Rail flatters Stagecoach

Underlying pre-tax profit rose 8 per cent to £218.9m. Rail made £49.9m of that, up 84 per cent, after the East Midlands franchise entered revenue support. That's a one-off, but new contract extensions could boost earnings. A major restructuring of its London bus operation and sensible bidding for new contracts steered margins there up 350 basis points to 9.4 per cent and operating profit up 62 per cent. Outside the capital, government subsidy cuts, higher fuel prices and late receipt of some concessionary scheme fees hit margins, although profits did improve. Most of April’s fare increases have dropped through to the bottom line, says finance chief Ross Paterson, but further subsidy cuts would hurt. Crucially, in North America, Megabus grew like-for-like revenue by 32 per cent. True, loss-making new services, bad weather and a price war cut North American profits by a third, but a pause for breath this year means fewer start-up losses and fatter profits.

Adjusting for new accounting rules and Investec Securities expects underlying pre-tax profit of £171m for 2014, giving underlying EPS of 22.9p (2013: 30.2p).