Bus and train operator Stagecoach (SGC) is still struggling to get enough new rail passengers to offset rising operator costs. The failure to boost passenger numbers significantly on its Virgin Trains East Coast and South West Trains franchises saw UK Rail operating profit slump 53.5% to £31m in the year to 29 April 2017.
The latter franchise is due to end in August.
The UK Rail arm is perhaps the most dismal performance of a pretty poor set of results across the board. The company's tiny North America unit was its only division to post increases in both revenues and profits.
Little wonder that the share price has tumbled 10.5% to 182.2p on Wednesday.
Canaccord Genuity analyst Gert Zonneveld says the ‘modest’ 1.5% rise in passenger revenue was limited largely because of intensifying competition from cars, sluggish economic growth and a lower pace of price increases.
Stagecoach is currently in discussion with the Department of Transport about its Virgin Trains East Coast franchise. It is too expensive to run under the current terms so Stagecoach is hoping to get a better deal, one that will allow the line to become profitable from 2019.
In the meantime, the company is having to write-off £84.1m as an exceptional charge to cover current running costs.
On the bus side, regional services saw operating profit fall 11.8% to £121.1m, while London routes profit fell 9% to £18.4m. Stagecoach's European Megabus service remains loss-making, although the deficit was cut last year from £24.1m to £4.3m.
