Shares in Stagecoach took a double digit spike as investors reacted to the Perth transport giant’s confirmation it was in talks to potential offload its US operations.
The group’s stock rose by more than 12% in morning trading despite the bus and rail operator declaring a £560 million fall in half year revenues to £1.23 billion.
The downturn was almost entirely due to the loss of the South West Trains franchise last year and the government’s decision in the summer to remove the Virgin Trains East Coast franchise from the operator.
Overall, Stagecoach plunged into the red in the first half of the current financial year after declaring a statutory loss of £22.6 million.
The figure compares with a £96.7m pre-tax profit last year.
However, the bottom line includes an £85.4m writedown on the the value of the US business and, on an adjusted basis, pre-tax profits for the first half of the year came in £9.7m lower at £87m.
Earnings per share on an adjusted basis fell from 13.6 pence to 12.9p in the period, although the group maintained its first interim dividend at the prior year level of 3.8p.
Stagecoach pointed to a number of operational highlights within the first half of the year including the commencement of autonomous bus trials, moves to increase contactless payment systems and efforts to develop “demand responsive transport” systems.
It also pointed to an “encouraging performance” from its UK regional bus business.
However, confirmation of the writedown on its America business and plans to potentially divest its operations in the US piqued investor interest and sent the share price surging.
The group has an extensive bus and coach operation Stateside, much of which was built out following large-scale investment in the 1990s.
Figures show the North American division suffered a 3.2% fall in revenues in the first half of the year, while earnings dropped to $21.2m US dollars from $27.6m.
Stagecoach chief executive Martin Griffiths said: “While we recognise the competitive challenges in some of our markets in the UK and North America, we are confident that public transport will be central to delivering government priorities to grow the economy, connect people and communities, reduce road congestion and improve air quality.
“We are reviewing strategic options for the North America Division and that includes ongoing discussions regarding a possible sale of all or part of the business.”
Stagecoach’s year has been tumultuous after it was stripped of the East Coast Main Line franchise in controversial fashion by the Government in June.
The group, which ran the line as a joint venture with Virgin, has already previously revealed an £85.6m financial impact from losing the franchise, which was taken back into public control after the operators failed to achieve revenue targets.
Stagecoach said it was set to take another £45m cash charge for the lost franchise, as detailed in its annual report, but added its rail business had performed better than it expected.
The firm said it was “well-positioned” in the UK rail sector with bids ongoing for three franchises – South Eastern, East Midlands and the West Coast Partnership.
“We welcome the rail review announced by the UK Government earlier this year,” the directors’ added.
“Private sector innovation and investment has helped transform Britain’s railway for customers, taxpayers, communities and our economy.
“However, we believe the review presents a clear opportunity to deliver a more customer-focused and partnership driven railway, which addresses the strains in the system, unlocks innovation and is sustainable for the long-term.”
Shares closed up 15.8% at 177p.