Stagecoach focuses on future as UK bus backdrop worsens

Train and bus operator Stagecoach has lifted its interim dividend and tried to put the emphasis on the future to keep investors chipper as current profits and earnings fall in the face of what it said was a continuing "challenging and uncertain" political and economic environment.

Management's expectations of full year adjusted earnings per share is "broadly unchanged", with a more cautious view on the short-term revenue outlook for the regional UK bus division, broadly offset by improved forecasts for UK rail as well as finance and tax costs.

Like-for-like revenue for UK bus worsened to a 2.1% decline from the 1.9% in the first quarter, while London buses weakened to a 1.2% decline from 0.9%, while North American buses declines 2.9% LFL and UK rail rose 0.8%.

So for the half-year ended 29 October the outturn for group revenue of £2.0bn was up 1.6% on the same period last year, though operating profit fell 19% to £117m, pre-tax profits by 17% to £100.4m and adjusted earnings per share by 15% to 14.4p.

Citing the positive long-term prospects for the public transport industry, chief executive Martin Griffiths revealed the half-time payout was upped by 8.6% to 3.8p per share.

"We have a growth strategy built on continued investment, value-for-money travel and high customer satisfaction and we have made further significant investments to improve our bus and rail services for customers now and in the future," he said.

"There is a large market opportunity for modal shift from cars to public transport against a backdrop of population growth, urbanisation, technological advancements, and increasing pressure to tackle road congestion and improve air quality."

Stagecoach made further investment in new vehicles and technology, particularly the digital offering for customers, with net capital expenditure upped to £125.5m from £83.9m in the same period last year.

The FTSE 250 company also highlighted its bid for new South Western rail franchise submitted, current franchise extended to August 2017.