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Stagecoach Group plc has issued an update on trading in advance of a series of meetings with analysts.
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)
|
- twenty four weeks ended 12 October 2014
|
+3.2%
|
UK Bus (London)
|
- twenty four weeks ended 12 October 2014
|
+14.5%
|
UK Rail
|
- twenty four weeks ended 12 October 2014
|
+7.4%
|
North America
|
- five months ended 30 September 2014
|
+3.5%
|
Virgin Rail Group
|
- twenty four weeks ended 12 October 2014
|
+5.8%
|
UK Bus (regional operations)
Our UK Bus (regional operations) Division has continued to perform satisfactorily.
The division has grown both passenger
volume and revenue year-on-year. Like-for-like revenue growth for the
twenty four week period of 3.2% excludes the revenue earned from
contracts to provide transport for the Commonwealth Games. Passenger
volume growth on an equivalent basis was 0.7%. Higher commercial
revenue (i.e. revenue earned directly from fare-paying passengers) has
contributed most to overall revenue growth, with concessionary, tendered
and school revenue also growing. In the equivalent period last year,
revenue was earned from providing additional bus
services to replace train services that were affected by major railway
resignalling work. As a result, revenue growth in the twelve weeks
ended 12 October 2014 was lower than for the preceding twelve weeks.
Stagecoach were disappointed but not surprised at
the decision by the North East Combined Authority earlier this month to
refer proposals to implement a bus contracting system in Tyne and Wear
to a Quality Contracts Review Board. These proposals are to
be subject to more rigorous examination by a properly constituted
independent board that should not be motivated by political
considerations and who will take appropriate, impartial,
professional advice in reaching a decision. The Review Board has a duty
to determine whether the proposals meet the five statutory public
interest criteria that have to be met to support the introduction of the
contracting scheme. The operators do not believe these tests have been met and will present robust evidence to the Review Board to demonstrate this. Stagecoach say that they will discuss with the Review Board the significant flaws in the
proposed contracting scheme, and at the same time and continue to
review their legal options. The voluntary partnership agreement proposed
by the local bus operators would be far more effective at delivering
customer service improvements and generating savings for the public
sector without the huge financial risks of the proposed contracting
scheme to the region's taxpayers.
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Stagecoach have been pleased with the progress of their megabus.com inter-city coach operations in continental Europe and are now planning to extend the network further. They will introduce
more European megabus.com services over the remainder of the year ending
30 April 2015, building on the success of megabus.com in the UK and
North America. This is an exciting prospect for the medium-term but
will result in a few million pounds of new start-up losses in the year
ending 30 April 2015 and around £20m of additional capital expenditure,
primarily in acquiring new vehicles.
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Revenue
growth in our UK Bus (London) Division has been good during the
period. Traffic disruption from ongoing road works has continued to
adversely impact on the quality incentive income, which has moderated
revenue growth. Excluding the uplift in contract prices to compensate
for the cessation of Bus Service Operators' Grant (a rebate of fuel
duty), revenue increased by 9.4%. The focus remains on keeping costs
under control and bidding competitively to retain existing and win new
contracts.
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UK Rail
The financial performance of the UK Rail
Division is in line with expectations, reflecting the focus on
growing revenue and controlling costs to mitigate the substantial
increases in premia payments to the Department for Transport ("DfT"). As
expected, the rate of revenue growth is higher than that reported for
the first twelve weeks of the financial year, which is partly due to the
effect of prior year resignalling work in the Nottingham area.
North America
Revenue growth in North America is
encouraging. Megabus.com increased revenue by 13.5% in the five months
ended 30 September 2014. Stagecoach are satisfied with the progress of the 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. Trading to date under the
new franchise has been strong.
Twin America
Stagecoach and their joint venture partners are in
ongoing discussions with the US Department of Justice and the New York
Attorney General to conclude the previously reported litigation relating
to the Twin America joint venture.
The New York sightseeing market remains highly competitive, with current trading still challenging.
Bank re-financing
The Group has entered into £535m of new
bank facilities. The new facilities have been committed for a period of
five years to October 2019 with the potential for them to be extended
by up to a further two years. These facilities replace previous bank
facilities that were due to expire in February 2016.
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 are on course to meet expectations
for the year.
Interim results
The Group plans to announce its interim results for the six months ended 31 October 2014 on 10 December 2014.
