28 September 2016
Stagecoach Group plc is today (28 September 2016) providing a trading update in respect of its financial year ending 29 April 2017, ahead of a series of meetings with analysts. Our expectation of the Group's adjusted earnings per share for the year ending 29 April 2017 has not changed from when we announced our full year results in June 2016. We note, however, that independent macro-economic forecasts cover a wide range of possible outcomes and therefore, there is a higher than usual degree of forecasting uncertainty.
Like-for-like revenue growth for the financial year to date in each of the Group's main businesses is provided below.
UK Bus (regional operations) - sixteen weeks ended 20 August 2016 (1.9)%
UK Bus (London) - sixteen weeks ended 20 August 2016 (0.9)%
North America - four months ended 31 August 2016 (3.3)%
UK Rail - sixteen weeks ended 20 August 2016 1.7%
Virgin Rail Group - sixteen weeks ended 20 August 2016 4.7%
UK Bus (regional operations)
Passenger volumes continue to be weaker than we have seen in the UK Bus (regional operations) Division in recent years. This is partly attributable to weak underlying local economic conditions in some parts of the UK and sustained lower fuel prices. We continually review and adjust our bus networks in response to changing demand. Like-for-like revenue per vehicle mile was 0.5% below the equivalent prior year period. Notwithstanding that, we see prospects for improving revenue trends later in the year through enhanced marketing and the further development and promotion of our digital offering. We remain positive on the longer term opportunities within the UK Bus (regional operations) Division.
On 1 July 2016, the Group completed the sale of the retailing part of the megabus Europe business to FlixBus. The consideration was satisfied by the issue of a loan note and the Group expects that loan note to be fully settled by the end of 2017. The Group has also agreed that it will transfer a number of vehicles to FlixBus, or a nominee of FlixBus, at a future date. As previously reported, after taking account of costs incurred as a result of the sale, we expect to report an exceptional gain on the disposal of the business.
UK Bus (London)
As previously reported, our UK Bus (London) Division has experienced a small net reduction in contracts with Transport for London. However, we believe our strategy of bidding prudently is the right one for the long-term sustainability of the business and we still aim to deliver long-term operating margins in excess of 7%.
Trading at our megabus.com inter-city coach services in North America remains challenging due to the effects of sustained lower fuel prices, through heightened car and air competition. The four-month like-for-like revenue decline of 3.3% for the Division includes 10.1% decline for megabus.com, partly reflecting the impact of mileage reductions in response to market conditions and customer demand. Like-for-like revenue at the other businesses in North America grew at 0.1% and trading remains in line with our expectations.
UK Rail and Virgin Rail Group
UK Rail industry revenue growth has slowed over the last year and the outlook for the industry remains uncertain, particularly given its sensitivity to economic conditions. Like-for-like rail revenue growth in our own UK Rail Division (including Virgin Trains East Coast) was 1.7% in the sixteen weeks, with revenue growth at our inter-city businesses out-performing growth at our London commuter business. Revenue growth at Virgin Rail Group's West Coast franchise was 4.7%. As usual, revenue growth figures for relatively short periods can be affected by factors such as the timing of school holidays and the timing of rail industry settlements. As previously highlighted, we believe the reduced rate of growth reflects the effects of weakening consumer and business confidence, increased terrorism concerns, sustained lower fuel prices, the related effects of car and air competition, slower UK GDP growth and slowing growth in real earnings.
We will continue to take steps to mitigate the effects of lower revenue growth, focussing on cost control as well as additional initiatives to grow revenue. At our Virgin Trains East Coast franchise, which has over six years to run, we have taken a range of positive actions aimed at significantly growing revenue over the remaining term of the franchise. Our 2016 Annual Report provides a flavour of some of the initiatives we are undertaking.
We continue to work constructively with the Department for Transport and other industry partners to meet our obligations, manage contract changes and ensure the continued stability and growth of our rail businesses.
In June 2016, we announced our plan for four scheduled updates each year: results announcements in June and December, and further trading updates around September and March. The next planned update is therefore, the announcement of the Group's interim results for the six months ended 29 October 2016 on 7 December 2016.
For further information, please contact:
Stagecoach Group plc www.stagecoachgroup.com
Investors and analysts
Ross Paterson, Finance Director 01738 442111
Bruce Dingwall, Group Financial Controller 01738 442111
Steven Stewart, Director of Corporate Communications 07764 774680
(1) 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.
(2) 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.
This information is provided by RNS