Stagecoach cautions over challenging UK rail outlook

FTSE 250 transport operator Stagecoach said revenue in the UK over the last year has been low as it cautioned the outlook for the UK rail industry was becoming increasingly challenging.

In the 48 weeks to 2 April, like-for-like revenue in UK Bus was up 0.2%, with LFL sales in the London bus division up 1.1%.

LFL UK Rail revenue was up 2.5% and revenue at the Virgin Rail Group was 4.6% higher, but North America saw a 3.4% decline.

Stagecoach said it plans to keep fare increases for the year ahead to a minimum in light of the slowdown in the UK and will look to stimulate demand through those low fare increases, enhanced marketing and the further development and promotion of its digital offering.

“The outlook for the UK rail industry is more challenging than it was at this time last year. Although growth trends continue to vary across the different parts of the rail industry, the overall industry rate of revenue growth has slowed in recent months,” the company said.

“We believe the reduced rate of growth reflects the effects of weakening consumer confidence, increased terrorism concerns, sustained lower fuel prices, the related effects of car and air competition, slower UK GDP growth and slowing growth in real earnings.”

Still, Stagecoach said it remains on track to achieve its earnings expectations for the year to the end of April.

Shore Capital said: “While we await confirmation from management, the widespread nature and extent of the declines over such a short period suggests to us that the timing of Easter could well have played a part in these recent trends.

“However it is clear that passenger volume trends are weak across the UK Bus and rail operations, with management planning little by the way for fare increases in Bus and with a focus on cost control likely to be key to hitting forecasts.”

At 0938 BST, Stagecoach shares were down3.2% to 259.40p.