Stagecoach wins partial subsidy victory

STAGECOACH expects its rail division to be profitable this year after settling a subsidy dispute with the government but warned a partial victory meant revenue support would fall short of what it hoped.

Credit ratings agency Fitch last November assigned a negative outlook to Stagecoach's long-term debt, saying failure to resolve the dispute over the way subsidies are calculated in its favour would weaken the group's financial profile.

The bus and rail operator said in a statement that an arbitrator had ruled in favour of Stagecoach in relation to a dispute over the start date for calculating revenue support for the year to the end of March 2011.

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But the Department for Transport won its argument that car park revenues should be included when determining how much support Stagecoach's SWT division should receive.

"We are pleased at the outcome of the arbitration process, which has ruled in our favour on the central issue of revenue support," Stagecoach said in a statement.

Stagecoach said the decision meant it expected the group's rail division to remain profitable in the year to the end of April 2011 but that it would make less money than hoped in the future given the ruling in relation to car park revenues.

For the current financial year, the group predicted that 8m would be shaved off the pre-tax profit of both the division and the group as a whole.