Stagecoach shares fall as rail growth slows

Stagecoach chief executive Martin Griffiths

Shares of Perth-based international transport group Stagecoach fell 3.6% after it warned in a trading statement that the outlook for the UK rail industry “is more challenging than it was at this time last year.”

The company cited weakening consumer confidence, increased terrorism concerns and sustained lower fuel prices as possible causes of slower growth in rail.

Stagecoach also said revenue growth at its UK bus and coach operations had been low in the last year, and that its mainland European coach business remained loss-making. 

The London bus operations and North America division of Stagecoach are performing in line with expectations. 

Stagecoach said the group is on course to achieve its expectation of overall adjusted earnings per share for year ending April 30.

It said like-for-like revenue growth for the financial year to date was up 0.2% at its UK regional bus operations, up 1.1% at its UK London bus business, up 2.5% at UK rail, up 4.6% at Virgin Rail Group, and said its North America business was down 3.4%.

“The outlook for the UK rail industry is more challenging than it was at this time last year,” said Stagecoach.

“Although growth trends continue to vary across the different parts of the rail industry, the overall industry rate of revenue growth has slowed in recent months. 

“Reflecting those softer trends, like-for-like rail revenue growth in our own UK Rail Division (principally South West Trains and East Midlands Trains) was 2.5% in the forty eight weeks, revenue growth at Virgin Trains East Coast was 4.9% and revenue growth at Virgin Rail Group’s West Coast franchise was 4.6%. 

“We believe the reduced rate of growth reflects the effects of weakening consumer confidence, increased terrorism concerns, sustained lower fuel prices, the related effects of car and air competition, slower UK GDP growth and slowing growth in real earnings.  

“We have taken and will take further steps to mitigate the effects of lower revenue growth, focussing on cost control and additional initiatives to grow revenue. 

“We continue to work constructively with the Department for Transport and other industry partners to meet our obligations, manage contract changes and ensure the continued stability and growth of our rail businesses.”

The announcement of Stagecoach’s preliminary results for the year ending April 30 is scheduled for June 29.