28th Apr 2009 07:00
Stagecoach Group plc
28 April 2009
Trading update
Stagecoach Group plc ("the Group") is today providing an update on trading in advance of a series of meetings with analysts.
The Group is also providing an update on the status of discussions between it and the Department for Transport ("DfT") in respect of the South Western Trains ("SWT") rail franchise.
The Group plans to announce its preliminary results for the year ending 30 April 2009 on 24 June 2009.
Financial performance
The Group expects to report a profit before tax and exceptional items for the year ending 30 April 2009 in line with management's expectations.
The Group expects to report around £12m of exceptional restructuring costs for the year ending 30 April 2009 in relation to the cost-reduction measures implemented in the Group's UK Rail Division. These measures save around £50m of annual operating costs.
Year-to-date revenue growth
Like-for-like revenue growth* in each of the Group's main businesses is provided below. The revenue to the end of March excludes the Easter period in 2009 but includes it in 2008. The revenue growth for the forty four weeks ended 1 March 2009, as reported in the Group's Interim Management Statement of 16 March 2009, therefore provides a more appropriate indicator of revenue trends.
Like-for-like revenue growth* in each of the Group's main businesses is provided
below.
UK Bus - forty eight weeks ended 29 March 2009 9.7%
UK Rail - forty eight weeks ended 29 March 2009 7.3%
North America - eleven months ended 31 March 2009 6.4%
(including Megabus.com)
Virgin Rail Group - forty eight weeks ended 29 March 2009 0.5%
The revenue growth at Virgin Rail Group has been adversely affected by the continued disruption to its train services as a result of work undertaken by Network Rail on the railway infrastructure.
The reported like-for-like revenue growth for UK Rail does not include East Midlands Trains. For the forty eight weeks ended 29 March 2009, the revenue of East Midlands Trains when compared to the equivalent businesses under their former ownership was 10.5% higher than the previous year.
South Western Trains contractual matters
The Group has been in discussion with the DfT regarding the following aspects of the SWT franchise agreement:
1. The Group and the DfT agree that any revenue support (whereby the DfT is contractually committed to pay SWT for an element of any shortfall of revenue against agreed revenue targets) should be receivable by SWT from February 2011. However, in determining the amount of revenue support that is receivable there is dispute concerning the period over which revenue shortfalls should be assessed and, in particular, whether that period commences in April 2010 (consistent with the Group's view) or February 2011. The dispute does not affect the calculation of revenue support after 1 April 2011.
2. The Group believes that for the purpose of calculating the amount of any franchise payments due between SWT and the DfT (which include any revenue support which might be due), the actual revenue figures should be calculated to exclude all car park revenue. The DfT believes that most car park revenue should be included.
The sums in question depend on future revenue, which in turn partly depends on future macroeconomic conditions. However, to the extent that these matters are not satisfactorily resolved, the UK Rail Division is likely to incur a significant operating loss in the year ending 30 April 2011.
In view of the magnitude and nature of the disputed items, the Group will today refer these matters to arbitration under the Rail Industry Dispute Resolution Rules. The Group has taken appropriate legal advice and considers it has a strong position.
Financial position
Against a background of difficult credit markets, the Group's financial position remains strong and it has significant committed, undrawn bank facilities. Although the Group expects its ratio of Net Debt to EBITDA to increase over the next year as result of the downward pressure on UK Rail profits, it expects to remain well financed and operate comfortably within the financial covenants applying to its bank facilities.
Outlook
We have previously commented on the outlook for the Group, including the challenges and uncertainties facing our rail operations. These comments continue to apply. Our rail businesses are not immune to the impact of the current tough economic climate and we continue to monitor economic developments. We have already taken significant action to reduce costs at our rail operations and we will continue to seek opportunities to achieve further efficiencies and maximise revenue. We expect our UK Rail Division and Virgin Rail Group to remain profitable in the year ending 30 April 2010.
Our bus businesses are growing strongly and we expect them to continue to perform well through difficult economic conditions.
* Like-for-like revenue growth is derived, on a constant currency basis, by comparing year-to-date revenue with the equivalent prior year period for those businesses and individual operating units that have been part of the Group throughout both periods. In the case of Virgin Rail Group, the like-for-like revenue growth relates to West Coast Trains only and in order to obtain a like-for-like comparison, it excludes the services that were transferred from CrossCountry Trains to West Coast Trains.
For further information, please contact:
Stagecoach Group plc
www.stagecoachgroup.com
Martin Griffiths, Finance Director 01738 442111
Steven Stewart, Director of Corporate Communications 07764 774680
Notes
Stagecoach Group
Stagecoach Group is a leading international public transport group, with extensive bus and rail operations in the UK and North America.
Cautionary Statement
This announcement contains certain forward-looking statements with respect to the financial performance, financial position and businesses of Stagecoach Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Except as required by law, Stagecoach Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.
Related Shares:
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