Buses drive Stagecoach

Perth-based transport company Stagecoach said yesterday that its profits since the May 1 start of its new financial year had been better than it had expected, mainly because of greater-than-anticipated revenue growth in its UK bus division.

Stagecoach, which holds its annual meeting in Perth today, said revenues in its UK bus division in the 16 weeks to August 17 were up 9.3% on the same period last year on a like-for-like basis. It highlighted again the boost to its business from the switch by many people to bus travel, at a time when soaring petrol costs have made it much more expensive to go by car.

In its UK rail business, the annual rise in revenues in the first 16 weeks of Stagecoach's financial year was 9.0%.

Separately, in Stagecoach's Virgin Rail joint venture with Sir Richard Branson's eponymous group, annual like-for-like revenue growth was 2.0% in the 16 weeks to August 17. This Virgin Rail venture operates the West Coast Main Line services between Glasgow and London.

Stagecoach also reported that revenues in its North American business in the three months to July 31 were up 7.6% on the same period of last year on a like-for-like basis.

The company said in its upbeat statement to the London Stock Exchange: "We are encouraged by the current trading performance of the group, which provides further evidence of a modal shift towards bus and train travel prompted by high fuel costs, environmental concerns, and healthy lifestyles.

"Whilst we are mindful of macroeconomic developments and of continuing cost pressures such as increased fuel prices, the outlook remains positive."

Shares in Stagecoach, which have been storming ahead in recent times, slipped 0.75p to 302p in the wake of yesterday's upbeat trading update. However, the shares remain within pennies of their recent all-time highs.

Stagecoach said its UK bus division "continues to trade strongly with the cost pressures from increased fuel costs and higher UK inflation being more than compensated for by continued strong revenue growth".

The company said that like-for-like passenger volumes for the 16 weeks to August 17 were up 4.9% on the equivalent prior-year period. Like-for-like full-fare passenger volume growth was 2.3%. Total revenue, including the impact of acquisitions and disposals, was up 11.6%.

Stagecoach said that its North American business continued to benefit "from favourable conditions for bus and coach travel".

Declaring that it was "encouraged by the early performance" of its Megabus.com coach business in the north-east of the United States, where it began services on May 30, Stagecoach added: "Whilst this is presently a relatively small part of the North American business, passenger volumes and revenue have exceeded our initial expectations."

Stagecoach said profit at Virgin Rail Group since May 1 had "been at the upper end of our expectations".

Meanwhile it continued to try to bring pressure to bear on not-for-profit railway infrastructure organisation Network Rail to complete work on the West Coast Main Line in time for Stagecoach to introduce significantly increased services from December this year.

Stagecoach yesterday kept up its publicity drive on this front - reiterating again its claims that Network Rail might not finish the work on time. However, it emphasised that it had been compensated for disruption caused by upgrade work to date, and had "contractual protection" if Network Rail did not meet the deadline.

Stagecoach said: "The introduction of a new timetable in December 2008 is intended to result in around 30% more train services and will be an important development for Virgin Rail Group. Recent train performance and reported revenue at Virgin Rail Group have been adversely affected by work being undertaken on the railway infrastructure by Network Rail in anticipation of the increase in train services.

"However, because Virgin Rail Group is compensated for this disruption, its overall profitability has not been adversely affected."