Stagecoach on track with road and rail growth

PERTH-BASED TRANSPORT giant Stagecoach has reported revenue growth across all divisions and is on track to hit full-year targets.

The new East Coast rail franchisee in partnership with Virgin posted increases in like-for-like revenues for the 40 weeks to January 31.

UK Rail was up 7.6%, the UK Bus regional division was up 2.7% and the UK Bus London division was up 9.8%.

Revenues from its partnership with Virgin Trains in the Virgin Rail Group which operates the West Coast rail franchise were up 6.7%.

The North America division was up 1.9%, including Megabus.com where revenue grew 10.3%.

In UK Rail, Stagecoach said financial performance was in line with expectations and reflected the focus on growing revenue and controlling costs to mitigate the substantial increases in premia payments to the Department for Transport.

Stagecoach and Virgin’s bid for the East Coast franchise will see it pay £3.3 billion to the DoT in premium payments over the eight-year contract, £900 million ahead of competing bids.

The group continued: “The new franchise is expected to significantly enhance the profitability of the UK Rail division in the year ending April 30 2016 and beyond.”

Virgin Rail agreed a newWest Coast rail franchise with the DoT in June 2014 and is paying £433m in the initial contract period to March 2017.

Trading on the West Coast franchise remains strong and UK taxpayers are benef iting from the prof its-sharing agreement with the DoT.

In the UK Bus regional division, Stagecoach said the prospect of further expanding the Megabus brand across Europe, building on the success of the UK and North America, is exciting.

Slightly higher net start-up losses of around £5m are expected this year, and further losses the following year as the significant opportunity is developed.

The division includes Stagecoach’s services inTayside and Fife, and passenger volumes rose 0.4% on a like-for-like basis.

Growth was lower in January due to the weather but this did not indicate any underlying change.

In the London Bus division, some revenue was lost in January owing to the 24-hour strike by drivers.

In the US, the 1.9% rise in revenues was below the previous level due to the fall in fuel prices on the Megabus inter-city coaches, and adverse weather in December and January.

The US market remained competitive including in NewYork where Stagecoach’s sightseeing tours in its Twin America joint venture is expected to produce a relatively low profit for the full year.

Despite challenges to growing profit, Stagecoach said overall trading is satisfactory and the group is on course to meet expectations for the year.