Stagecoach is on track as rail improves

STAGECOACH yesterday reported a rise in sales at its British and US transport businesses, with its rail operations performing strongly.
Stagecoach, operator of the South West Trains franchise in Britain and which last year failed in an attempt to buy rival National Express, said in a statement it had significant undrawn bank facilities.

The company’s chief executive Brian Souter said in June the group would continue to assess takeover opportunities, using the company’s strong balance sheet.

Like-for-like revenue at Stagecoach’s UK rail business, which includes the South West Trains London commuter franchise, grew seven per cent in the 12 weeks to 25 July, while Virgin Rail, in which it owns a 49 per cent stake, achieved sales growth of 18.7 per cent.

Sales at its UK bus unit rose two per cent, while its North American coaches operation posted a 6.9 per cent rise in underlying revenue in the three months to the end of July, shrugging off tough economic conditions.

Shares rose by around three per cent after the trading statement.

National Express walked away from talks over a takeover by Stagecoach last October, opting instead to raise cash by selling shares to cut its debts.

Since then, Europe’s biggest transport group Deutsche Bahn has sealed a takeover of Britain's Arriva and predicted a Europe-wide transport sector consolidation wave as companies look to take advantage of a more liberalised transport market.

Analysts at UBS have said a new bid from Stagecoach for National Express, which has a major presence in the North American and Spanish bus markets, is a possibility.

Stagecoach said the outlook for its businesses was positive despite uncertainty surrounding the effect of the change in the UK government and the sustainability of economic recovery. It added it remains on course to meet its expectations of profitability for the year. The company is expected to report a full-year pre-tax profit of between £178.6 and £202.4m.