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Stagecoach to further expand Megabus for US and Europe

STAGECOACH Group is eyeing further expansion of the Megabus network in Europe and North America while its annual results flagged uncertainty arising from the Scottish independence referendum and UK general election as potential risks to the business.

Chief executive Martin Griffiths said all divisions were performing solidly as he announced a 4.4 per cent increase in turnover from £2.8 billion to £2.93 billion for the 12 months to April 30, 2014. UK bus operations outside London saw revenue increase from £966.7 million to more than £1.01 billion. Like-for-like passenger growth was put at 1.3 per cent with the division booking a 2.9 per cent rise in operating profit to £147.4 million. London bus saw its revenue grow 5.2 per cent from £232.7 to £244.9 million with operating profits up almost 26 per cent to £23.9 million.

Mr Griffiths said there was a need for longer-term thinking on ways to fund concessionary travel citing Stagecoach having to cut its services in Wales as a result of regulatory changes to the regime there. He said: "I need to see the business gets properly compensated."

UK rail revenue, where Stagecoach operates South West Trains and East Midlands Trains, was up 4.2 per cent from £1.2 billion to £1.25 billion but operating profit dipped to £34.3 million. The Virgin Rail joint venture, which runs the West Coast franchise, saw its revenue go up 5.5 per cent to £465.6 million with operating profit down to £2.6 million.

Mr Griffiths indicated the business is continuing to examine the potential for adding to its rail operations in the UK.

He said: "The good news is 50 per cent of the franchises will come up during the life of the next [UK] parliament. That is a great opportunity."

The North America arm recorded £428.2 million revenue in the 2014 financial year, up from £407.2 million with the Megabus operation the fastest growing part of that business.

Mr Griffiths said: "There are one or two other key locations in the US where we think there are opportunities for growth. It is not all performing yet where we want to be. We still have challenges in persuading Americans to get out of cars and competition with other operators."

Alongside that Stagecoach is also looking at further European expansion for Megabus. Mr Griffiths said the European network is now breaking even and bringing in around £6 million in revenue covering locations including Amsterdam, Paris, Toulouse, Cologne and Barcelona. He said: "The opportunity to expand our Megabus business out there is something we are focusing on quite closely at the moment."

Among the risks and uncertainties Stagecoach listed were regulatory changes and availability of public funding.

It said: "Such changes may arise as a result of the outcomes of the September 2014 referendum on Scottish independence and/or the 2015 UK general election."

Stagecoach co-founder and chairman Sir Brian Souter is a prominent support of the SNP.

Asked about the referendum Mr Griffiths said: "In our business in particular we have dealt with many different political administrations over the long term.

"Independence will be a decision for the people of Scotland. Whatever that choice is, we will deal with.

"I am very confident the buses will still run, the trains will still run. We will wait and see and react accordingly."

Mr Griffiths said preparations for the Ryder Cup transport contract are at an advanced stage and also noted the company was looking forward to providing services around the Glasgow Commonwealth Games.

Stagecoach increased its dividend from 8.6p to 9.5p. Shares were flat at 377.5p.

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