Shares in Perth headquartered public transport group Stagecoach fell yesterday after it warned over profits in its UK regional bus and North American businesss.
Stock dropped by more than 9% at one point during trading as investors were spooked by the admission despite Stagecoach stressing it expected the lower returns from the two divisions to be offset by a stronger performance in other areas of the business.
“Stagecoach has made an overall satisfactory start to the second half of the current financial year and there has been no material change to our expected adjusted earnigns per share for the year,” the firm said in an interim update yesterday.
“In light of trading trends in recent weeks, we have changed our view of the likely divisional mix of profit and we are lowering our expectations of 2014/15 operating profit from our regional UK Bus and North America businesses, but this is broadly offset by other areas, including the share of profit we expect from Virgin rail Group.
“We do not expect the new East Coast rail franchise to have a material impact on 2014/15 earnings but we do expect it to make a significant contribution from 2015/16 onwards.
“We remain in a strong financial position, with oppportunities for further growth.”
Revenues climbed by 4.8% to £1.54bn in the six months to October 31 compared with a year earlier while pre-tax profits bfore exceptionals were £3m ahead at £108.6m. On a statutory basis, profts were flat at £98.3m.
The company yesterday revealed a 10.3% rise in the interim dividend per share to 3.2p.
In the half-year period, the firm saw revenue growth in each of its four main operating units.
The UK rail business was the biggest income generator with a 7.2% rise in revenues to £664.3m, while the UK regional bus operation delivered a 4.5% uplift to £527.1m.
Stagecoach’s London-based bus business saw sales jump 13.8% to £131.3m while the firm’s North American operations were marginally ahead at 0.8%.
Chief executive Martin Griffiths said the firm had returned a “good set of results” while improving the travel experience for customers, investing in new services and fleet and providing value for shareholders.
He highlighted growth in the UK bus operations and the expansion of the firm’s budget travel brand megabus – it recently began operating out of its first dedicated Continental European hub in Belgium – as major achievements for the period along with the securing of the east coast rail franchise along with joint venture partner Virgin.
“Overall, the group is in excellent financial shape and we are well placed to drive value through new opportuniies in our core bus and rail markets,” Mr Griffiths said.
“While we have changed our view of the likely division mix of profit for the year ending April 30, 2015, with lower expected operating profit from our regional UK bus and North America businesses broadly offset by other areas, we remain on course to achieve our expected adjusted earnings per share for the year.”
Shares rallied somewhat late in the day to close down 6.9% at 379.2p.