Stagecoach buses deliver good results but rail performance is disappointing

Stagecoach reports good organic and revenue growth in its four main operating divisions for the year ended 30 April 2014.

Group revenue increased 4.4% to £2.930bn (2013: £2.805bn), and group operating profit grew by 1.2% to £223.3m (2013: £220.7m). EBIDTA (earnings before interest, tax, depreciation & amortisation) -including joint ventures but excluding exceptional items – was up 1.9% to £340.2m (2013: £333.9m). Net debt is down to £461.6m (2013: £538.0m).

UK Bus (regional):  This sector accounts for 34.5% of group turnover but contributes 61.9% of group profits. Revenue increased by 4.8%, breaching the billion mark at £1.013bn (2013: £966.7m). Operating profit was up 2.9% to £147.4m (2013: £143.2m), but the operating margin was slightly down at 14.6% (2013: 14.8%); the previous year being partly inflated by the Olympics factor.

Passenger journey numbers increased by 1.3% but this was largely attributable to concessionary travel. Stagecoach increased its share of the tender market with revenues up 7%. The regional fleet consists of 7,100 vehicles and roughly holds a 20% share of the UK bus market outside London.

UK Bus (London):  The London operation represents 8.3% of group turnover and makes up 10.0% of group profits. Revenue increased by 5.2% to £244.9m (2013: £232.7m), but operating profit rose sharply by 25.8% to £23.9m (2013: £19.0m), partly due to lower costs and a fall in fuel prices. The operating margin improved to 9.8% (2013: 8.2%).

Stagecoach re-entered the London bus market in 2010 and results have surpassed expectations. It now has 1,200 buses and is the third largest operator in the capital.

UK Rail: The rail division generates 42.6% of group turnover but only 14.4% of group profits. Revenue was 4.2% up at £1.252bn (£1.201bn), but operating profit slumped 16.7% to £34.3m (2013: £41.2m). The operating margin also declined to 2.7% (2013: 3.4%).

Stagecoach runs the South West Trains and East Midlands Trains passenger franchises: The results reflect the increased payments to the DfT, up to £599.0m (2013: £531.4m), which more than offset payments to the franchises by way of revenue support, increased to £301.3m (2013: £256.4m). (This is the payment due to TOCs if revenue falls below an agreed target level).

Stagecoach has a 49% stake in Virgin Rail Group (VRG), which runs the West Coast franchise: Revenue was 5.5% up to £465.6m (2013: £441.5m), but operating profit plunged 75.2% to £2.6m (2013: £10.5m), and the operating margin plummeted to 0.6% (2013: 2.4%). The DfT takes most of the risk under the terms of the current franchise (which VRG is attempting to normalise).

North America: Operating profit was up 80.1% to £23.7m (2013: £13.4m), with Megabus being the fastest growing part of the business.

656/Sep 14


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