Stagecoach shares up despite bus and coach declines

Passenger transport operator Stagecoach Group published an update on its current trading on Wednesday, ahead of a series of meetings with analysts.

The board said its expectation of the FTSE 250 group's adjusted earnings per share for the year ending 29 April 2017 had not changed from when it announced full year results in June.

It did note, however, that independent macroeconomic forecasts were creating a “higher than usual degree” of forecasting uncertainty.

In its regional bus operations in the UK, like-for-like revenue was down 1.9% for the 16 weeks to 20 August, with its London bus operations seeing a 0.9% fall over the same period.

“This is partly attributable to weak underlying local economic conditions in some parts of the UK and sustained lower fuel prices,” the board said of the regional operations.

“Like-for-like revenue per vehicle mile was 0.5% below the equivalent prior year period.

It blamed the drop in London for a small net reduction in contracts with Transport for London.

“However, we believe our strategy of bidding prudently is the right one for the long-term sustainability of the business and we still aim to deliver long-term operating margins in excess of 7%.”

The company’s UK rail division, which includes its wholly-owned rail franchises South West Trains and East Midlands Trains, revenue grew 1.7% over that period, with revenue at the Virgin Rail Group - a joint venture with Virgin - was up 4.7%.

“UK Rail industry revenue growth has slowed over the last year and the outlook for the industry remains uncertain, particularly given its sensitivity to economic conditions,” the board said.

North American operations proved to be the sorest point, with revenue declining 3.3% on a like-for-like basis in the four months to 31 August.

The board explained that trading in its inter-city coach service division in North America remained challenging due to the effects of sustained lower fuel prices, which heightened the effects of car and air competition.

Stagecoach said the next update would be its interim results for the six months to 29 October, to be published on 7 December.

As at 0850 BST, shares in Stagecoach were up 0.57% at 211.2p, reversing the market’s early reaction which sent them into the red.