Stagecoach continues organic growth

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Revenue growth in North America remains highest of all divisions

Stagecoach continued to grow its regional UK bus division for the six months to October 31 with revenue up 3.3% to £504.3m compared to the same six months in 2012. Operating profit was 15.2%. Revenue at its London division fell by 0.9% to £115.4m with an operating profit of 8.3%, but rapid grow continues in North America where there was a 17.2% increase to £238.3m, returning an 8.2% profit, and UK rail was also up 3.3% at £619.5 – operating profit 2.9%.

Group revenue was £1,473.9m and profit before taxation £105.6m. Adjusted earnings per share were up 2.8% to 14.6p while the interim dividend per share is 11.5% to 2.9p. Net debt was down £43.4m to £494.6m.

The regional UK bus division’s results “reflect a continuation of its successful strategy to grow revenue and passenger volumes organically,” said Martin Griffiths, Stagecoach CEO. “The previous year’s financial results for the six months ended October 31, 2012 included revenue of £18.8m and operating profit of around £4m arising from the successful delivery of contracts to provide transport for the media and athletes at the London 2012 Olympic and Paralympic Games. Excluding that £4m operating profit, the division has increased operating profit by £4.1m or 5.6% in the six months ended October 31 2013.”

He explained: “Our section-leading regional bus services have gone from strength to strength despite lower public spending and austerity measures. We have the lowest fares and highest customer satisfaction of any major bus operator, which is helping getBritainback on board the bus. Smart ticketing and other developments in new technology are helping make our services more convenient and offer further potential to encourage people to switch from the car to public transport.”

Talking about the London bus division Martin said: “From October 1 2013, the business no longer receives BSOG, but this is offset by a corresponding uplift in the contract prices paid to the business by Transport for London. The impact of this change will be an increase in both our reported revenues and costs, and a decline in profit margin but no overall change in profit. Excluding the effect of this change, revenue declined by 1.6%. The reduction in revenue during the period includes the effect of non-recurring revenue related to the London Olympic and Paralympic Games, and is in line with our expectations.”

Small disposals were made inNorth America. RAZ was sold to DMC Transport LLC for US$0.8m while several small operators were sold in Canada to Pacific Western Transportation for C$4.6m. That included the last remaining school bus operations based in Peterborough and Whitby, a local transit contract business, and services providing transport to and from Pearson International Airport in Toronto.

“Revenue growth in North America remains the highest of any of our divisions,” said Martin. “We remain on track to deliver a significant increase in operating profit in the North American division in 2013/14, we would not expect to see such a significant increase in 2014/15 as we absorb the operating losses associated with the additional vehicle miles recently added and the further new mileage that we plan to add over the next 12 months. We are confident in the sustainability of the business model and the investment in new mileage should add to the long-term value of the business.”

Talking about its Scottish Citylink joint venture, Martin said: “the megabus Gold and sleeper coach services have performed well in the first half of the year… We have demonstrated there is a clear market for premium travel products and we believe this has exciting potential for markets in other countries.”