Financial performance
Recent trading has been consistent with expectations and there is no change to the anticipated adjusted earnings per
share for the year ending 30 April 2016.
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 25 July 2015 1.0%
UK Bus (London) - twelve weeks ended 25 July 2015 1.5%
UK Rail - twelve weeks ended 25 July 2015 5.5%
(excluding Virgin Trains East Coast)
North America - three months ended 31 July 2015 (5.3)%
(including Megabus.com)
Virgin Rail Group - twelve weeks ended 25 July 2015 7.5%
UK Bus (regional operations)
UK Bus (regional operations) Division's trading is in line with expectations.
The Division's like-for-like revenue
growth continues to come principally from commercial on and off bus
revenue, which is the revenue received directly from passengers in
respect of travel on bus services. Growth in both commercial
revenue and revenue from tendered and school services was affected by
the timing of school holidays compared to last year - stronger
growth is expected over August and September as this effect reverses.
Concessionary revenue growth remains modest. Revenue from tendered and school services provided under contract has continued to decline, reflecting the timing of school holidays referred to above and the result of local authorities reducing spending on supported services due to budget constraints.
Expansion of the megabus.com
inter-city coach operations in mainland Europe is progressing and Stagecoach remain positive about the growth opportunities in that market. As we
expected, the European business remains loss-making at this early,
high-growth phase of its development but progress to date has been
encouraging with strong demand for the recently launched domestic coach
services in Germany and Italy.
Overall, estimated passenger journey
numbers for the Division in the 12 weeks were 0.7% below last year,
which was driven by a reduction in the number of concessionary passenger
journeys that reflects the poorer summer weather in various
parts of the UK.
UK Bus (London)
Trading at the UK Bus (London) Division is consistent with expectations.
The portfolio of contracts that the
Division has with Transport for London is of a similar size to the prior
year and the reported revenue growth principally reflects a net
increase in contract prices resulting from the renewal of and/or
variations to contracts. Low inflation and the fall in fuel prices mean
that the annual inflation-linked adjustment to each contract's price is
minimal.
The operating environment in London
continues to be adversely affected by traffic disruption, including
congestion resulting from road works, which affects the revenue the
business receives as Quality Incentive Income based on its operational
performance.
UK Rail
The company are pleased with the financial
performance of the UK Rail Division. In addition to the like-for-like
revenue growth of 5.5%, overall reported revenue increased substantially
year-on-year in the 12 weeks due to the inclusion of the new Virgin
Trains East Coast franchise, which commenced on 1 March 2015.
Having been unable to agree terms with
the UK Department for Transport ("DfT") for a direct award of a new
South West Trains franchise to at least April 2019, the company expect applicants
to be invited to tender for a new long-term franchise to commence in
2017. The current franchise is due to end in February 2017, and the DfT
has indicated that it expects to exercise its pre-contracted option to
extend the franchise to June 2017. It is not expected that South West
Trains to earn a significant profit during any extension period.
In July 2015, the DfT published a revised
rail franchise schedule. The core period of the planned East Midlands
Trains franchise direct award is now expected to run from October 2015
until March 2018, rather than October 2017. Constructive discussions are
continuing with the DfT in respect of that direct award.
The Group has submitted its bid for a new
Transpennine Express franchise and its joint venture with Abellio is
shortlisted to bid for a new East Anglia franchise. The successful
bidder for Transpennine Express is now expected to be announced in
December 2015, with the franchise commencing in April 2016. The winner
of the new East Anglia franchise is expected to be announced in June
2016, with the franchise commencing in October 2016.
North America
Virgin Rail Group
Virgin Rail Group's West Coast rail
franchise continues to perform strongly and that is benefitting
taxpayers through profit share payments by the business to the UK
Department for Transport. As expected, profit in the 12 weeks was
significantly higher than the equivalent prior year period because until
June 2014, the franchise operated under a temporary management
contract. The revised rail franchise schedule referred to above
envisages the franchise running until September 2017, having previously
been planned to run until at least 31 March 2017.
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 2015, reflecting additional investment in the bus fleet and the reversal of some favourable UK Rail working capital
timing differences in the previous financial year, partly offset by
continued strong cash generation from operations.
Outlook
Overall current trading is satisfactory and the company remain on course to meet expectations for the year.
