Stagecoach swings to loss but still beats expectations
Stagecoach Group issued its interim results for the half-year ended 27 October on Wednesday, reporting a fall in revenue to £1.23bn from a restated £1.79bn a year earlier.
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The FTSE 250 passenger transport operator said its adjusted earnings were ahead of expectations, which primarily reflected the “positive resolution” of contractual matters for the now-defunct South West Trains franchise, as well as “strong profitability” at the Virgin Rail Group.
Profit before tax was £87m for the period, down from £96.7m a year earlier, on an adjusted basis.
Adjusted earnings per share were 12.9p, down from 13.6p, with the prior year figure including a “strong” contribution from the South West Trains franchise, which ended in August 2017.
On a statutory basis, Stagecoach swung to a loss per share of 5.5p, from earnings of 13.6p, which was put down to an £85.4m non-cash exceptional impairment charge in respect of North America goodwill.
The board maintained its interim dividend at 3.8p per share, and said full-year adjusted earnings would reflect the out-performance of its rail operations in the first half of the year.
On the operational front, Stagecoach said it continued to invest in innovation, with a trial of autonomous buses carrying passengers between Edinburgh and Fife launched with £4.35m funding from Innovate UK.
It had also become the second-largest contactless transit merchant in Europe, after Transport for London.
The board spoke of “encouraging performance” from its regional UK Bus operations, with commercial initiatives said to be delivering passenger revenue growth, and like-for-like revenue per vehicle mile up 4.4%.
Good profitability and further opportunities were reported from its UK rail operations, with Stagecoach involved in shortlisted bids for three new franchises.
It also said good progress had been made on the negotiation of a new direct award franchise at East Midlands Trains, through to at least August next year.
On its North America strategic review, Stagecoach said first half performance in the region was in line with its revised expectations.
It said no significant changes had occured since its September trading update in expected profit for the full-year, but a £85.4m non-cash goodwill impairment had recorded to reflect a revised view on its long-term profitability.
The company was reviewing its strategic options, and was in discussions regarding a possible sale of all or part of the business.
Stagecoach’s board said its focus was on growing scheduled service in the geography, including megabus, as well as contract parts of the business.
“I am pleased to report positive half-year financial results, ahead of expectations,” said Stagecoach chief executive Martin Griffiths.
“Our strategy is designed to grow our core business, to support innovation, and to position the group to benefit from future opportunities.
“We have delivered encouraging results at our UK regional bus business, where we continue to deliver high customer satisfaction.”
Griffiths said targeted fleet and technology investment was helping to enhance operational delivery and improve cost efficiency.
He also explained that the firm was continuing to innovate across a range of areas including autonomous buses, contactless payment, data analytics and demand responsive transport.
“We are well positioned in UK rail, with three live contract bids and more than 20 years [of] experience of delivering innovation and investment for customers.
“We welcome the UK Government's rail review as an opportunity to deliver better value and day-to-day performance for passengers, a partnership structure and contracting system which is sustainable for the long-term, and reform of outdated regulations which are holding back customer-focused improvements.”
Griffiths added that, while the board recognised the competitive challenges in some of its markets in the UK and North America, it remained “confident” that public transport would be central to delivering government priorities to grow the economy, connect people and communities, reduce road congestion and improve air quality.
“We are reviewing strategic options for the North America division and that includes ongoing discussions regarding a possible sale of all or part of the business.
“The group is focused on making further progress in the second half of the year and we have increased our expectation of full-year adjusted earnings per share to reflect the above-forecast rail earnings in the first half of the year.”