Stagecoach says bus travel ‘steadily recovering’

Perth-based Stagecoach Group plc, the UK’s biggest bus, coach and tram operator, said on Friday that passenger demand in its UK regional bus operations “had been steadily recovering since April as COVID-related restrictions were relaxed” but the latest restrictions “may discourage public transport use in the short-term.”

Stagecoach shares are down almost 70% over the past 12 months, giving it a current stock market value of about £230 million.

In a trading statement, Stagecoach said: “The UK Bus (regional operations) business continues to be affected by the substantial fall in passenger demand for public transport in response to the COVID-19 pandemic.

“Passenger demand had been steadily recovering since April as COVID-related restrictions were relaxed, with commercial revenues returning to around 50-60% of the prior year levels.

“We are now operating vehicle mileage in excess of 93% of prior year levels. 

“The recent government announcements to impose further restrictions may discourage public transport use in the short-term.

“We are grateful for the measures put in place by the respective governments in England, Scotland and Wales, and by our local authority partners, to protect the continuity of local bus services throughout this period.

“In August, the Department for Transport confirmed that payments for the provision of these essential services by regional bus operators in England would continue until no longer required.

“These COVID-19 Bus Services Support Grant Restart payments are continuing, with an eight week notice period.

“While this and similar arrangements are in place, we expect to continue to generate positive EBITDA and avoid significant operating losses.”

On its London bus operations, Stagecoach said: “We are pleased with the continued strong operational and financial performance of our London business.

“We continue to work collaboratively with Transport for London in response to the COVID-19 situation, and contract payments are now at normal levels with full service restored, while an agreement on Quality Incentive Contract income is under discussion.

“Our expectation is that profitability in 2020/21 will be broadly consistent with the prior year financial performance.”

Stagecoach said it maintains a “solid financial position” with investment grade credit ratings and available liquidity of over £800 million.

On the 2020 triennial valuation of its main defined benefit pension scheme, Stagecoach said: “We expect the funding deficit to be substantially lower than the £404.1m (included in the group total of £413.1m) determined on an accounting basis as at 2 May 2020.

“Currently, we envisage that the funding deficit on the main scheme is in the range of £150-200m, which may lead to an increase in employer contributions over the medium to long-term.”

Stagecoach CEO Chief Executive said: “While the situation remains fluid, we have made progress in the restoration of our networks to close to pre-COVID levels and in growing passenger volumes safely within the current restricted environment.

“We have a strong business, with good liquidity, devolved operating companies closely focused on our customers and local communities, good financial discipline and a supportive relationship with government and our local authority partners. 

“As well as continuing to provide vital connections to jobs and public services during the current pandemic, our sustainable public transport services are central to long-term plans for a greener, smarter, safer, healthier and fairer country.”