Stage­coach boss sees future of rail­ways in pri­vate hands de­spite tak­ing £86.5m hit

The Daily Telegraph - Business - - Business - By Iain Withers

THE boss of bus and train op­er­a­tor Stage­coach has said he “pas­sion­ately be­lieves” pri­vate com­pa­nies should de­liver rail ser­vices, de­spite be­ing stripped of the East Coast main­line fran­chise ear­lier this year.

Martin Grif­fiths, chief ex­ec­u­tive of Stage­coach, claimed the com­pany failed to de­liver its prom­ises on the Lon­don-Ed­in­burgh-In­ver­ness line due to an un­fore­seen slow­down in eco­nomic con­di­tions.

“The whole eco­nomic and po­lit­i­cal out­look is now very dif­fer­ent to when we bid,” Mr Grif­fiths told The Daily

Tele­graph. “Rail rev­enues are sig­nif­i­cantly down on what we ex­pe­ri­enced post pri­vati­sa­tion.”

The com­pany yes­ter­day con­firmed an £86.5m hit due to the fail­ure of the fran­chise – in which it owned a 90pc stake. The line was tem­porar­ily re­na­tion­alised in May un­der the his­toric Lon­don and North East­ern Rail­way brand, af­ter the pri­vate oper­a­tors failed to make promised pay­ments on the £3.3bn con­tract.

Asked to com­ment on Labour’s pro­posal to re­na­tion­alise rail franchises due to a string of high-pro­file fail­ures, Mr Grif­fiths de­fended pri­vate oper­a­tors. “I pas­sion­ately be­lieve in what pri­vate com­pa­nies have brought to the rail­ways, there are many pos­i­tive things that have hap­pened,” he said. How­ever, he added that cus­tomers were “en­ti­tled to want more”.

Mr Grif­fiths said Stage­coach would stay in the rail mar­ket pro­vid­ing the Gov­ern­ment’s on­go­ing re­view of the fran­chise model re­sulted in a sys­tem that worked for “gov­ern­ment and share­hold­ers”.

The firm is still work­ing on bids for the new South East­ern, West Coast Part­ner­ship and East Mid­lands rail franchises. Stage­coach’s prof­its soared last year de­spite the hit on the East Coast fran­chise.

The FTSE 250 com­pany still man­aged to more than quadru­ple pre-tax prof­its to £95.3m in the year to April 28 be­cause of £133m of ex­cep­tional costs it racked up the pre­vi­ous year.

Ad­justed op­er­at­ing profit, ex­clud­ing one-off costs, dipped 2.7pc to £180m, how­ever, fol­low­ing a rise in group over­heads and fall­ing prof­its in Stage­coach’s bus di­vi­sions.

Rev­enues sank 18pc to £3.2bn, which Stage­coach said re­flected the end of its South West Trains fran­chise last August. Share­hold­ers will see their full-year div­i­dends cut from 11.9p to 7.7p, which Stage­coach said was a more “sus­tain­able” level.

Stage­coach added that it had made a good start to the cur­rent fi­nan­cial year. The com­pany’s shares closed up 4.3pc at 139p yes­ter­day.

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