Stagecoach revenues soar but it stays silent on rail fare increases

Published on Tuesday 17 August 2010 21:58

PERTH-based transport group Stagecoach cheered investors yesterday with a strong trading update unveiling across-the-board revenue increases as it stonewalled speculation that rail passengers face swingeing fare increases next January.

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• Profits at Stagecoach's Virgin Rail joint venture jumped nearly 20% Picture: Andrew Milligan/PA

Stagecoach said like-for-like revenues at its wholly-owned rail business - whose flagship is South Western Trains out of London Waterloo - rose 7 per cent in the 12 weeks to 25 July.

Revenues at Virgin Rail - the joint venture between Brian Souter's company and Sir Richard Branson's Virgin Group that runs between Glasgow and London - jumped 18.7 per cent as analysts said it was up against the weak comparators of last year's recession.

Stagecoach's UK bus revenues rose 2 per cent in the period, while its North American operation boosted revenues just under 7 per cent in the slightly different period of the three months to 31 July.

The Scottish group revealed earlier this summer that annual profits to end-April slipped to 129.8 million from 170.8m as it was hit by 22m in rising fuel costs and bad winter weather. The company yesterday added: "Trading conditions have improved across the group, with improving revenue trends in both the UK and North America.

"Whilst the effect of the change in the UK government and the sustainability and pace of economic recovery remain uncertain, we believe that on balance the outlook for the group is positive."

Keith Bowman, an analyst with broker Hargreaves Lansdown, said: "This update has pleased investors, with marketing campaigns and the broader rebound in both the UK and US economies underwriting progressive sales."

Martin Griffiths, Stagecoach's finance director, said he was not able to comment on industry speculation that rail passengers face annual fare increases of nearly 6 per cent next January following this week's latest inflation figures.

A UK government review is considering relaxing the formula which allows rail companies to lift fares 1 per cent above inflation. Data on Tuesday showed that the Retail Price Index in July, the traditional benchmark for rail fares in the following calendar year, stood at 4.8 per cent.

Griffiths said: "It's not possible to say definitely (on fare increases]. That's a matter for the government. They set the model on rail fares. We are not in a position to make a comment on the review."

Meanwhile, Stagecoach fuelled speculation about acquisitions by saying in its statement yesterday that its "financial position remains strong and we have significant committed, undrawn bank facilities".

Souter talked about the possibilities of transport industry consolidation earlier this year.Douglas McNeill, transport specialist at broker Charles Stanley, said: "Coach USA [an ill-starred acquisition that led to fundamental restucturing by Souter] casts a long shadow.

"But it was quite a number of years ago, Stagecoach has learnt its lessons from the episode, and I think the City would cut the group slack on future acquisitions if the terms and rationale were good."

Stagecoach's shares closed up 1.5 per cent at 169.9p.