despite a £200 million dip in revenues.

The interim results, for the half year ending on October 28, showed the impact of losing the South West Trains franchise for the first time.

It was announced in March that Stagecoach had lost the franchise it had run since 1996 to Firstgroup and MTR.

The changeover to the new operator took place in August and Stagecoach said this largely accounted for the dip in revenues to £1.8 billion from £2bn for the six-month period last year.

Pre-tax profits rose from £89.5m to £96.7m and Stagecoach said it expected its results to meet full-year expectations.

The company confirmed its East Midlands Trains franchise had been extended to March 2019 and that it had been shortlisted for the new South Eastern franchise.

Last week Stagecoach shares rose steeply after the transport secretary Chris Grayling said the loss-making Virgin Trains East Coast contract, of which Stagecoach is the operator, would be terminated early.

Having been due to run until September 2023, it will be replaced with a new model in 2020 which will take on responsibility for both intercity trains and track operations on the route.

Company chief executive Martin Griffiths said the company was “working with the Department for Transport” which could effectively set fresh terms until 2020.

He did not rule out Stagecoach bidding to remain as the operator beyond 2020.

He said: “There will be opportunities coming up to bid for new contracts and that will be one of them.

“We assess each opportunity on its merits and I don’t see that changing.”

Turning to the group’s bus operations Mr Griffiths said action taken on “pricing, services operated and commercial initiatives” had been successful in the UK bus operation which saw a fall in revenues from £64.9m to £61.6m for the reporting period.

Performance in the inter-city coach market had been “weak” but steps had been taken to improve revenues.

Mr Griffiths added: “In North America, we have seen improved revenue trends, new contract wins and growth in profit.

“We are focused on making further progress in the second half of the year and have maintained our expectation of full-year adjusted earnings per share.”

Shares in the company rose by 7.09p to 183.49.

Top: there has been a downturn in the UK coach market which has impacted on Stagecoach-owned Megabus. Above: Stagecoach chief executive Martin Griffiths.