Transport operator Stagecoach PLC (LON:SGC), which earlier this week found out it is to lose the South-West rail franchise, has reported a decline in its third-quarter revenues hit be weak performances by its bus operations in both the UK and North America, although it is seeing signs of a stailisation.
In a trading update, the FTSE 250-listed firm said total like-for-like revenues fell by 1.7% in its UK regional bus division, with London bus revenue down 0.9%, largely as a result of “weak underlying local economic conditions in some parts of the UK and sustained lower fuel prices.”
In a trading update, the FTSE 250-listed firm said total like-for-like revenues fell by 1.7% in its UK regional bus division, with London bus revenue down 0.9%, largely as a result of “weak underlying local economic conditions in some parts of the UK and sustained lower fuel prices.”
READ: Stagecoach loses South West franchise ...
In North America, Stagecoach said like-for-like revenue fell by 2.2%, including a 5.4% decline for megabus.com, although encouragingly revenue per vehicle mile was up 2.8%.
The group said: “The market remains challenging due to the effects of sustained lower fuel prices, which have heightened car and air competition.
“Trading at the other businesses in North America remains in line with our expectations. Like-for-like revenue at these businesses declined by 0.7%, largely reflecting reductions in mileage at our sightseeing business in California.”
Rail revenues up …
Stagecoach said like-for-like rail revenue growth in its UK Rail Division was 1.6% in the forty four week period, with revenue growth of 5.3% at its Virgin Rail inter-city businesses continuing to out-perform growth at its London commuter business, up 1.6%.
On Monday it was announced that Stagecoach had lost the franchise for South West Trains, which it had run since privatisation in 1996, to a consortium of FTSE 250 rival FirstGroup PLC (LON:FGP) and Hong Kong metro operator, MTR.
The South West Trains contract will end in August, while the East Midlands and Virgin West Coast franchises are also up for renewal in the near future.
Overall, however, Stagecoach said its expectations for full-year adjusted earnings per share “has not changed from when we announced our interim results in December 2016.”
The group will announce preliminary results for the year ended April 29 2017 on June 28.
Shares up ...
In early trading, Stagecoach shares were 1%, or 2.0p higher at 201.3p.
In a note to clients on Stagecoach, analysts at Liberum Capital said: “The divisional revenue growth rates show signs of stabilisation, with the year to date run rates generally modestly stronger than those reported in H1.”
They added: “Although it is too soon to call a recovery, and the absolute rates of growth remain very weak, consensus estimates ought to be underpinned.
“Although the valuation remains attractive on conventional multiples, these do not fully reflect the risks in rail. For now, we remain cautious. Our recommendation remains HOLD with a 215p target price.”
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