Sir Brian reaches end of Stagecoach road
SHARES in Stagecoach surged by nearly nine per cent on the day co-founder Sir Brian Souter surprised City watchers by revealing he was standing down as chairman of the transport giant.
Sir Brian, who established the company with sister Dame Ann Gloag in 1980, announced his resignation as the Perth-based firm reported a rise in first-half profits.
He will vacate the role on December 31, after which he will become a non-executive director. Dame Ann will end her time as a non-executive director the same day, as will long-standing director Sir Ewan Brown.
Sir Brian, who will be replaced by transport veteran Ray O’toole, remains the second-biggest shareholder in the business with a 13.37% stake. Dame Ann is the thirdlargest investor with a shareholding of 11.36%.
Sir Brian, who cited his wish to spend more time with his grandchildren, steps down with the company having all but exited the UK rail franchising business this year.
The company ceased running the West Coast in its long-running partnership with Virgin Trains last week when the franchise was transferred to Firstgroup and Trenitalia, which is now running services along the route under the new Avanti brand. Earlier this year Stagecoach said it would no longer bid for new UK rail franchises after it was ruled out of the running for the East Midlands, South Eastern and the West Coast after the Department for Transport said it did not take on sufficient risk for a railway workers’ pension scheme.
Stagecoach is taking legal action against the government with regard to the three disqualifications, and said the High Court is due to hear the three cases in early 2020.
Stagecoach and Virgin were stripped of the East Coast franchise in controversial circumstances in June of last year after performance targets were missed. The Scottish firm had lost the South West deal in 2017.
Sir Brian, who vigorously defended the company’s rail performance record at its annual meeting in August, said: “At the age of 65, the time is right for me to step down as Stagecoach chairman to spend time on my other interests and with my family, including my three young grandchildren.
“My family and I continue to have a significant shareholding in Stagecoach, and I have every confidence in the management team, our strategy and the positive prospects of the business. I look forward to continuing to represent the interests of stakeholders as a non-executive director on the board.”
Stagecoach said the board changes reflect the “significant changes over the past two years in the scale of the group and the market in which it operates”.
Unveiling its first-half results yesterday, which showed a
35% rise in statutory profits to £65.9 million from £48.9m, the company said it was striving to balance its portfolio and open up new markets. It noted that it had been made a shortlisted bidder for the operation of Roslagsbanan rail system in Stockholm County, Sweden.
At present, its only other train operation is the Sheffield Supertram tram train operations.
Stagecoach said: “While the current rail franchise model is subject to ongoing assessment by the Williams Review, as previously indicated we have no intention to bid for new UK rail contracts on the current risk profile offered by the Department for Transport.”
On its first-half results, the company said revenue from continuing operations dipped to £800.2m from around £1 billion, reflecting the end of the East Coast and East Midland franchises.
Operating profit from continuing operations slipped to £79.6m from £87.5m, which came amid lower UK bus profits. This reflected factors such as the “exceptionally good weather” of 2018 against poorer weather this summer. Stripping out discontinued operations, including the US business which Stagecoach sold last year, pre-tax profits fell to £66.6m from £73.1m.
Chief executive Martin Griffiths said: “We are pleased to have delivered a solid set of financial results and further improvements for our customers over the first half of the financial year.
The company maintained the interim dividend at 3.8p per share.
Shares closed 11.2p. or 8.92%, at 136.8p.