Operating charges and cut in government subsidies for UK rail franschises blamed
Stagecoach has reported a slight drop in pre-tax profits despite a rise in group revenues for the year.
Pre-tax profits for the year to April 30 were £202.5 million compared with £205.7 million last year on revenues of £2.59 billion, up eight per cent on the £2.38 billion reported last year.
The Perth-based transport giant has reported a rise in revenue for the year across all divisions, including UK regional, London and North America bus operations and UK rail.
However, operating profits at its UK rail division dropped to £27.1 million, a fall of 44 per cent on the £48.4 million reported the previous year.
Stagecoach said the bulk of those losses stem from its East Midlands Train division as a result of revenues being below the level forecast when the contract was originally awarded.
The group said it earned “revenue support” from the Department for Transport (DfT) in the second half of the financial year, which has “returned that business to profitability”.
This "revenue support" came from the reintroduction of government subsidies in the second half of the year, in which the group took a total of £124.4 million for the year.
Stagecoach, which is also a partner with Virgin Rail on the West Coast franchise, said its two rail franchises had not seen the revenue growth expected when the contracts were agreed, and franchise payments to the DfT had risen faster than the rate of revenue.
The group said charges to Network Rail and rising diesel costs had also impacted on group rail revenues.
Stagecoach said it is continuing to review its rail franchising in light of the McNulty report on value for money in the rail industry and publication of the Rail Command Paper.
The group is currently shortlisted for two UK rail franchises it recently applied for, Greater Western and Thameslink.
In the UK bus divisions, London has recovered from a £5.9 million loss last year to an operating profit of £13.5 million, benefiting from the acquisition of East London Bus Group Ltd.
The regional bus division saw revenues rise by six per cent on the previous year to £162.7 million.
Revenues from the group's North American operations, which Stagecoach says is the group's fastest growing division, rose nearly eight per cent to $498 million (£318.4 million).
Stagecoach, which has been disposing of the bulk of its US school bus operations, is planning further expansion of its megabus in the US and Canada after agreeing last month to buy nine bus businesses from Coach America out of bankruptcy.
Chief executive Sir Brian Souter said: “We continue to see good organic growth in our bus and rail services in the UK and North America.
“This has been supported by our successful mix of innovation, value-for-money travel, continued investment in our services, and strong operational delivery.
“Our UK regional bus operations are delivering good returns with different management approaches applied to respond to the different conditions in each of the markets in which we operate.
“In London, our turnaround plan is progressing well and we have won new contracts on more acceptable profit margins.
“We are excited about the next phase of our growth plan for our budget coach brand, megabus.com.
“As well as testing the market in Europe, we are expanding to new locations in North America where the response to the product from consumers has been particularly strong.”
Stagecoach carries around 2.5 million passengers a day in the UK on a fleet of 7,700 buses generating revenues of £909.7 million in the regions and £230.5 million in London.
The group also operates 1,900 buses and coaches in the US and Canada, including through its budget service megabus.com.