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