Overhaul of board unveiled at travel company

RAIL and bus operator Stagecoach announced a controversial boardroom overhaul as it reported continued growth.

The group’s chief executive and co-founder Sir Brian Souter is returning to the role of chairman – despite contravening the Corporate Governance Code – with finance director Martin Griffiths stepping up to CEO.

The transport giant admitted it is flouting corporate governance, but billed its management overhaul as an “orderly transition”, allowing it to retain Sir Brian’s entrepreneurial talents.

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It was last night unclear whether Sir Brian’s new role will be an executive one. The firm said “retaining the talent and knowledge of Sir Brian in the role of chairman will be to the benefit of the company and all of its shareholders”.

Director of finance and company secretary Ross Paterson is joining the board as finance director. Chairman Sir George Mathewson is retiring, and senior non-executive Garry Watts will also become deputy chairman. It also plans to appoint another non-executive director.

Sir Brian moved to chairman from CEO in 1998, but was forced to take the helm again in 2002 after problems in the United States. The Scottish entrepreneur, who together with his sister and co-founder Ann Gloag own more than a quarter of the company, said it was time to step back.

Sir Brian said: “I remain committed to the success of Stagecoach and consider now to be an appropriate time to plan to take a step back from the day-to-day management of the business.

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“I fully support the board’s decisions to appoint Martin and Ross to their new roles, which reflects a further continuation of the transition in responsibilities that has occurred over recent years.

“With a combined shareholding of over 25 per cent, my family and I remain committed shareholders in Stagecoach and I will devote whatever time is necessary to effectively discharge my responsibilities as chairman when that time comes.” Mr Griffiths said: “I am honoured and delighted to be taking on the position of chief executive.

“I am proud to be part of the Stagecoach success story, working closely with Sir Brian. I look forward to continuing to work with Sir Brian and the team of talented people across the group that underpin Stagecoach’s success.”

Stagecoach yesterday said like-for-like revenues in its UK regional bus arm – which serves cities including Hull and Sheffield – were up 4.1 per cent year-on-year in the 12 weeks ended July 22. That was an improvement on the 2.4 per cent growth Stagecoach saw in its most recent financial year.

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“Overall current trading remains good and we believe the prospects for the group remain positive,” said the company.

Its UK rail arm reported 12-week sales growth of 6.8 per cent – down from its nine per cent growth in the year to the end of April. Sales at the group’s US bus operation, which includes shuttle services and sightseeing tours, gained 10.4 per cent in the three months to the end of July.

However, its London bus business posted revenues down 5.7 per cent after it dropped some contracts as part of a restructuring drive. Virgin Rail, jointly owned by Stagecoach and Richard Branson’s Virgin Group, was last week stripped of the West Coast Mainline franchise, which runs from London to Scotland, after the Department for Transport awarded the 13-year franchise to rival First Group.

Stagecoach, which transports about three million passengers a day, is however shortlisted for the Great Western and Thameslink rail franchises.

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“Stagecoach is shortlisted for both of the other UK rail franchises it applied for and we are making good progress with our bid for the Great Western franchise,” the company said. “We will also consider other rail franchise opportunities as these arise.”

Stagecoach is a major UK employer, with about 30,000 UK staff.

Stagecoach’s bus services in Yorkshire cover Hull, Sheffield, Barnsley, Rotherham, Huddersfield, Doncaster, Pontefract and Wakefield and employ more than 1,300 staff. They operate about 440 vehicles and serve about 57m passengers annually. The group also runs the Sheffield Supertram, which carries about 15m passengers annually, employs 270 staff and runs 25 trams.

It’s ‘business as usual’

Analysts said it is “business as usual” at Stagecoach despite the reshuffle.

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Investec analyst John Lawson said the new appointments are competent and well-known to investors.

“We do not expect these changes to alter investors’ perceptions of the group and we keep our buy,” he said.

“This is an orderly management succession and we do not expect today’s news to cause too many ripples.”

Analysts at Shore Capital said in a note to clients: “We retain our buy recommendation, despite the outperformance recently. The company to our minds retains decent growth prospects, defensive characteristics and robust cash generation.”

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