Scotland business

Stagecoach warn of 'challenging' market as profits fall

Image copyright Stagecoach

Perth-based transport firm Stagecoach has warned of "challenging" market conditions after a fall in profit.

The company said it was adjusting to changing travel patterns, with economic slowdown squeezing its fare revenue.

Costs are being cut, and bus services reviewed to take account of shoppers' reduced travel to high streets in favour of online retail.

They also said passenger numbers on long-distance routes had dropped as cheaper fuel made car use cheaper.

Operations in North America have been harder hit by that factor.

Total group revenue for Stagecoach in the year to April rose from £3.2bn to £3.87bn.

The boost came from a 90% share in the new joint venture running Virgin Trains East Coast. It took on the Edinburgh-London franchise from a government-owned operator in March 2015.

Terrorism concerns

However, pre-tax profit was down 37%, from £165m to £104m, partly through capital investment.

Revenue growth in the UK rail division slowed significantly between November and April.

The company explained this by weakening consumer confidence, slow growth in real earnings, increased terrorism concerns and the relative cost of car and air competition with low fuel prices.

Alongside its results, Stagecoach announced it has sold the retail end of its Megabus operations in continental Europe.

While turnover doubled to £18m last year, the division made a loss of £24m.

That was bigger than expected, after the company expanded to take advantage of de-regulation in France. However, Stagecoach claims terror attacks in Paris and Brussels reduced demand for transport between cities.

The German operator of long-distance coaches FlixBus is to take over continental operations for an undisclosed sum, though Stagecoach will still operate some of those routes under contract.

Competitive market

UK non-London bus operations saw flat revenue, at more than £1bn, but a 5.5% fall in profits, with poor winter weather a contributing factor.

London bus operations suffered from a sharp rise since 2012 in the number of roadworks. Stagecoach said it is ready to expand its services as more housing is built in the east of the city.

Chief executive Martin Griffiths said: "We are affected by reduced public spending and factors in the wider economy, such as weakening consumer reports confidence and slowing growth in both UK GDP and real earnings.

"Public transport also faces the challenge from sustained lower fuel prices, the related effects of car and air of petition, as well as traveller concerns over global security."

Stagecoach operates 13,000 buses, coaches, trains and trams. It has around 40,000 employees, and uses 425m litres of fuel annually.

Its North American operations deploy 2,300 buses and coaches, serving 130 destinations. It felt the effects of competition from other transport, and reduced business from running school buses and charters.

The performance of its Twin America sightseeing tour buses in North America has been particularly tough in a competitive market for 'hop-on, hop-off' buses. The company reduced its valuation of that joint venture with a £38m charge to the accounts.

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