Stagecoach on course to cash in on high fuel cost

Jun 26 2008 by Peter McCusker, The Journal

TRANSPORT group Stagecoach said environmental fears and higher fuel costs were sparking a “fundamental shift” towards public transport as it unveiled big revenue rises for bus and train operations.

The Scottish-based firm said like-for-like revenues rose 13.6% at its train arm – which includes South West Trains and East Midland Trains – and 7.5% at its UK bus division.

They helped the group post underlying pre-tax profits of £174.4m for the year to April 30, marginally ahead of market expectations.

Chief executive Brian Souter said: “We believe there are growing signs of a fundamental positive shift in customer attitudes towards public transport.

“This is driven by increasing road congestion, rising fuel costs and concern about climate change.”

He said the current financial year had started well, and he was encouraged by the “significant potential for further shift from the car to bus and train travel”.

Stagecoach’s total revenues from continuing business were up 17.2% at £1.76bn.

Revenues at its trains division, which contributes around 45% of group turnover, rose 36.1% to £777.8m.

The company said due to “strong organic growth” – and a first contribution from East Midlands Trains – passenger volumes at South West Trains franchise were up 5.7% in the year. Revenues for the new network between November 11 last year and April 30 were up 9.5% on a comparable basis, Stagecoach said.

UK trains’ operating margin fell during the year to 7.6% from 10.3%.

This was blamed on the new terms of the South Western franchise, which replaced the old South West Trains deal in February 2007.

Overall like-for-like passenger volumes at the UK bus arm, which contributes just over 40% of group revenue, were up around 3.6%.

The division saw operating margin rise to 14.8% from 12.2% in 2007, representing revenue growth, relatively stable year-on-year fuel costs and a continued focus on cost control.

Around two million UK passengers travel on Stagecoach buses every day in around 100 towns and cities in the UK. The firm has a fleet of around 7,000 buses.

Stagecoach said it was “mindful” of the impact of rising fuel costs.

The group gets through 328 million litres of diesel per year.

Shares fell nearly 5% yesterday.