It's definitely an uphill struggle for bus and rail company Stagecoach (SGC). Low fuel prices have encouraged greater use of cars in the UK and the US, while fragile consumer confidence coupled with weak economic growth has weighed on demand for buses in some regional areas too. Only the group's UK rail business managed to grow sales, with revenue up a slither by 0.8 per cent. That said, every division - excluding the now sold Megabus Europe - reported a drop in operating profit and margins.
The sharpest earnings decline was in UK rail, where operating profits dropped by more than half to £20.5m. A fall of this magnitude was to be expected following predetermined payments to the government relating to its rail franchises, but finance director Ross Paterson said the profit performance was actually ahead of expectations from the start of the year. The group is also more optimistic about rail revenues for the rest of the year, with positive trends starting to emerge during the first four weeks of the second half.
However, management is more circumspect on UK buses, having taken a "more cautious" short-term outlook. The UK regional bus business saw revenue drop 1.6 per cent to £513.9m while London witnessed a 1.2 per cent drop to £132m. Mr Paterson said that while passenger growth was evident in areas such as Cheltenham, Gloucester and Merseyside, conditions were tougher in Scotland. Mr Paterson also said the company had continued to invest in its fleet despite holding off on price rises in most areas. Chief executive Martin Griffiths said this non-aggressive pricing strategy was wise as higher prices would have hurt passenger numbers. In his view customers are "very sensitive to pricing".
Analysts at Liberum expect pre-tax profit of £173m for the year to April 2017, giving EPS of 24.7p, down from £187.4m and 27.7p for FY2016.
| STAGECOACH (SGC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 209p | MARKET VALUE: | £1.20bn | |
| TOUCH: | 208-209p | 12-MONTH HIGH: | 365p | LOW: 194p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 27p* | NET DEBT: | £484m | |
| Half-year to 29 Oct | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.97 | 90.8 | 12.8 | 3.50 |
| 2016 | 2.00 | 89.5 | 12.7 | 3.80 |
| % change | +2 | -1 | -1 | +9 |
Ex-div: 9 Feb Payment: 8 Mar *Includes intangible assets of £244m, or 42p a share | ||||
