Stagecoach Group PLC (LON:SGC) shares fell on Thursday as the transport operator reported fall in revenues and slashed its dividend after the company reported £84.5mln hit from losing East Coast rail franchise.
The FTSE 250-listed company said its revenue for the year ended 28 April 2018 fell to £3.2mln from £3.9mln, but pre-tax profit rose to £95.3mln from £17.9mln.
Stagecoach said it has suffered £84.5mln hit after government decided to take the East Coast rail franchise, which the group run as a joint venture with Virgin, back into public control.
As a result, the company has cut its dividend to 7.7p from 11.9p and said the decision was made to “rebase the dividend to what we view as a sustainable level and which is covered by the normalised, annual free cash flows from our non-rail operations.”
Martin Griffiths, chief executive of the company, said: “I am disappointed to be reporting significant exceptional costs in respect of Virgin Trains East Coast but I am pleased that there is now clarity for both customers and shareholders.”
He added: “We have made significant progress elsewhere in our rail portfolio and continue to see value and opportunities.”
In early morning trading, Stagecoach shares fell 7.08% to 124.60p.
In a note to clients, analysts at Liberum said rebasing the dividend to a level that is covered by non-rail cash flows makes sense, relieving the pressure to win new rail franchises.
However, analysts think that the ability to grow the dividend will depend on restoring the bus division profit growth.
The analysts said: “The current outlook in the UK remains challenging.”
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