Stagecoach reduced bus mileage outside London by 2.7 per cent in the year to 28 April, with a 1.7 per cent drop in commercial mileage and a higher reduction on tendered routes.
The figures are reported in the group’s statutory results for the year ended 28 April, which show profit before taxation climbing from £17.9m to £95.3m. However, the group’s adjusted results show profit before taxation falling from £151m to £144.8m.
The share price fell as Stagecoach cut its full year dividend from 11.9p to 7.7p.
Group revenue fell from £3.941bn (2016/17) to £3.226bn, reflecting the end of the South West Trains franchise last August.
Revenue from UK regional bus operations (i.e. outside London) fell 0.3 per cent from £1.015bn to £1.012bn. London bus revenues fell 4.4 per cent from £263.4 to £251.8m. UK rail revenue fell 30.8 per cent from £2.160bn to £1.495bn. North America operations contributed £470.9m, down 0.4 per cent from £488.8m.
The operating profit margin for UK regional bus was £112.9m (11.2 per cent), down from £117m (11.5 per cent) in 2016/17.
London bus operating profit was £13.3m (5.3 per cent), down from £18.4m (7 per cent) in 2016/17.
Rail operating profit was £24.9m and 1.7 per cent – lower than the £28.5m in 2016/17 but higher in percentage terms (2016/17: 1.3 per cent).
Stagecoach said that the “declining propensity to travel in the UK” was presenting challenges for its regional bus operations. The UK bus commercial team is looking at new initiatives, including demand response services in a number of locations, and running the first UK pilot of autonomous vehicle technology on a standard bus.
Stagecoach is implementing further mileage reductions in 2018/19 and fare increases “where appropriate”. “We continue to expect modest revenue growth from our local bus services in the short-term,” it said.
The operator made a net gain of four London bus routes in the year and says this should be reflected in revenue for 2018/19. The drop in London revenues reported in 2017/18 reflects contracts lost in the previous year.
“We currently expect our UK Bus (London) operating margin to remain below our long-term aspiration of 7 per cent in the year ending 27 April 2019,” said Stagecoach. “Staff cost inflation in excess of what was assumed in previous successful bids for contracts is affecting profit but our revised expectation of staff and other costs is reflected in our bids for new contracts.” The company continues to monitor Transport for London’s plans to reduce contracted mileage.
On rail, Stagecoach reported an £85.6m hit in the year as a result of problems with the East Coast franchise, which the Government is taking in-house. Stagecoach still runs East Midlands Trains and the Sheffield Supertram. It has been shortlisted for SouthEastern (Alstom will have a 20 per cent stake in the franchise); is part of a shortlisted joint venture for the West Coast Partnership (Stagecoach 50 per cent, SNCF 30 per cent, Virgin 20 per cent); and is shortlisted for the new East Midlands franchise.
Stagecoach expects UK rail operating profit to fall in 2018/19 as profits from East Midlands Trains are partly offset by bidding costs for new opportunities.
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