5th Dec 2018 12:40
LONDON (Alliance News) - Stagecoach Group PLC on Wednesday said it swung to a loss in the first half of its current financial year, but adjusted earnings were ahead of expectations, causing the company to raise its annual outlook.
Shares in the FTSE 250 constituent were up 13% at 174.00 pence on Wednesday, the second best performer in the index.
The transport operator said it swung to a pretax loss of GBP22.6 million in the six months to October 27 from GBP96.7 million profit reported for the same period a year earlier. Adjusted pretax profit declined by 10% to GBP87.0 million from GBP96.7 million year-on-year.
The result was hurt by lower revenue, which fell by a third to GBP1.23 billion from GBP1.79 billion year-on-year due to the expiry of South West Trains franchise in August last year and the Virgin Trains East Coast franchise in June.
Despite the swing to a statutory loss, the company said adjusted earnings for the half were above expectations. Adjusted earnings per share came in at 12.9p, though this was down from 13.6p a year earlier.
"While we recognise the competitive challenges in some of our markets in the UK and North America, we are confident that public transport will be central to delivering government priorities to grow the economy, connect people and communities, reduce road congestion and improve air quality," said Chief Executive Martin Griffiths
"The group is focused on making further progress in the second half of the year and we have increased our expectation of full-year adjusted earnings per share to reflect the above-forecast rail earnings in the first half of the year," Griffiths added.
Revenue in the UK Rail division was down 63% to GBP335.1 million from GBP899.2 million year-on-year. Like-for-like revenue, which includes East Midlands Trains and Sheffield Supertram businesses, rose by 0.4% to GBP202.1 million from GBP201.3 million.
The division's operating profit fell 47% to GBP11.5 million from GBP21.7 million a year ago.
"Like-for-like revenue growth has been suppressed during the period, due to the effects on the East Midlands Trains franchise of both the revised timetable necessary to accommodate changes to the Thameslink network effective May and the current year resignalling programme at Derby railway station," explained Griffiths.
The company's operating loss for the half-year was GBP6.2 million compared to a GBP114.8 million profit reported in the first half of financial 2018, mainly reflecting a GBP85.4 million impairment of goodwill in respect of its North America operations.
Stagecoach operates around 2,100 buses and coaches in the US and Canada.
In the first half, revenue in North America fell 4.1% to USD245.7 million from USD256.3 million reported the year before, reflecting strong competition in certain markets Stagecoach operates in.
On a like-for-like basis revenue declined 3.0%, including a 1.7% decrease in megabus.com North America. In the first half of financial 2018, Stagecoach benefited from rail replacement contracts linked to train disruptions on New Jersey Transit and Long Island Rail Road.
Stagecoach said it is reviewing options for North American unit and is currently in talks regarding a potential sale of all or part of the business.
Meanwhile, the company intends to continue to focus on growing the scheduled service, including megabus.com, and contract parts of the business.
Elsewhere, in the UK Bus division, revenue from regional operations improved by 2.9% to GBP527.1 million from GBP5142.4 million, while London operations generated revenue of GBP128.6 million, up slightly from GBP128.4 million a year ago.
The company noted that the UK Bus division has benefited from the favourable summer weather throughout the country and rail replacement work at Derby railway station.
The company operates over 8,000 buses and coaches on a network stretching from south-west England to the Highlands and Islands of Scotland. Revenue per vehicle mile up 4.4% in the first half, with like-for-like revenue per journey up 4.3%.
However, Stagecoach now expects the revenue growth to moderate over the remainder of the year, reflecting these one-off benefits in the first half of the year.
Stagecoach maintained its interim payout at 3.8 pence a share.
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