Stagecoach hit by Virgin East Coast rail line woes
Rail and bus operator Stagecoach Group has reported a 15.3% drop in full-year pre-tax profit.
It has also been hit with a £84m charge at its unprofitable Virgin East Coast rail franchise, of which it owns 90%.
Chief executive Martin Griffiths said revenue growth on the line had not met the expectations envisaged when it bid for the franchise in 2013-14.
After the announcement, Stagecoach's shares were trading down 11% at 180p, the lowest level since December 2009.
At close in London, they had staged a recovery, but were still down 6% on the day.
The group said it was making provisions to reflect losses over the next two years on the East Coast Line, which connects London and Edinburgh.
"But based on our contractual position, I am confident that Virgin Trains East Coast will become profitable again from 2019 onwards," Mr Griffiths said.
'Doomed to failure'
He said Perth-based Stagecoach was currently talking to the government about new terms for the contract, but that these had not progressed as quickly as hoped because they had straddled a general election.
Mr Griffiths said he expected a deal to be agreed in the next 12 months.
However, Mick Cash, general secretary of the Rail, Maritime and Transport (RMT) union, said the franchise should be renationalised.
"RMT warned that reprivatising East Coast, after it had been successfully run in the public sector following the last private failure, was a gamble doomed to failure," he said.
"We have been proved right. This is the third private operator to run the vital East Coast intercity routes into the ground and rather than waiting for the inevitable financial collapse, it should be brought back into public ownership immediately."