Slowing economic growth, the Brexit vote and lower oil prices prompting people to use their cars more have seen half-time profits at train and bus giant Stagecoach fall by a fifth.
Group chief executive Martin Griffiths said terrorism attacks in Europe and poor weather had also taken their toll as the Perth-based business posted a statutory operating profit of just under £109 million for the six months to 29 October. That was down from £137.2m in the same period of 2015.
The bus business could be bumpy for the next 18 months to two yearsMartin Griffiths
“We are in the lowest growth environment I have seen for a long time,” Griffiths said.
Overall group revenues rose to £2 billion from £1.97bn last time. Griffiths said management was pleased with the resilient performance of the business, co-founded by executive chairman Sir Brian Souter, in a “challenging and uncertain political and economic environment”.
He added: “Brexit has not helped and the US [presidential] election has not helped. What may be positive is that he [Donald Trump] has made great play on investment in US infrastructure. And if you are building infrastructure that usually involves moving workers around.
“It is pluses and minuses. Megabus.com [the inter-city coach business] in North America is not going to be the growth engine it was three years ago.”
Stagecoach’s North American arm saw profits fall 17.8 per cent to £23.5m, while megabus.com’s revenues fell 7.8 per cent. The interim dividend – to be paid on 8 March – is lifted 8 per cent to 3.8p.
Stagecoach’s results were largely down across the board, but the biggest hit was to its rail operations, where profits halved to £20.5m from £43.8m.
The group owns Britain’s largest commuter rail franchise, South West Trains (SWT) out of London Waterloo, and its other operations include a 49 per cent stake in Virgin Rail Group, which runs the West Coast mainline, and a 90 per cent holding in Virgin Trains East Coast.
At SWT, the group has pioneered trials of the joint working arrangements with Network Rail (the owner of the rail infrastructure) announced by transport secretary Chris Grayling on Monday.
Revenues in Stagecoach’s UK bus business, incorporating 8,500 buses, fell to £514m from £522.4m, while profits dropped 7 per cent to £66.6m, with a profit margin of 13 per cent.
Griffiths said: “The bus business could be bumpy for the next 18 months to two years.”
He said the firm would look at capacity and demand, but did not want to be “aggressive” on price rises with the danger of adversely affecting long-term positives for the business such as urbanisation and greater use of technology.
Griffiths said although the terrorist attacks in Europe, including multiple attacks in Paris in November, had a dramatic impact on all of Stagecoach’s long-distance business “including to major conurbations like London” that had since eased.