Stagecoach sees light at end of recession tunnel

TRANSPORT group Stagecoach reported a 24 per cent drop in annual profits today but said the outlook for its UK rail division had improved in recent months.

The company, which operates the South West Trains and East Midland rail franchises, posted group-wide profits of 129.8m for the year to April 30, down from 170.8m a year earlier.

It benefited from a resilient performance by its UK bus division, which grew operating profits 0.4 per cent to 126.1m, although passenger revenue growth in UK rail failed to keep pace with payments to the Department of Transport.

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Profits in UK rail fell by 25.3 per cent to 41.6m but Stagecoach said this exceeded its expectations at the start of the financial year.

Like-for-like rail passenger revenues increased 3.9 per cent to 968.9m and had boosted the outlook for the current financial year, the company added.

Its prospects were given a further lift last week when the company's argument that its South West Trains franchise should be granted revenue support from April this year was backed by the rail industry's dispute arbitrator.

The Department for Transport had argued that payments did not kick in until February 2011, although Stagecoach lost a separate battle over the use of car park revenues in subsidy calculations.

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Stagecoach will receive the first revenue support before the end of the current financial year, but the loss of the car park revenue dispute will dent profits by 8m.

In the UK bus division, which serves more than 100 towns and cities in the UK, like-for-like revenues increased 4.2 per cent to 839.5m.

The division will benefit from lower fuel costs in the year to April 30 but it warned other costs were subject to some increases.

In light of the uncertain pace of economic recovery, Stagecoach said its bus division was planning for "relatively modest" fare and revenue increases in the year ahead.