Stagecoach Group Limited (LSE:SGC) has reported growth in first-half revenue and underlying profit, as passenger volumes continue to recover from the COVID-19 pandemic and as more people squeezed by the cost-of-living crisis leave the car at home and travel by bus.
The bus and coach operator, which was taken private earlier this year by DWS subsidiary Inframobility, said its expectations for full-year profit are broadly unchanged while acknowledging the challenges posed by the current macroeconomic headwinds.
Revenue came in at £669.6mln for the six months to 29 October 2022, up from £579.4mln in the same period last year.
Adjusted pre-tax profit climbed to £36.4mln from £18.4mln, which was in line with expectations. In addition to the rise in passenger numbers, the figure was boosted by payments from national governments to protect public transport services.
Stagecoach reported growth in passenger demand in its UK regional bus operations and said recent passenger journeys have been at around 80% of pre-pandemic 2019 levels.
The tough economic environment is supporting a “modal shift away from car to bus”, it noted.
The company's London bus operations slipped into a small operating loss in the first half, as staff shortages have led to contractual penalties and lower quality incentive income. In addition, the business was hit by higher staff costs and rising inflation.
“However, we expect profitability to improve as we address labour market challenges, benefit from lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered,” Stagecoach said.
The company said it recruited and trained more than 2,300 new bus drivers in the first half, “to protect and improve the reliability of our services”.
In Scotland, the free bus travel scheme for under-22s is supporting strong growth in bus travel by young people, the company said.
"We are pleased to report a positive set of results for the half-year ended 29 October 2022 as we move forward under new ownership. We have delivered increased revenue and profit, reflecting growth in our business and investment by the UK, Scottish and Welsh Governments in bus networks,” commented Martin Griffiths, Stagecoach Group chief executive in the results statement.
"We have made further progress as we rebuild from the pandemic, manage the immediate-term macro-economic headwinds, and position our business to maximise the opportunities for growth as we transition to a net zero future. At the same time, the current economic environment is helping to demonstrate the good value of our public transport services and encourage modal shift away from the car.
"We remain positive on the long-term outlook for the group, while mindful of the macro-economic challenges facing businesses across the country. Underpinned by a strong financial position and with strong relationships with our national and local government partners, we are well-positioned for future growth for the benefit of our customers, employees, investors and wider stakeholders," he added.