East Coast rail 'big opportunity' says Souter

Published on Wednesday 8 December 2010 15:49

TRANSPORT group Stagecoach said yesterday it may bid for the East Coast mainline following the government's franchise review.

Martin Griffiths, the Perth-based group's finance director, said: "If the East Coast line is let on the right terms it would be a very big opportunity and we would certainly be interested in that.

"We are also committed to keeping the West Coast mainline beyond our current franchise (to March 2012]. It's one of our principal assets and we have done a good job."

Stagecoach was bullish the day after the government unveiled a shake-up of Britain's railways, as the group posted a 55.6 million leap in pre-tax profits to 126.8m on revenues of 1.1bn in the six months to the end of October.

Whitehall said on Tuesday it was to award a new 14-year franchise for the West Coast line and a 15-year franchise for the East Coast next year.

Stagecoach's UK rail division, spearheaded by South Western Trains out of London Waterloo, boosted profits 8m to 23m. Its share of the profits of its joint venture with Virgin that runs the West Coast line increased 700,000 to 10m.

Stagecoach's UK bus profits motored ahead 14.4m to 73.3m, although the group said the recent snow chaos in Scotland, north-east England and Yorkshire would cost it "several million pounds" in the current financial year.

Brian Souter, chief executive and founder of the group, said the snow had made parts of the road network "so elementary people are walking half a mile to get a bus".

Many managers had not had a day off since the snow struck, sleeping in company offices, he said. "But we take people's money when times are good. We believe we have a moral obligation to provide that service when things are tough," Souter said.

He said diesel shortages had hit depots including Aberdeen, Inverness and parts of Yorkshire, but was confident the group could transfer supplies from depots with greater reserves.

Stagecoach's North American bus business saw profits rise 6.8m to 15m, helped by a strong performance from the cut-price Megabus, which Souter claimed was becoming "the Ryanair of the roads".

The company fired a shot over the government's bows about potential pressure on UK concessionary fares, with Souter saying that if cuts were too harsh the company may have to look at lower frequency, higher volume buses to compensate.Stagecoach makes about a quarter of its 1bn bus revenues from concession-linked fares.

Griffiths said it would be "naive" to think concessionary fares would not come under pressure in the austerity climate.

But Souter said while he would be highly reluctant to reduce provincial mileage to compensate, "you cannot justify running a high frequency, small bus if the unit revenues fall to a ridiculous level".

On the Competition Commission's initial findings on its bus industry competition inquiry due next month, Souter said Stagecoach had argued "empirically" that is major competitor was the car.

"We would not be able to deliver the modal shift we have if people were not leaving the car and taking the bus," he added.

The company raised its interim dividend 10 per cent to 2.2p.