Switch to buses and trains helps cover Stagecoach fuel costs

Published on Thursday 28 August 2008 21:42

GROWING numbers of passengers turning to bus and rail travel amid the rising costs of motoring have "more than compensated" for higher fuel and staffing costs at Stagecoach.

The Perth-based company said in a trading update that profits since May were higher than expected after a sharp rise in revenues, mainly at its bus division.

Its update mirrored industry trends, which suggest a growing shift to public transport, and comes a week after rival Arriva posted figures ahead of fore- casts after a better-than- expected performance by its bus division.

Stagecoach, headed by chief executive Brian Souter, said its UK bus division had achieved a 9.3 per cent improvement in like-for-like revenues in the 16 weeks to 17 August, including a 4.9 per cent rise in passenger numbers.

The UK rail division, which includes the South West Trains franchise, posted a 9 per cent rise in revenues.

Finance director Martin Griffiths told The Scotsman: "All parts of the business have done well in the first quarter, but we are not too complacent. People are using buses and trains instead of getting in their cars as the costs of fuel and parking charges are rising.

"In a survey we did a few months ago, a very high proportion of people said they had changed their travel habits in the last year, for both economic and environmental reasons.

"Public transport is on good form."

But he added that despite the upbeat outlook for the future, the company would inevitably take a hit from the current economic downturn.

He said: "At the moment, we are seeing good revenue growth, but our staffing costs and fuel prices are rising – we are not immune to that."

Stagecoach added in yesterday's statement that profit at Virgin Rail Group, in which it has a 49 per cent stake, was at the "upper end" of expectations. the division reported 2 per cent revenue growth over the period.

It said that, despite difficult credit markets, its financial position was strong and that it had "significant surplus cash" and solid banking facilities running to 2012.

Griffiths said that he was also encouraged by the performance of its Megabus operations in North America, which reported a 7.3 per cent rise in revenues in the 16-week period.

He said: "It has taken off far quicker than we had initially expected."

Around two million UK passengers travel on Stagecoach buses every day in 100 towns and cities in the UK.

The firm has a fleet of around 7,000 buses.

Investec Securities expects pre-tax profits of 196 million this year and 215.5m in 2009.

Stagecoach shares closed slightly lower – down 0.75p at 302p – which analysts said reflected profit-taking and fears over the impact of central London job losses.