Stagecoach posts 13 per cent profits rise

Transport group Stagecoach today said its bus operations were performing well as it revealed a 13% rise in annual profits to £196.4 million.

The company, which carries two million passengers a day using a fleet of 7,000 bus and coaches, said growing demand for bus travel amid the recession and as commuters switched from cars had helped the division to operating profits of £125.6 million, an improvement of 14% on a year earlier.

Stagecoach's rail arm was more sensitive to economic conditions after profits fell to £55.7 million from £59.1 million a year ago. The South West Trains and East Midland Trains operator has responded to slower revenues growth with a cost reduction programme and efforts to attract new customers.

Chief executive Brian Souter said there was "no doubt" the transport sector faced a challenging year ahead, but he added Stagecoach was well placed to withstand the economic pressures.

"We have a record of being able to respond quickly to the changing business environment," he said.

Stagecoach said the rail arm's operating margin fell from 7.6% last year to 5.7% as a result of slower revenues growth, with the impact of City job losses particularly impacting its South West Trains commuter franchise.

In April, the Perth-based group warned of "significant" operating losses in two years on the franchise if a row with the Department for Transport is not settled. The key point of contention is a deal in which the Government agrees to pay a proportion of a franchisee's losses if it fails to hit revenue targets.

Stagecoach believes the contract entitles it to revenue support calculated from April 2010, but the DfT believes the start date should be February 2011.

There is also a dispute over whether car parking revenues should be included in the calculations. Stagecoach is committed to paying £1.2 billion by 2016 for the right to operate the service.