Steven Knight analyses the accounts to see how some of Stagecoach’s operating companies performed in the last financial year
While it is normal for ‘listed’ companies to provide their shareholders with trading updates, these tend to focus on top level performance at group level. The real financial detail can be found in the individual accounts that are filed as a statutory requirement with Companies House.
Those for the Stagecoach Group operating businesses, covering the year to 29 April 2023, have recently been filed and provide a snapshot of the individual company performance.
We selected four geographically spaced companies to see how they performed, and have also taken a quick look at top level trading detail for the last full year of trading (to April 2019) before the major impact of the Covid-19 pandemic. In some cases, changes to company structures means that operating areas may have changed year on year.
As is common within large group companies, capital expense on new vehicle purchase is borne at Group level and recovered through monthly depreciation payments from the operating companies.
We have used the operating margin figure, pre-tax profit as a percentage of turnover to calculate the financial health of the four companies which show at best a return of under 5%. This is a long way from the early part of the millennium when, for example, the Cambus Limited (Stagecoach East) business was producing an Operating Margin of 14.74% in 2008/09. For 2022/23 it was in the red at -2.46%.
Turnover has been calculated using revenue, other income – which includes Government and other support – as well as bus advertising income. Also included is any financial income from interest received. Exceptional items applied after the pre-tax profit/loss accounts line have not been included in the calculations.
On 28th June 2022, the listing of Stagecoach Group’s shares was cancelled. On 15th August 2022, lnframobility UK Bidco Limited completed the acquisition of the Group’s entire issued share capital, and on 17 October 2022, the Group re-registered as a private company. lnframobility UK Bidco Limited is a company managed by DWS Infrastructure, a long-term infrastructure investment management business.
The accounts show diverse financial performance across the four operating companies, which were picked at random. It also shows that the new owners are looking to boost Group finances through dividend payments from the regional operating companies.
Western Buses Limited
2022/23 Operating Margin 2.84%
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The company trades under the Stagecoach West Scotland name and operates local and inter-urban bus and coach services in parts of Glasgow and throughout Ayrshire and the surrounding areas including on the Isle of Arran, It also holds a number of contracts to provide Scottish Citylink and megabus coach services.
The introduction of electric vehicles to reduce emissions is a key initiative for the business, which in line with most Stagecoach subsidiaries has seen passenger numbers increase post-Covid. 2022/23 saw a 10% uplift in concessionary travel income against the previous 12 months. Passenger numbers improved from 48,000 a day in 2021/22 to 58,000 a day in 2022/23.
Turnover for 2022/23 was £63.163m with operating costs coming in at £61.371m, giving a pre-tax profit of £1.792m and an operating margin of 2.84%. For the year to 30 April 2022 turnover was £55.404m with operating costs recorded at £55.274m. However, there was a £150,000 financial charge which produced a pre-tax loss of £20,000, effectively giving a break-even operating margin.
Looking at the figures for the year to 27 April 2019, the last full trading year pre-Covid pandemic, turnover was £56.378m with operating costs of £55.113m and finance charges of £130,000 producing a pre-tax profit of £1.398m. This gives an operating margin of 2.47%.
During the year to April 2023 the company operated 291 buses and coaches, down from 335 the year before with staff numbers increasing slightly to 854 (2021/22: 843).
The main revenue stream for 2022/23 came from:
Commercial Fares£16.269m (2021/22: £15.504m)
Concessionary Travel £20.427m (2021/22: £18.550m)
Tenders and Schools £4.509m (2021/22: £4.204m)
Contracts £9.750m (2021/22: £9.140m)
Total £50.955m (2021/22: £47.478m)
Staff costs for the year were £28.393m, which included direct wages of £24.325m
The net book value of vehicles in the fleet increased slightly from £32.325m at the start of the year finishing at £35.387m.
The accounts for 2022/23 report a dividend payment was made to the parent company of £2m with -£675,000 being transferred to company reserves.
On 29 April 2023 the company had net assets worth £36.944m.
Midland Red (South) Limited
2022/23 Operating Margin -1.94%
The company, under the Stagecoach Midlands trading name, operates services in both Northamptonshire and also Warwickshire, Services from both counties also operate into Leicestershire. Services from Stratford-upon-Avon, Leamington, Rugby, and Nuneaton also operate into Coventry. From January 2023 services have also been operated in the Birmingham area under contract to Centro. Passenger numbers improved from 62,000 a day in 2021/22 to 68,000 a day in 2022/23.
Surprisingly the introduction to the accounts filed with Companies House makes no reference to the Northamptonshire operations, which also extend into Bedfordshire.
The company also had a significant involvement in megabus operations throughout the 2022/23 period and also operates the City Sightseeing tours in Stratford-upon-Avon.
Turnover for 2022/23 was ££89.621m with operating costs and finance charges coming in at £91.360m, resulting in a pre-tax loss of £1.739m and an operating margin of -1.94%. For the year to 30 April 2022 Turnover was £72.156m with operating costs recorded at £79.133m. However, there was also a £639,000 financial charge which produced a pre-tax loss of £7.616m which resulted in a significant negative operating margin of -10.55%. The directors have done extremely well to turn around that from 2021/22 by 2022/23.
Looking at the figures for the year to 27 April 2019, the last full trading year pre-Covid pandemic, turnover was £94.317m with operating costs of £93.057m and finance charges of £1.45m producing a pre-tax loss of £190,000. This effectively gave break-even financial performance.
During the year to April 2023 the company operated 339 buses and coaches, down from 396 the year before with staff numbers decreasing slightly to 947 (2021/22: 968).
The main revenue stream for 2022/23 came from:
Commercial Fares £40.722m (2021/22: £39.141m)
Concessionary Travel £13.080m (2021/22: £11.608m)
Tenders and Schools £6.623m (2021/22: £3.191m)
Contracts £21.207m (2021/22: £7.722m)
Total £81.632m (2021/22: £61.122m)
Staff costs for the year were £43.415m, which included direct wages of £38.036mm
The net book value of vehicles in the fleet was down from £18.558m at the start of the year finishing at £17.227m.
The accounts report that no dividend payment was made to the parent company in respect of the 2022/23 trading year.
On 29 April 2023 the company had net assets worth £13.181m.
Stagecoach South Limited
2022/23 Operating Margin 4.35%
Stagecoach South operates local and long-distance bus services throughout Surrey, Sussex, and Hampshire, which carried 106,000 passengers a day in 2022/23, an uplift of 27,000 (34%) passengers a day from the 79,000 carried a day in 2021/22.
Turnover for 2022/23 was £75.990m with operating costs coming in at £75.990m and a £50,000 loss on investments, giving a pre-tax profit of £3.455m and in current trading conditions what appears to be a respectable operating margin of 4.35%. For the year to 30 April 2022 turnover was £70.896m with operating costs recorded at £66.795m. However, there was also a £214,000 financial charge which produced a pre-tax profit of £3.887m, giving an operating margin of 5.48%.
Looking at the figures for the year to 27 April 2019, the last full trading year pre-Covid pandemic, turnover was £69.150m with operating costs of £63.717m and finance charges of £125,000 producing a pre-tax profit of £5.308m. This gave an operating margin of 7.68%.
During the year to April 2023 the company operated 428 buses and coaches, down from 511 the year before with staff numbers down slightly to 1213 (2021/22: 1234).
The main revenue stream for 2022/23 came from:
Commercial Fares £43.354m (2021/22: £35.189m)
Concessionary Travel £17.906m (2021/22: £15.403m)
Tenders and Schools £7.277m (2021/22: £8.011m)
Contracts £2.036m (2021/22: £2.112m)
Total £70.573m (2021/22: £60.715m)
Staff costs for the year were £39.400m, which included direct wages of £33.638m
The net book value of vehicles in the fleet decreased from £30.315m at the start of the year finishing at £25.861m.
The accounts for 2022/23 report a dividend payment was made to the parent company of £6m with £3.132m being transferred from the company’s reserves.
On 29 April 2023 the company had net assets worth £43.674m.
Stagecoach North West Limited
2022/23 Operating Margin 2.25%
The company trades under the Stagecoach Cumbria & North Lancashire brand with operations in Lancaster/Morecambe, Barrow, Carlisle, West Cumbria, and Kendal. It also operates some long-distance services including Carlisle-Newcastle, Lancaster-Keswick, and Workington-Keswick-Penrith. Serving the Lake District, it has a highly seasonal operation. Post-Covid the increase in visitors has seen increased congestion on roads in the South Lakes whilst driver shortages also affected performance. Passenger numbers improved from 47,000 a day in 2021/22 to 56,000 a day in 2022/23.
Turnover for 2022/23 was £46.267m with operating costs coming in at £45,223m which gave a pre-tax profit of £1.044m and produced an operating margin of 2.25%. For the year to 30 April 2022, turnover was £41.032m with operating costs recorded at £39.971m. However, there were additional costs of £70,000 in respect of a loss on disposal of investments and a £159,000 financial charge which gave a pre-tax profit of £832,000 – giving a 2.02% operating margin.
Looking at the figures for the year to 27 April 2019, the last full trading year pre-Covid pandemic, turnover was £37.439m with operating costs of £36.125m and finance charges of £99,000 producing a pre-tax profit of £1.215m. This gave an operating margin of 3.24%.
During the year to April 2023 the company operated 281 buses, down from 334 the year before with staff numbers remaining fairly stable at 752 (2021/22: 766).
The main revenue stream for 2022/23 came from:
Commercial Fares £24.799m (2021/22: £21.116m)
Concessionary Travel £10.915m (2021/22: £8.291m)
Tenders and Schools £1.534m (2021/22: £1.313m)
Contracts £3.987m (2021/22: £3.370m)
Total: £41.235m (2021/22: £34.090m)
Staff costs for the year were £23.306m, which included direct wages of £18.269m
The net book value of vehicles in the fleet increased slightly from £18.332m at the start of the year finishing at £18.947m.
The accounts for 2022/23 report a dividend payment was made to the parent company of £7m with the balance of -£6.039m being transferred to company reserves.
On 29th April 2023 the company had net assets worth £19.409m.
Like much of the bus industry, the results for the year to April 2023 for Stagecoach’s operating companies show positive signs of recovery following the loss of ridership during and following the Covid-19 pandemic. The reduction in concessionary travel post-pandemic has still not recovered at the same rate as other passenger demographics and remains suppressed. However, in a double blow in addition to the reduced passenger numbers, there have also been some significant increases in operating costs.
Many operating companies have also been forced to look at their bus service networks and in some cases a retrenchment into core areas has been the result, whilst reductions in frequencies brought in at the height of the pandemic have not been fully reversed.
Passenger confidence during the year continued to be affected by an ongoing shortage of drivers which caused short notice cancellations and drove further timetable reductions.
There is a glimmer of hope, however, in the most recent trading statement from Stagecoach Group which covered the six months to October 2023 confirms ongoing improvement with a 5.3% increase in regional bus passenger journeys in the half-year ended 28 October 2023 compared to the equivalent period in 2022. It will be interesting to see how this is reflected regionally, but the heady days of double-digit operating margins are likely to remain a statistic of the past.
