Stagecoach eyes up the United Arab Emirates market whilst underlining its current position

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Stagecoach has revealed details about its future market plans in its half-year report

Stagecoach Group plc has published its half-year report for the six months to 30 October, giving an insight into its performance in ‘radically different’ market conditions as a result of the coronavirus pandemic. Financial highlights include a pre-tax profit, which it says reflects management actions to respond to Covid-19, and supportive measures by government and local authorities. The company remains cash positive with reduction in net debt to £310.8m. Adjusted earnings per share are reduced to 0.1p (H1 2020: 10.0p), reflecting the effects of Covid-19 and last year’s expiry of rail franchises. Statutory earnings per share are 0.8p (H1 2020: 9.8p), and around £17m of annualised cost savings have been identified since March 2020. The Group retains over £850m of undrawn, committed bank facilities and available cash/deposits.

From a strategic and operational point of view, the Group said that public transport continues to have a key role to play in economic recovery and environmental sustainability. In its regional bus operations, the Group reports significant recovery in patronage and commercial revenue since May, notwithstanding social distancing and other restrictions. The division is currently operating around 91% of prior year vehicle mileage, with commercial sales having recovered to almost 60% of prior year levels and now at around 54%, reflecting some tightening of Covid-19 restrictions.

In London, the Group reports the continuation of strong operating and financial performance, reflecting additional contracts gained.

The Group said that it is also looking at diversification by exploring partnership opportunities and new commercial initiatives, and has been short-listed for new bus contracts in Sweden and Dubai. It also continues its strong environmental, social and governance performance, with intentions of a zero-emissions bus fleet by 2035.

Martin Griffiths, Stagecoach Group Chief Executive, said: “The safety and wellbeing of customers and our people remains our absolute priority as we continue to navigate the Covid-19 pandemic. While the situation remains fluid, we have made progress in the restoration of our networks to close to pre-Covid levels and in growing passenger volumes safely.

“We have a strong business, with good liquidity, devolved operating companies closely focused on our customers and local communities, and a supportive relationship with government and our local authority partners.

“As well as continuing to provide vital connections to jobs and public services during the current pandemic, our sustainable public transport services are central to long-term plans for a greener, smarter, safer, healthier and fairer country.

“We welcome the UK, Scottish and Welsh governments’ recognition of the importance of bus and tram services, as evidenced by the sector-specific actions they have taken to support the continuation of vital services during the Covid-19 pandemic. We are working closely with our government and sector partners on a new framework to ensure the country’s public transport networks adapt to new working and travel patterns, are fit for the post-Covid world, and meet the continuing needs of our customers and communities.

“We are grateful for our people’s professionalism, selfless spirit and dedication to serving our customers, throughout this difficult period. I’m confident that with our strong leadership and committed frontline people we can come through the challenge of the Covid-19 pandemic and maximise the significant opportunities for public transport ahead.”

The Group’s outlook for the remainder of the year ending 1 May 2021 is unchanged from its trading update in October.

Stagecoach also introduced a new customer rewards scheme in August, with special offers across the UK in the leisure sector, including visitor attractions, places to eat out and hotels. The Group said that it expects Stagecoach Rewards will help support those local businesses in the communities it serves.

Furthermore, in July, it launched Stagecoach Solutions, a ‘one-stop-shop’ to help businesses, the education sector and event organisers, which offers a range of tailored transport solutions designed to respond to the ‘new normal’ and meet the need for flexible mobility services.

Stagecoach plans to pilot fare capping using contactless tap-in/tap-off ticketing on bus services in Peterborough in 2021. Having developed a technical solution earlier this year the Group said it plans to deliver a customer proposition when Covid-19 restrictions are sufficiently relaxed and there is clarity on market conditions. It also plans to introduce a new simplified fares structure across Scotland in January 2021.

The Group is also pursuing overseas interests as part of its diversification strategy, where it sees relatively low political and regulatory risk, contracts that offer an appropriate risk-reward balance, and geographies with positive demographics and economic outlook. Although recent bids for four bus contracts in the Skåne Municipality in the south of Sweden were unsuccessful, it is continuing with shortlisted bids for two other bus contracts in Skåne and is shortlisted for two contracts in the Gothenburg region, for 10 years and 8.5 years respectively and involving the operation of around 140 buses, including electric vehicles, from June 2022. Final bids are to be submitted in early 2021. The Group is also exploring potential bus and long distance coach contracts in the United Arab Emirates.