STAGECOACH has attributed the performance of its UK rail business, as a result of network issues, for a 17 per cent fall in pre-tax profits and chief executive Martin Griffiths said he was open to giving franchise holders a role in managing the rail network.
Mr Griffiths also refused to rule out a bid for the ScotRail franchise, should the Scottish Government remove current operator Abelio as it continues to endure heavy criticism for its performance.
“We have in the past not bid for the ScotRail franchise. We would have to assess what the proposition was at the time, if that came about,” he said.
The Perth-based transport giant operates franchises including South West Trains, East Midlands and the east coast and west coast mainlines.
Commenting that he was concerned about Network Rail’s overall performance, Mr Griffiths said: “I have always believed, properly set up joined up management of train operations and train infrastructure is what we should do.”
On Tuesday, Transport Secretary Chris Grayling unveiled plans to fully privatise the rail network, giving responsibility for trains and tracks to franchise holders.
Stagecoach recently took part in a pilot with its South West Trains franchise on taking a role in managing infrastructure, which did not proceed “for a number of reasons”.
“We made some progress, but under a structure that wasn’t conducive to getting the best outputs,” said Mr Griffiths. “If we get this right, get the structure right, with the right people then I would be very supportive of it.”
When asked about a possible bid for the Scotrail franchise, Mr Griffiths said: “We’re in the rail industry, when rail opportunities come up, we will assess them: what is the commercial proposition, what are the competition issues? One of the issues for us in Scotland is we are a shareholder in and operator of CityLink and we also have a lot of local bus services that overlap some of the railways.”
Mr Griffiths was speaking as Stagecoach reported that revenue growth for the six months to October 29 slowed to 1.6 per cent, with sales topping £2 billion.
Pre-tax profit was down 17 per cent to £100m as the company reported subdued revenue across all divisions, but Stagecoach achieved its expected earnings per share of 14.4p, down from 17p in the same period last year.
UK rail operating revenue grew 0.8 per cent to £1.1bn as it was hit by “poor Network Rail operational performance”. Operating profit fell 53 per cent to £20.5m as lower passenger growth was insufficient to cover operating costs and Government payments.
On the Virgin Trains East Coast mainline, Stagecoach said revenue was below target, but it would be profitable for the remaining franchise period to 2023, allowing the group to fully repay loans from its shareholders.
The company also cited lower oil prices, which has led to an increase in competition from car and air travel.
The long-term low oil price has also hampered growth in the company’s US bus business, where megabus like-for-like revenue fell 7.8 per cent to $103.5m, but a stabilisation of oil prices has helped boost revenue per mile.
In the UK, Mr Griffiths was highly critical of local authorities as town centres are hit by congestion and a poor retail offer. This hit regional bus sales, where revenue fell 1.6 per cent, and in London, where there was a 1.2 per cent fall.
Stagecoach also revealed it would make a £2.8m loss on the disposal of its megabus business in Europe, which was sold to Flixbus in July.
Finance director Ross Paterson said: “I’d hoped we might make a small gain on the disposal but we’ll make a small loss. It doesn’t change our views that it was the right deal to do.”
Looking at the overall outlook, Mr Griffiths said: “I can’t say I’ve been pleased with the [recent] share price, but I think investors recognise that while we have some short term slowing of revenue the long-term fundamentals are very strong in terms of the need to tackle road congestion, growing population in UK and US, more people wanting to live and travel in big cities, the whole concern about air quality; all of these things play well in terms of the opportunity for public transport so I think our long-term investors appreciate and understand that and can see through the ups and downs of year-to-year revenue trends.”
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