Stagecoach co-founder departs as focus shifts to bus

The transport group announced a swathe of management changes alongside these figures, which included chairman and co-founder Sir Brian Souter being succeeded in his position by non-executive director Ray O’Toole on 1 January 2020.

The group's involvement in UK franchised rail has also concluded. Stagecoach, which was disqualified by the Department for Transport (DfT) in April 2019 for bidding for the East Midlands, the West Coast Partnership and South Eastern franchises, will derive almost all of its future revenues from its UK bus operations. It is in no mood to bid for any future UK rail contracts, given “the current risk profile offered by the Department for Transport”. It remains locked in a legal battle with the department over its trio of qualifications, which will go to the High Court in early 2020. However, the group is a shortlisted bidder for a 12.5-year contract that would see it operate the Roslagsbanan rail system in Stockholm County, Sweden.

For now, Stagecoach is predominantly a UK bus company. For some, the group’s significant exposure to UK bus work is seen as risky. It prompted a downgrade of its debt rating from Moody’s in October, from a rating of Baa2 to Baa3, with the ratings agency concerned by declining bus passenger journeys in most UK market segments and an expectation that “franchising, if implemented in Manchester, would constrain future profitability in one of Stagecoach's largest markets”. In 2017-18, 4.36bn passenger journeys were made by local bus in England according to the government, down 1.9 per cent on 2016-17.

Over the half-year, Stagecoach’s regional bus revenues edged up 1.4 per cent to £535.1m, while its London bus turnover dropped by 6.2 per cent to £120.6m. While London bus operating profits dropped 16.4 per cent to £5.1m, these were nevertheless ahead of the company’s expectations. It views a “substantial” opportunity in the “modal shift from the car to mass transit” driven by concerns about the environment and road congestion. 

Bloomberg consensus figures forecast full-year 2020 adjusted earnings per share of 15p, falling to 13p in 2021.