Financial Performance
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 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)
|
- twenty four weeks ended 17 October 2015
|
1.0%
|
UK Bus (London)
|
- twenty four weeks ended 17 October 2015
|
1.4%
|
UK Rail
(excluding Virgin Trains East Coast) |
- twenty four weeks ended 17 October 2015
|
5.8%
|
North America
(including Megabus.com)
|
- five months ended 30 September 2015
|
(5.6)%
|
Virgin Rail Group
|
- twenty four weeks ended 17 October 2015
|
8.7%
|
The UK Bus (regional operations)
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 on bus services.
Concessionary revenue growth remains
modest. Revenue from tendered and school services provided under
contract has continued to decline, as a result of local authorities
reducing spending on supported services due to budget constraints.
Overall, estimated passenger journey
numbers for the Division in the 24 weeks were 0.3% below last year,
which is consistent with trends reported earlier this year.
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. The company are
accelerating their expansion plans with the launch of domestic services in
France following the French Government's decision to liberalise
inter-city bus routes of at least 100km in distance from August 2015.
Accordingly, net start-up losses of around £15m are expected for the
year ending 30 April 2016, which is around £5m higher than previous
expectations.
Trading elsewhere at our UK Bus (regional operations) Division is in line with expectations.
UK Bus (London)
Trading at the UK Bus (London) Division
is also consistent with expectations, with reported revenue growth
reflecting the profile of contracts the Division has with Transport for
London. Growth continues to be impacted by congestion resulting from
road works, which affects the revenue the business receives as Quality
Incentive Income based on its operational performance.
UK Rail
The UK Rail Division continues to perform
strongly and the company have revised up the forecast of 2015/16 UK Rail
operating profit to reflect continued good cost control and clarity
around the terms of the new East Midlands Trains franchise.
In September 2015, the Group agreed a new
East Midlands Trains franchise direct award with the Department for
Transport ("DfT"), which commenced on 18 October 2015 and is scheduled
to run until 4 March 2018. The DfT has the option to extend the contract
by up to one year on commercial terms that have already been agreed.
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 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
The fall in fuel prices continues to
impact demand adversely for megabus.com inter-city coach services,
with like-for-like revenue at megabus.com North America in the five
months ended 30 September 2015 being 5.9% below the equivalent period
last year. Trading elsewhere in the North America division and its joint
venture, Twin America, is broadly in line with expectations.
Sightseeing and some other leisure-related businesses continue to be
adversely impacted by competition and the strength of the US dollar.
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 DfT.
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, the acceleration of interest and premium payable associated
with redeeming 5.75% bonds 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.
The Group issued £400m of 10-year bonds
with an annual coupon of 4.00% on 29 September 2015. The Group
subsequently redeemed the £400m of 5.75% bonds that were due to mature
in December 2016. The premium payable to redeem the 5.75% bonds in
excess of their par value, together with the cost of terminating
interest rate swaps that became ineffective as a result of the
re-financing, will be approximately £23m. As previously reported, it is intended to recognise the actual cost of this as an exceptional item in
the Group's consolidated income statement for the six months ended 31
October 2015.
Outlook
Overall current trading is satisfactory and the group remain on course to meet expectations for the year.
