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Stagecoach Group plc have provided an update on its trading ahead of a series of meetings with equity analysts. Recent trading has been consistent with expectations and there is no change to the adjusted earnings per share anticipated for the year ending 30 April 2015.
Revenue growth
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)
|
- forty eight weeks ended 29 March 2015
|
2.4%
|
UK Bus (London)
|
- forty eight weeks ended 29 March 2015
|
8.1%
|
UK Rail
|
- forty eight weeks ended 29 March 2015
|
9.0%
|
North America
|
- eleven months ended 31 March 2015
|
1.0%
|
Virgin Rail Group
|
- forty eight weeks ended 29 March 2015
|
7.6%
|
UK Bus (regional operations)
The Regional UK Bus Division is trading in
line with expectations with continued revenue growth. Modest growth has been seen in passenger journeys. The company are pleased that
the forecast reduction in fuel costs has enabled fare
increases for the year ahead to be kept to a minimum, consistent with long-term
objectives to grow passenger volumes through value fares strategy
and notwithstanding increases to staff and other costs.
In mainland Europe, the company have recently
commenced domestic megabus.com coach services within Germany and are
now progressing plans for a new Cologne-Lyon-Barcelona service as well
the first megabus.com services within Italy. These new services are in
addition to existing international services connecting the UK,
France, Spain, Germany, Belgium, Luxembourg and the Netherlands. Stagecoach have been encouraged by the progress of megabus.com in mainland Europe
and remain excited about its future prospects. In the short-term, as they continue the expansion of this promising business, they would expect
operating losses to increase from around £5m in 2014/15 to around £10m
in 2015/16. This is based on previous experience of megabus.com
start-up operations, where they invested in expanding the business in the
early years of megabus.com in each of the UK and North America, which
are now strong, profitable businesses.
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UK Bus (London)
The UK Bus (London) Division continues to
perform well. Revenue growth is consistent with expectations and
reflects the profile of the contracts that the Division has with
Transport for London.
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Like-for-like revenue growth in UK Rail
remains strong. They began operating the new Virgin Trains East Coast
rail franchise on 1 March 2015 and are pleased with its progress so
far. The new franchise is expected to make a significant operating
profit contribution in the year ending 30 April 2016, reflecting the programme of investment to grow the business by transforming the
customer experience. There will also be additional finance costs (in
respect of pensions and bonding arrangements) related to the franchise.
North America
The 1.0%
like-for-like revenue growth for North America includes 8.1% for
megabus.com, where the significant drop in fuel prices has resulted in a
marked slowing of revenue growth. The company remain cautious on the short-term
prospects for megabus.com revenue growth as the year-on-year fuel price
drop persists. There are no plans for any significant expansion of the North America megabus.com operations in the coming months but will
re-assess the further growth opportunities for the business in the
second half of the year ending 30 April 2016.
Virgin Rail Group
Virgin Rail Group is seeing a continuing
strong performance from its West Coast rail franchise and that is set to
benefit taxpayers through profit share payments by the business to the
UK Department for Transport.
Twin America
Stagecoach are pleased that a settlement has now
been agreed in principle with the US Department of Justice and the New
York Attorney General's office in respect of the previously reported
anti-trust litigation relating to the Group's joint venture, Twin
America. The settlement envisages cash payments by the defendants of
US$7.5m and the relinquishment of certain bus stop rights. They have
previously recognised costs associated with the litigation as
exceptional items and anticipate that the Group's share of the
additional costs associated with this settlement will not exceed £3m and
that these will be recorded as exceptional items in the second half of
the year ending 30 April 2015. The settlement with the US Department of
Justice and the New York Attorney General's office remains subject to
court approval, following a public consultation and comment process. Stagecoach will continue to co-operate fully with the authorities in relation to
any further matters related to the Twin America litigation.
Twin America's management will now focus
on seeking to re-build the business in the highly competitive New York
tourism and sightseeing market.
