Challenging conditions for group

Profits hit as Stagecoach offloads Europe business

Martin GriffithsTransport group Stagecoach reported a slump in pre-tax profits from £165.2 million to £104.4m as the company suffered from reduced public spending and weakening consumer confidence.

The company, which said conditions were “challenging” in all markets in which it operates, has sold its megabus operations in Europe. It said it had made a “satisfactory” start to the current year.

The board is proposing a final dividend for the year of 7.9p per share (2015: 7.3p) which would give a total dividend for the year up 8.6% to 11.4p per share (2015: 10.5p). The proposed final dividend would be payable on 5 October 2016 to shareholders on the register at 2 September 2016.

Chief executive, Martin Griffiths, said:  “These are a solid set of results, with further revenue and underlying profit growth.  We are experienced at managing the challenges we face, and the improvements and changes we are making now should ensure that we continue to have a strong portfolio of sustainable and growing businesses for the long-term.

“We are investing for growth and improving the journeys of our customers through new digital tools, smarter ticketing, and the introduction of greener and more comfortable buses and trains. At the same time, we are taking a prudent approach to controlling costs and ensuring our transport networks meet the changing conditions and requirements of our customers.

“Our locally-managed bus companies have strong partnerships with local authorities, allowing them to deliver tailored transport solutions to help communities get to work, access health and education, and enjoy shopping and leisure. We have been independently assessed as offering the best value fares of any major UK bus operator and our customer satisfaction levels are amongst the best in the sector.

“We have confirmed the sale to FlixBus of the retailing part of megabus Europe.  I am pleased that we will continue to operate a number of European inter-city coach services as a contractor to FlixBus and we hope to build on that new relationship.

“In North America, we have taken steps to match our inter-city coach services to changing patterns of demand and we are well placed to expand our networks as conditions improve.

“We note the result of the recent referendum in favour of the UK leaving the European Union. As with other businesses, we are closely following developments in this area. Although we have little business in Europe outside the UK, we acknowledge the referendum result may lead to continuing economic, consumer and political uncertainty.

“Like other business sectors, we are affected by reduced public spending and factors in the wider economy, such as weakening consumer confidence and slowing growth in both UK GDP and real earnings. Public transport also faces the challenge from sustained lower fuel prices, the related effects of car and air competition, as well as traveller concerns over global security.  Nevertheless, we have experienced management teams who are working hard to stimulate growth and we have not significantly revised our expectation of 2016/17 adjusted earnings per share.

“We remain positive on the long-term prospects for public transport and the Group remains in a strong financial position.”

Stagecoach has agreed the sale of the retail operations of its megabus Europe business to FlixMobility.  Only those retailing operations involving mainland Europe are part of the agreed sale.  

The megabus Europe business comprises both retailing activities and coach operating activities.  The retailing activities involve the design of inter-city coach services, including their timetabling, co-ordination and marketing, as well as the pricing and sale of journeys on those services.  The coach operating activities encompass the day-to-day operation and staffing of the coach services.  We have agreed the sale to FlixBus of the retailing part of that business.  We will continue to operate a number of European inter-city coach services as a contractor to FlixBus and we look forward to building on our relationship with it.

The sale of the megabus Europe retail operations will complete on or around 1 July.  In addition, Stagecoach has agreed that it will dispose of a number of vehicles to FlixBus or its nominee at a future date.

The agreed amount of the consideration for the sale of the retail operations will be satisfied by the issue of a loan note from FlixBus to Stagecoach at completion.  Stagecoach expects the loan note to be fully settled by the end of 2017.   Payment of the loan note is not subject to any conditions or performance criteria which need to be fulfilled.

Stagecoach expects to report a gain on disposal in respect of the sale in its consolidated financial statements for the year ending 30 April 2017.

Existing customer bookings for Europe journeys remain valid and these services are continuing to operate as normal.  FlixBus is a leading retailer of inter-city coach travel in Europe

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