Stagecoach falls 25% to £1.4bn, but shares get relief

Shares of Perth-based bus and rail giant Stagecoach Group plc got some respite on Wednesday, rising 10% after its results for the year ended May 2 were not as bad as some analysts had predicted.

The firm said revenue for the year to May 2 fell almost 25% to around £1.4 billion and statutory profit before tax fell 60% to £40.6 million.

“The lower revenue reflects the end of the Virgin Trains East Coast franchise in June 2018 and the end of the East Midlands Trains franchise in August 2019,” said Stagecoach.

The company said it has “identified opportunities overseas” as part of its strategy to diversify the business.

Stagecoach is Britain’s biggest bus and coach operator, employing around 25,000 people. Its shares are down about 60% for the past 12 months.

“The FY results were not as bad as feared, beating both our forecasts and consensus,” said analysts at Liberum.

“As expected, London bus has been supported by its contractual structures and government financial support for regional bus has seen the group remain cash generative, despite lockdown.”

In its outlook, Stagecoach said: “With the continuing uncertainty of the COVID-19 situation and the UK’s recovery, it remains difficult to reliably predict profit for the new financial year ending 1 May 2021. 

“In the short-term, the actions we have taken and the continuing support of government should ensure we continue to generate positive EBITDA (earnings before interest, tax, depreciation and amortisation) and avoid significant operating losses, and we are working to re-build profitability over time.

“We expect a lasting effect of the COVID-19 pandemic on travel patterns with an acceleration in trends of increased working from home, shopping from home, telemedicine and home education. 

“We anticipate that it will be some time before demand for our public transport services returns to pre-COVID levels and we are planning for a number of scenarios. 

“We are continuing to review our cost base, to reduce overheads and plan for adjustments to direct and semi-direct costs across a range of scenarios. 

“At the same time, we see positive drivers for our business from a renewed societal focus on health, wellbeing and the environment.

“Public transport can play a major role in a cleaner, greener and more resilient economy and society, tackling climate change with strong government action to reduce car use.

“As Britain’s biggest bus and coach operator, we have clear opportunities to grow our business and contribute to thriving communities.

“We continue to believe that by working together, the private sector and our local authority partners can deliver the public transport services our customers want.  

“Beyond our existing core operations, we have identified opportunities overseas as part of our strategy to diversify the business.

“We are investing in our people and in new technology to navigate our changing and challenging world.

“Challenge brings opportunity and we believe our track record of innovation, collaborative working, and commitment to excellence will help deliver the solutions needed to ensure better mobility, cleaner air and a more sustainable future for our communities.”

Stagecoach CEO Martin Griffiths said: “We have achieved a creditable set of financial results in what has been one of the most challenging and sobering periods for citizens, communities and economies across the globe in living memory …

“Prior to the COVID-19 pandemic, the business was on track to meet its expectations for the full year …

“In responding to the more recent global challenges, we have taken decisive action so that the business remains in as strong a position as possible and well placed to secure the significant long-term opportunities we see for public transport.

“Supportive short-term actions by government and our local authority partners have helped protect public transport networks, which are critical to the country.

“We have also been encouraged by the good momentum created by the positive direction of government bus policy and investment.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.