Shares in bus and train operator Stagecoach (SGC) jumped 10% to 81.3p as the company surprised the market by making a pre-tax profit, despite the coronavirus pandemic crushing travel demand.
Operating profit on an adjusted basis in the six months to 31 October stood at £16.1 million, well below the £79.6 million in the first half of its last financial year, while adjusted pre-tax profit stood at £0.4 million, tumbling 99% from the £66.6 million it recorded in the same period last year.
But this is better than what analysts had been expecting. Before today’s results, broker Peel Hunt said it was expecting underlying operating profit of £6.5 million and an underlying pre-tax loss of £9 million.
‘We suspect that the latest lockdown will have stalled the recovery in regional bus commercial revenues and delayed the relaxation of social distancing, which would need to happen for a full recovery to take place,’ Peel Hunt said last week.
Statutory pre-tax profit plunged to £5.4 million, down from £65.9 million year-on-year, as revenue sank 43% to £454.6 million.
Stagecoach said the fact that it was able to remain profitable reflected management actions to respond to Covid-19 and support from Government and local authorities.
‘ROOM FOR OPTIMISM’
Neil Shah, director of research at Edison, said there ‘still remains room for optimism’ with Stagecoach and pointed to the firm’s London bus business, which has shown growth over the past year despite the pandemic.
The only division to show growth during the pandemic, revenue in the period for its London bus business was up 4.9% to £126.5 million, with operating profit increasing to £9.2 million, compared to £5.1 million in the same period a year ago.
Shah said ‘another huge boost’ for Stagecoach is the beginning of the vaccine distribution, which will eventually enable more confidence in travel.
Stagecoach shares have soared from a low of 38.7p on 6 November, just before the vaccine news, to over 80p today as investors bet on a pickup in public transport demand again.
But Shah added, ‘What remains to be seen though, is just how much of a degree the shift to part time working from home there'll be: a factor which would obviously hit commuter customer figures.’
