27th Apr 2016 12:28
LONDON (Alliance News) - Transport company Stagecoach Group PLC on Wednesday warned on slowing revenue growth in its train operations and saw revenue from its North American division decline, while its UK bus business remained in line.
Stagecoach said the outlook for the UK rail industry is more challenging move into its new financial year than it had been a year prior. The overall rate of growth has slowed in recent months, though this has varied by region, the company said.
Like-for-like UK rail sales were up 2.5% in the 48 weeks to April 2, while like-for-like sales for its Virgin Rail Group venture were up 4.6%. In the 40 weeks to February 6, like-for-like UK rail sales were up 4.6%, while Virgin Group sales increased 6.6%, indicating conditions weakened towards the end of the financial year to the end of April.
Stagecoach said the slowing growth was down to a series of issues. The group said weakening consumer confidence, sluggish GDP growth and slowing wage growth in the UK all contributed. In addition, the group said increased terrorism concerns, following the attacks which have hit Paris and Brussels in the past six months, have also dragged on growth.
Those issues have been complemented by sustained lower fuel prices following the collapse in the oil price. This has meant more competition to rail services from air travel, where fuel savings are resulting in lower air fares, and from cars as the cost of petrol for drivers remains relatively low.
Stagecoach said it had taken steps to try to mitigate the problems, focusing on controlling costs and additional initiatives to grow revenue in the rail business.
The rail outlook issues sent Stagecoach shares down 3.5% on Wednesday to 258.6 pence, one of the worst performers in the FTSE 250.
While Stagecoach warned on the rail business, the slowing like-for-like growth was not isolated to this division, with the same trend shown in its bus businesses.
For the 48 weeks, like-for-like UK regional bus sales were up 0.2%, again weaker than the 0.7% growth seen in the first 40 weeks of the financial year.
Stagecoach acknowledged revenue growth in its UK bus and coach operations had been weak over the financial year. As a result, the company will keep fare increases to a minimum in the new financial year and will seek to drive demand for its services through low fare increases, more marketing and developing its digital offering.
Stagecoach added its European Megabus.com coach business remains loss-making at present, but it at an early stage of its development.
UK London bus sales growth also slowed in the final weeks of the financial year, coming in at 1.1% for the 48 weeks against 1.3% for the first 40 weeks. Stagecoach said the division traded in line with its expectations, though it reiterated it anticipates its operating margin will decline in the short term.
North America revenue declined 3.4% on a like-for-like basis in the 48 weeks, slightly better than the 4.4% decline in the first 40 weeks. The group did not provide an explanation for the decline, but the decline seen in the first half of the financial year was driven by a lower number of European customers travelling to the US, which hit sightseeing and tour revenue, and by the loss of some local authority contracts.
Stagecoach will publish annual results on June 29.
By Sam Unsted; [email protected]; @SamUAtAlliance
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