Stagecoach reported first half pre-tax profits were £105.2m compared to 2007's £84.6m and has raised its interim dividend by 33% to 1.8p per ordinary share. However, despite the positive results Stagecoach warned of planned job cuts in light of the worsening consumer environment, which has pushed its share price lower in early morning trading. Shares in Stagecoach were down more than 18% as of 8:30am.
Over the six months ending 31 October the group said its UK bus business saw 9.2% like-for-like growth with passenger volumes up 4.1% on the same basis. UK rail revenue saw like-for-like growth of 8.2% over the period.
Despite the growth over the first half, Stagecoach’s chairman Robert Speirs noted the travel sector is not immune to the macro-economic environment and while its UK and US bus operations are relatively protected from the effects of an economic slowdown, its rail services are not. Bus operations in the UK and North America accounted for 61% of the combined bus and rail operating profit for Stagecoach over the six month period.
The rail side of its business may be more susceptible to changes in economic conditions partly because of the relatively high fixed cost base of the UK train operating company model. Anticipating a sharp reduction in central London employment during the next 12 to 18 months, Speirs said Stagecoach is looking at cost cutting measures, which will include job cuts. The programme to install automatic ticket gates at London Waterloo Station is progressing and is due to open by early 2009, which the group believes will further assist revenue protection and improve passenger flow.
Speirs added: “In light of the challenges and uncertainties facing our UK Rail operations, we have less visibility of UK Rail profits for 2009/10. Notwithstanding the management action being taken, based on our current assessment of the various risks and opportunities facing our rail businesses, we are likely to see downward pressure on 2009/10 rail profits.”
