Switch from car to bus boosts Stagecoach revenue

Efforts to tempt more people out of their cars and on to buses have helped Stagecoach deliver a rise in revenues, putting it on track to meet its earnings targets for the full year.

Perth-based Stagecoach carry more than three milion passengers per day. Picture: Contributed
Perth-based Stagecoach carry more than three milion passengers per day. Picture: Contributed

The Perth-based group, which carries more than three million passengers each day, told investors that overall trading during the first quarter was “satisfactory” as sales also motored ahead at its Megabus budget coach operation in North America.

On its home turf, bus passenger volumes outside London grew 0.9 per cent in the 12 weeks to 20 July, propelling revenues from its regional operations up 4 per cent.

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The firm, led by chief executive Martin Griffiths, recently placed orders worth more than £90 million for greener buses, with the record figure highlighting its confidence in “continuing to get people out of their cars and back on board the bus”.

Within London, bus revenues jumped 14.4 per cent compared with a year earlier, boosted by a string of recent contract wins, and Stagecoach said it would continue its focus on keeping costs under control while bidding “competitively” to secure more deals.

RBC Capital Markets analyst Damien Brewer said the group had started the year “on a solid trajectory”, although he noted that talks with the Department for Transport over planned extensions to its East Midlands and South West rail franchises may not be concluded until after the general election in May.

Over the past year, the firm has lost out on the Docklands Light Railway and Thameslink, Southern and Great Northern franchises, but was recently shortlisted to run the TransPennine Express route, with the winner due to be announced in October 2015.

Aberdeen-based incumbent FirstGroup and French rival Keolis are also in running for the service, which connects Edinburgh and Glasgow with English cities including Blackpool and Manchester.

Stagecoach’s UK rail revenues were up 4.9 per cent in the first quarter, while sales at its Virgin Rail joint

venture, in which it has a 49 per cent stake, were up 5.7 per cent on a year ago. Virgin was told in June that it will retain its West Coast mainline franchise until 2017.

In North America, sales for the three months to 31 July gained 4.9 per cent, helped by a 14.9 per cent surge at the Megabus budget coach operation.

Stagecoach said: “We are satisfied with the progress of our Florida

Megabus.com network, where operations began in May. The operating environment in North America is competitive, but we remain positive on the division’s prospects and the market opportunity.

In June, the group – co-founded by SNP donor Sir Brian Souter – warned that the outcome of next month’s independence referendum, as well as next year’s general election, could pose a number of risks through changes to the regulatory environment or the availability of public funding.

Yesterday it told investors: “Although there are a number of challenges to growing profit in the year ending 30 April, 2015, overall current trading is satisfactory and we remain on course to meet our expectations for the year.”

Analysts at Panmure Gordon forecast that the group’s pre-tax profits will rise 4.1 per cent to £188.2m for the full year, on sales up 6.9 per cent at £3.1bn.