STAGECOACH has flagged slower revenue growth in the UK rail industry in recent months, and highlighted its view that terrorism concerns and weakening consumer confidence are among the causes.
Shares in the Perth-based bus and rail company fell by 9.8p or 3.7 per cent to 258.2p, following the company’s declaration that the “outlook for the UK rail industry is more challenging than it was at this time last year”.
Stagecoach said that, reflecting the “softer trends”, revenue in its own rail division had in the 48 weeks to April 2 been up by 2.5 per cent on the same period of the prior financial year. This division comprises mainly South West Trains and East Midlands Trains,
It added that revenue growth at its Virgin Trains East Coast subsidiary had been 4.9 per cent. And it put revenue growth at the West Coast Main Line franchise of its Virgin Rail Group joint venture with Sir Richard Branson’s Virgin Group at 4.6 per cent.
Reflecting on the revenue growth in its UK rail operations, Stagecoach said: “We believe the reduced rate of growth reflects the effects of weakening consumer confidence, increased terrorism concerns, sustained lower fuel prices, the related effects of car and air competition, slower UK GDP (gross domestic product) growth, and slowing growth in real earnings.”
The company, which is chaired by co-founder Sir Brian Souter, added: “We have taken and will take further steps to mitigate the effects of lower revenue growth, focusing on cost control and additional initiatives to grow revenue. We continue to work constructively with the Department for Transport and other industry partners to meet our obligations, manage contract changes and ensure the continued stability and growth of our rail businesses.”
Stagecoach said it was on track to meet its expectations of overall adjusted earnings per share for its financial year to April 30.
It reported that revenues in its North American business in the 11 months to March 31 were down by 3.4 per cent on a year earlier but said trading in this division, which includes coach operation Megabus, was in line with its expectations.
Revenues in Stagecoach’s UK bus operations outside London were, in the 48 weeks to April 2, up by 0.2 per cent on the same period of the prior financial year.
It said of its bus operations: “Revenue growth in the UK over the last year has been low. In light of that, we plan to keep fare increases for the year ahead to a minimum and will look to stimulate demand through those low fare increases, enhanced marketing and the further development and promotion of our digital offering.”
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