Rail custom bodes well for Stagecoach and Go-Ahead

Published on Sunday 20 June 2010 21:35

STAGECOACH and Go-Ahead step into the spotlight with trading updates and results.

After a difficult period for the industry with rail travel hit by recession, the signs have been brighter for Stagecoach after improved demand on its main commuter lines.

The group's UK rail division, which operates South West Trains and East Midland Trains, achieved like-for-like revenues growth of 4 per cent in the 48 weeks to 4 April.

There were also signs of improvement in North America, although its bus fleet was disrupted by the snow in January.

Underlying pre-tax profits for the year are expected to fall to 135.7 million from last year's 196.4m on Thursday.

Stagecoach was also boosted this week after winning a legal battle with the UK Department for Transport over the timing of revenue support for its South West franchises, which should keep its rail division in profit.

Fellow transport group Go-Ahead – which operates the Southern, Southeastern and London Midland rail franchises through its 65 per cent-owned subsidiary Govia – posts its own pre-close update on Friday.

Southeastern's high-speed services, introduced in December last year, have proved popular with commuters, boosting both revenues and passenger numbers. The firm's bus business grew revenues and passengers by 10 per cent in the third quarter, helped by acquisitions in Plymouth and Sussex.

The owners of electrical chains Comet and Currys also post results this week following another tough year for the consumer, while Premier Inn owner Whitbread gives the latest leisure sector snapshot.

Comet owner Kesa Electricals will move back into the black in full-year results on Wednesday, though UK sales remain downbeat.

Kesa has already flagged up pre-tax profits of 76m for the year to 30 April – compared with losses of 81.8m during the previous year – so attention in the City will be on the outlook.

The sales picture is tough, as like-for-like revenues at Comet were down 4 per cent between January and 30 April and fell by 1.2 per cent across the group – although Kesa faced problems in January's blizzards, which knocked about two percentage points from the figure.

Kesa stressed that Comet both held its market share and improved its gross margins.

Meanwhile, results on Thursday from DSG International – which owns Currys and PC World – should offer more evidence of the turnaround in train under former Tesco director John Browett.

Browett took over at the worst possible time in late 2007 but has steered the business through a savage recession and put the firm's balance sheet in order with a cash-call on shareholders. Now two-thirds of the way through a three-year revival plan, the group's last trading update showed the benefits of the shake-up, with underlying like-for-like sales up 6 per cent in the second half of its financial year.

DSG's underlying pre-tax profits are likely to be in line with the 80m-90m expected by the market, up from 50.5m the previous year.

Costa Coffee was the star of the show when leisure group Whitbread last updated the market, but analysts expect further signs of momentum from budget hotel chain Premier Inn in tomorrow's update.

Premier Inn returned to like-for-like sales growth in the final quarter of the past year – helped by an advertising campaign fronted by comedian Lenny Henny.

Whitbread plans to increase room numbers at Premier by more than 2,500 this year and to 55,000 by March 2015, although Costa is also earmarked for further expansion.

The group is looking to increase Costa store numbers in the UK and overseas by 250, or 16 per cent, during the current financial year and targets 3,000 branches by 2015.