Transport group Stagecoach is to expand its successful Megabus service in mainland Europe at a cost of at least £20 million.
In a trading update on Wednesday, the company said it had been pleased with the progress of its budget inter-city coach operation in continental Europe and is now planning to extend the network further.
“We will introduce more European megabus.com services over the remainder of the year ending April 30 2015, building on the success of megabus.com in the UK and North America,” the company said.
“This is an exciting prospect for the medium term but will result in a few million pounds of new start-up losses and around £20m of additional capital expenditure, primarily in acquiring new vehicles.”
Stagecoach reported good performances by its UK and US bus businesses in the five months to mid-October.
The group said overall profitability remained satisfactory, and there is no material change to the expected adjusted earnings per share for the year.
The Megabus budget coach service enjoyed continued success in the period and Stagecoach said revenue in its UK regional bus operations grew 3.2%, largely due to fare-paying passengers with concessionary, tendered and school revenue also growing.
Revenues in the London division grew 14.5% despite disruption from roadworks.
Excluding the uplift in contract prices to compensate for the ending of the fuel duty rebate, revenue increased by 9.4%.
The firm’s UK Rail arm saw income grow 7.4% in the period and is operating in line with expectations.
Trading to date under the new West Coast Trains franchise has been strong.
Stagecoach also said revenue growth within its North America operation was encouraging, with the Megabus brand continuing to be a strong performer by increasing revenues by 13.5%.
Progress of the Florida megabus.com network is satisfactory and although the operating environment in North America is competitive, the group remain positive on the division’s prospects.
With Twin America, Stagecoach and its joint venture partners remain in discussion with the US Department of Justice and the New York attorney general to conclude previously reported litigation.
“The New York sightseeing market remains highly competitive, with trading still challenging,” the statement added.
The group entered into a £535m bank refinancing deal for a period of five years to October 2019 with the potential to be extended by up to a further two years.
The deal replaces previous bank facilities due to expire in February 2016.