Financial performance
The overall profitability of the Group
has remained satisfactory, and there has been no material change to expected adjusted earnings per share for the year ending 30 April 2015.
Like-for-like revenue growth for the financial year to date in each of the Group's main businesses is provided below.
UK Bus (regional operations) - twelve weeks ended 20 July 2014 +4.0%
UK Bus (London) - twelve weeks ended 20 July 2014 +14.4%
UK Rail - twelve weeks ended 20 July 2014 +4.9%
North America - three months ended 31 July 2014 +4.9%
(including Megabus.com)
Virgin Rail Group - twelve weeks ended 20 July 2014 +5.7%
UK Bus (regional operations)
The UK Bus (regional operations) Division
has continued to grow both passenger volume and revenue year-on-year.
Like-for-like passenger volume growth for the twelve week period was
0.9%. Higher commercial revenue (i.e. revenue earned directly from
fare-paying passengers) has contributed most to overall revenue growth,
with concessionary, contract, tendered and school revenue also
continuing to grow. As expected, local authorities continue to seek
to minimise concessionary reimbursement amounts and the company therefore
continue their endeavours to deliver good growth in commercial revenue to
offset inflationary cost increases.
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UK Bus (London)
Revenue growth in UK Bus (London)
Division has been strong during the period due to the commencement of
two new contracts and the continuing effect of contracts won last year.
Revenue growth has, however, been a little less than expected due to
quality incentive income being adversely affected by traffic disruption
related to continuing road works. Excluding the uplift in contract
prices to compensate for the cessation of Bus Service Operators' Grant
(a rebate of fuel duty), revenue increased by 8.7%. The focus remains
on keeping costs under control and bidding competitively to retain
existing and win new contracts.
UK Rail
The financial performance of the UK Rail
Division is in line with our expectations, as we continue to focus on
growing revenue and controlling costs to mitigate the substantial
increases in premia payments to the Department for Transport ("DfT"). The company continue to discuss with the DfT the planned extensions to the South
West Trains and East Midlands Trains franchises, and now expect that
these will be formally awarded shortly after the UK General Election in
May 2015.
Stagecoach say "We were disappointed not to have been
selected to operate the Docklands Light Railway franchise, but remain
optimistic about our prospects in UK Rail. We have submitted a bid with
Virgin as one of three shortlisted bidders for the new East Coast
franchise and we expect the DfT to confirm the operator of that
franchise later in 2014. Earlier this month, the DfT also confirmed
that we are one of three shortlisted bidders for a new TransPennine
Express rail franchise. It is our intention to bid selectively on
future rail franchises where we believe there is the right risk-reward
profile and we can add value to our shareholders."
North America (including Megabus.com)
Revenue growth in North America remains
encouraging, reflecting the continued expansion of megabus.com
services. Megabus.com increased revenue by 14.9% in the three months
ended 31 July 2014. The company "Were satisfied with the progress of our Florida
megabus.com network, where operations began in May 2014. The operating
environment in North America is competitive, but we remain positive on
the division's prospects and the market opportunity."
Virgin Rail Group
The new West Coast Trains franchise
commenced on 22 June 2014 and is planned to run until at least 31 March
2017. The DfT has the discretion to extend the contract, on pre-agreed
terms, by an additional year to 31 March 2018. While it is still early
in the new franchise, trading to date has been strong.
Twin America
The company and their joint venture partners remain
in discussion with the US Department of Justice and the New York
Attorney General to conclude the previously reported litigation relating
to our Twin America joint venture.
The New York sightseeing market remains highly competitive, with current trading challenging.
Financial position
The Group maintains a strong financial
position with investment grade credit ratings and appropriate headroom
under its debt facilities. Consolidated net debt has, as expected,
increased from 30 April 2014, reflecting additional investment in the bus fleet and the reversal of some favourable working capital timing
differences in the previous financial year, offset by continued strong
cash generation from operations.
Outlook
Although there are a number of challenges
to growing profit in the year ending 30 April 2015, overall current
trading is satisfactory and the company remains on course to meet expectations
for the year.
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