STAGECOACH GROUP PLC
29 October 2014
Stagecoach Group plc
Trading update
Stagecoach Group plc ("the Group") is today providing an update on trading in advance of a series of meetings with analysts.
Financial performance
The overall profitability of the Group has remained satisfactory, and there has been no material change to our expected adjusted earnings per share for the year ending 30 April 2015.
Like-for-like revenue growth for the financial year to date in each of the Group's main businesses is provided below.
UK Bus (regional operations) | - twenty four weeks ended 12 October 2014 | 3.2% |
UK Bus (London) | - twenty four weeks ended 12 October 2014 | 14.5% |
UK Rail | - twenty four weeks ended 12 October 2014 | 7.4% |
North America | - five months ended 30 September 2014 | 3.5% |
Virgin Rail Group | - twenty four weeks ended 12 October 2014 | 5.8% |
UK Bus (regional operations)
Our UK Bus (regional operations) Division has continued to perform satisfactorily.
The division has grown both passenger volume and revenue year-on-year. Like-for-like revenue growth for the twenty four week period of 3.2% excludes the revenue earned from contracts to provide transport for the Commonwealth Games. Passenger volume growth on an equivalent basis was 0.7%. Higher commercial revenue (i.e. revenue earned directly from fare-paying passengers) has contributed most to overall revenue growth, with concessionary, tendered and school revenue also growing. In the equivalent period last year, revenue was earned from providing additional bus services to replace train services that were affected by major railway resignalling work. As a result, revenue growth in the twelve weeks ended 12 October 2014 was lower than for the preceding twelve weeks.
We were disappointed but not surprised at the decision by the North East Combined Authority earlier this month to refer proposals to implement a bus contracting system in Tyne and Wear to a Quality Contracts Review Board. We now expect these proposals to be subject to more rigorous examination by a properly constituted independent board that should not be motivated by political considerations and which we fully expect to take appropriate, impartial, professional advice in reaching a decision. The Review Board has a duty to determine whether the proposals meet the five statutory public interest criteria that have to be met to support the introduction of the contracting scheme. We do not believe these tests have been met and we will present robust evidence to the Review Board to demonstrate this. We shall discuss with the Review Board the significant flaws in the proposed contracting scheme, and at the same time, we will continue to review our legal options. The voluntary partnership agreement proposed by the local bus operators would be far more effective at delivering customer service improvements and generating savings for the public sector without the huge financial risks of the proposed contracting scheme to the region's taxpayers.
We have been pleased with the progress of our megabus.com inter-city coach operations in continental Europe and we are now planning to extend the network further. We will introduce more European megabus.com services over the remainder of the year ending 30 April 2015, building on the success of megabus.com in the UK and North America. This is an exciting prospect for the medium-term but will result in a few million pounds of new start-up losses in the year ending 30 April 2015 and around £20m of additional capital expenditure, primarily in acquiring new vehicles.
UK Bus (London)
Revenue growth in our UK Bus (London) Division has been good during the period. Traffic disruption from ongoing road works has continued to adversely impact our quality incentive income, which has moderated revenue growth. Excluding the uplift in contract prices to compensate for the cessation of Bus Service Operators' Grant (a rebate of fuel duty), revenue increased by 9.4%. Our focus remains on keeping costs under control and bidding competitively to retain existing and win new contracts.
UK Rail
The financial performance of our UK Rail Division is in line with our expectations, reflecting our focus on growing revenue and controlling costs to mitigate the substantial increases in premia payments to the Department for Transport ("DfT"). As expected, the rate of revenue growth is higher than that reported for the first twelve weeks of the financial year, which is partly due to the effect of prior year resignalling work in the Nottingham area.
North America
Revenue growth in North America is encouraging. Megabus.com increased revenue by 13.5% in the five months ended 30 September 2014. We are satisfied with the progress of our Florida megabus.com network, where operations began in May 2014. The operating environment in North America is competitive, but we remain positive on the division's prospects and the market opportunity.
Virgin Rail Group
The new West Coast Trains franchise commenced on 22 June 2014 and is planned to run until at least 31 March 2017. The DfT has the discretion to extend the contract, on pre-agreed terms, by an additional year to 31 March 2018. Trading to date under the new franchise has been strong.
Twin America
We and our joint venture partners are in ongoing discussions with the US Department of Justice and the New York Attorney General to conclude the previously reported litigation relating to our Twin America joint venture.
The New York sightseeing market remains highly competitive, with current trading still challenging.
Bank re-financing
The Group has entered into £535m of new bank facilities. The new facilities have been committed for a period of five years to October 2019 with the potential for them to be extended by up to a further two years. These facilities replace previous bank facilities that were due to expire in February 2016.
Outlook
Although there are a number of challenges to growing profit in the year ending 30 April 2015, overall current trading is satisfactory and we are on course to meet our expectations for the year.
Interim results
The Group plans to announce its interim results for the six months ended 31 October 2014 on 10 December 2014.
For further information, please contact:
Stagecoach Group plc www.stagecoachgroup.com
Investors and analysts
Ross Paterson, Finance Director 01738 442111
Bruce Dingwall, Group Financial Controller 01738 442111
Media
Steven Stewart, Director of Corporate Communications 07764 774680
Notes
(1) Like-for-like revenue growth is derived, on a constant currency basis, by comparing year-to-date revenue with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods.
(2) This announcement contains certain forward-looking statements with respect to the financial performance, financial position and businesses of Stagecoach Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Except as required by law, Stagecoach Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.
This information is provided by RNS
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