Stagecoach revenues getting back on track

Published on Monday 8 March 2010 20:24

TRANSPORT group Stagecoach yesterday signalled light at the end of the recessionary tunnel, telling investors its UK rail revenues have edged up with a gradually improving economy.

The Perth-based firm, which runs South West Trains out of London Waterloo, the UK's biggest commuter rail franchise, said overall profitability also remained on track despite the "unusually severe" winter weather that hit revenues for December and January.

In a trading update, the group said like-for-like revenues at its rail division, which also includes East Midlands Trains, rose 2.1 per cent in the 40 weeks to 7 February. This compared with a 1.9 per cent rise in the six months to October.

Revenues at Virgin Rail, the joint venture Stagecoach runs with Sir Richard Branson's group along the west coast mainline from Glasgow to Euston, boosted revenues 8.8 per cent in the latest period.

The company's UK bus division, covering more than 100 towns and cities from the Scottish Highlands to the south west of England, saw revenue growth decelerate to 3.4 per cent in recent trading, from 4.4 per cent in the first six months of the trading year.

A spokesman for Stagecoach said the UK bus business was hit by the freezing winter weather as consumers cut down on travel in the extended cold snap.

But the rail division had seen better trading as the economy got "slightly better" and the financial services sector began to recover. SWT is used by many City workers.

The spokesman said: "(Stagecoach] runs South West Trains which is a big commuter service so it is closely linked to the economy."

Recent official data showed that in the final three months of 2009 the UK climbed out of the longest and deepest recession on record – six quarters of negative growth that shrank the economy 6 per cent.

Stagecoach responded with heavy costcutting in the rail business like a number of competitors in the sector such as FirstGroup and National Express.

Stagecoach's US bus arm, including Megabus.com, saw revenues down 5.2 per cent in the nine months to 31 January – an improvement on the 6.5 per cent decline for the first six months.

The US business has been hit by high unemployment as passengers cut back on discretionary leisure travel while results have also suffered on the weakness of the pound against the dollar.

Stagecoach, which reorganised its debts at the end of last year, said its financial position remains strong.

Gert Zonneveld, transport specialist at broker Panmure Gordon, said: "It's early days but those rail revenues look OK. SWT, in particular, is linked not just to economic growth but employment trends."