Stagecoach ponders sale of American operations

December 5, 2018

Public transport giant Stagecoach is pondering the sale of its extensive American operations which it first invested in back in the late 1990s.

The move comes as the group announced a £500 million drop in half-yearly turnover after losing the South West Trains franchise, which ended in August 2017. I

Half yearly revenue for the period was £1,230.8 million (H1 2018 restated: £1,794.0 million), which is lower than the prior year period due to losing the franchise and also the East Coast franchise, which ended in June 2018. The North American division saw revenues fall 3.2%, while earnings fell to $21.2 million from $27.6 million.

Total operating profit, before exceptional items, reduced to £103.4 million (H1 2018: £114.8m) with the reduction reflecting the strong prior year contribution from the now expired South West Trains franchise.

Coach USA is one of the largest transportation operators in North America. It operates more than 2,400 buses and coaches and employ more than 5,200 people. The North America business is headed by chief operating officer Linda Burtwistle. It provide critical local and inter-city transport services for communities throughout the US and Canada. Coach USA owns more than 25 bus carriers in North America that operate scheduled bus routes, motor coach tours and charters.

However, the company has highlighted its continuing innovation with the trial of autonomous buses carrying passengers between Edinburgh and Fife, in a £4.35 million Innovate UK funding initiative.

Stagecoach is now second largest ‘contactless transit merchant’ in Europe, after Transport for London.

Chief executive Martin Griffiths said: “I am pleased to report positive half-year financial results, ahead of expectations. Our strategy is designed to grow our core business, to support innovation, and to position the Group to benefit from future opportunities’’

“We have delivered encouraging results at our UK regional bus business, where we continue to deliver high customer satisfaction.

“Targeted fleet and technology investment is helping to enhance operational delivery and improve cost efficiency. We continue to innovate across a range of areas including autonomous buses, contactless payment, data analytics and demand responsive transport. We are well positioned in UK rail, with three live contract bids and more than 20 years’ experience of delivering innovation and investment for customers,” he said.

Related: Stagecoach East Coast rail line franchise ‘to be axed in days’

Mr Griffiths said he welcomed the UK Government’s rail review as an opportunity to deliver better value and day-to-day performance for passengers, a partnership structure and contracting system which is sustainable for the long-term, and reform of outdated regulations which are holding back customer-focused improvements.

“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. “The Group is focused on making further progress in the second half of the year and we have increased our expectation of full-year adjusted earnings per share to reflect the above-forecast rail earnings in the first half of the year.”

Stagecoach is one of the UK’s biggest bus and coach operators with over 8,000 buses and coaches on a network stretching from south-west England to the Highlands and Islands of Scotland. Low-cost coach service, , operates a network of inter-city services across the UK. Stagecoach is a major UK rail operator, running the East Midlands Trains network.

Source: Insider

West Coast rail: Virgin Trains and Stagecoach net £51.2m in dividends

October 19, 2018

Virgin Trains and Stagecoach shared in £51.2m worth of dividends from the West Coast main line railway, shortly before walking away from another franchise.

Virgin Rail Group’s dividends, for the year ending 31 March 2018, are almost double the £27.9m that was given back to its shareholders in 2015.

The details come after the firms’ East Coast franchise collapsed in June, with the government losing out on £2.3bn.

Virgin said strong performance had led to record payments for taxpayers.

But Labour said the failing rail system was “lining the pockets of billionaires”.

Virgin owns 51% of the operator which runs the West Coast main line connecting London to Glasgow – known as Virgin Rail Group – while Stagecoach owns the remaining 49%.

Failed franchise

The companies were also joint owners of the East Coast franchise.

In June, both Stagecoach and Virgin Trains dropped out of the contract.

The two firms ran the East Coast main line for three years from 2015, promising to pay £3.3bn to run the franchise until 2023.

But by the end of 2017 it was clear they were in trouble, and in June the East Coast franchise was handed back to the government.

At the time, Labour and trade unions accused Virgin of costing taxpayers £2bn.

Mr Grayling told the House of Commons in May that Stagecoach and Virgin had lost almost £200m on the failed East Coast franchise, but there had not been a loss to taxpayers “at this time”.

A Virgin Train

Reacting to news of the West Coast dividend, Labour’s Rachel Maskell told the BBC it was “shocking” that money from the franchise was not being put back into the railways.

Related: After losing TWO major rail franchises, Stagecoach makes it easier for bosses to land their bonus

She said: “At the same time, Transport Secretary Chris Grayling is letting them off a £2bn bill [for the East Coast franchise] which the taxpayers are having to bail out.

“This shows how franchising completely fails the public… buying a ticket is so extortionate these days that many people can’t afford to travel by rail.”

She added that Labour wanted to see dividends reinvested into publicly-owned railways that put passengers at the heart of business.

A spokesperson for Virgin Trains said that the West Coast line had seen “industry-leading levels of customer satisfaction thanks to innovations such as automatic delay repay, free films and TV on board, and mtickets”.

A Department for Transport spokesperson said that privatisation had helped to “transform” the UK’s railways innovation, investment and improved customer service: “Virgin Trains continue to be the leading long distance operator in the National Passenger Survey results delivering consistently high customer satisfaction.

“West Coast passengers will see ongoing investment and innovation with the introduction of the West Coast Partnership in 2019.”

Source: BBC

After losing TWO major rail franchises, Stagecoach makes it easier for bosses to land their bonus

August 27, 2018

Stagecoach has come under fire for making it easier for bosses to be paid bonuses after it was stripped of the East Coast rail franchise by the Government.

Influential shareholder advisory group Glass Lewis is urging investors to vote against chief executive Martin Griffiths’ pay plan at the train and bus operator’s annual meeting on Friday.

In a report sent to investors, seen by The Mail on Sunday, Glass Lewis lambasts the firm for failing to explain why it lowered the profit targets for Griffiths to get a long-term performance bonus of up to £1 million.

Stagecoach has lost two major rail franchises since the previous target was set in June 2016.

The company came under fire earlier this year after Transport Secretary Chris Grayling took away the East Coast mainline franchise. The line from London to Edinburgh was supposed to have been operated from 2015 to 2023 by the Virgin Trains East Coast franchise – which is 90 per cent owned by Stagecoach and 10 per cent by Richard Branson’s Virgin.

But Grayling said the firms ‘got their bid wrong’ and overestimated how profitable it would be.

Related: Stagecoach East Coast rail line franchise ‘to be axed in days’

Last year, Stagecoach also lost its South West Trains franchise to a consortium including FirstGroup. It ran the service since its privatisation in 1996.

Griffiths agreed with his board that he should receive no bonus for the 2017-18 financial year, in part because of the East Coast fiasco. His total pay for the year was £987,000, but moving the goalposts on his bonus targets will make it easier for him to get one in future.

Under new rules, Griffiths and finance boss Ross Patterson need to pull in earnings of 24.4p to 25.7p per share to get bonuses, down from between 28.9p and 31.9p.

Glass Lewis says it ‘firmly questions’ the lack of an explanation to shareholders on why the target has been cut.

A Stagecoach spokesman said its pay policy was backed by 95 per cent of investors at last year’s annual meeting and noted that another shareholder advisory group, ISS, is recommending that investors back the board.

‘Challenging long-term incentive payment targets are also set every year, taking into account the nature and scale of the business, internal forecasts and market consensus,’ the spokesman added.

‘It is only proper that these targets will change from year to year.’

Source: This is Money

Stagecoach bus revenues hold steady as mileage drops

July 9, 2018

Stagecoach reduced bus mileage outside London by 2.7 per cent in the year to 28 April, with a 1.7 per cent drop in commercial mileage and a higher reduction on tendered routes.

The figures are reported in the group’s statutory results for the year ended 28 April, which show profit before taxation climbing from £17.9m to £95.3m. However, the group’s adjusted results show profit before taxation falling from £151m to £144.8m.

The share price fell as Stagecoach cut its full year dividend from 11.9p to 7.7p.

Group revenue fell from £3.941bn (2016/17) to £3.226bn, reflecting the end of the South West Trains franchise last August.

Revenue from UK regional bus operations (i.e. outside London) fell 0.3 per cent from £1.015bn to £1.012bn. London bus revenues fell 4.4 per cent from £263.4 to £251.8m. UK rail revenue fell 30.8 per cent from £2.160bn to £1.495bn. North America operations contributed £470.9m, down 0.4 per cent from £488.8m.

Related: Stagecoach ponders sale of American operations

The operating profit margin for UK regional bus was £112.9m (11.2 per cent), down from £117m (11.5 per cent) in 2016/17.

London bus operating profit was £13.3m (5.3 per cent), down from £18.4m (7 per cent) in 2016/17.

Rail operating profit was £24.9m and 1.7 per cent – lower than the £28.5m in 2016/17 but higher in percentage terms (2016/17: 1.3 per cent).

Stagecoach said that the “declining propensity to travel in the UK” was presenting challenges for its regional bus operations. The UK bus commercial team is looking at new initiatives, including demand response services in a number of locations, and running the first UK pilot of autonomous vehicle technology on a standard bus.

Stagecoach is implementing further mileage reductions in 2018/19 and fare increases “where appropriate”. “We continue to expect modest revenue growth from our local bus services in the short-term,” it said.

The operator made a net gain of four London bus routes in the year and says this should be reflected in revenue for 2018/19. The drop in  London revenues reported in 2017/18 reflects contracts lost in the previous year.

“We currently expect our UK Bus (London) operating margin to remain below our long-term aspiration of 7 per cent in the year ending 27 April 2019,” said Stagecoach. “Staff cost inflation in excess of what was assumed in previous successful bids for contracts is affecting profit but our revised expectation of staff and other costs is reflected in our bids for new contracts.” The company continues to monitor Transport for London’s plans to reduce contracted mileage.

On rail, Stagecoach reported an £85.6m hit in the year as a result of problems with the East Coast franchise, which the Government is taking in-house.  Stagecoach still runs East Midlands Trains and the Sheffield Supertram. It has been shortlisted for SouthEastern (Alstom will have a 20 per cent stake in the franchise); is part of a shortlisted  joint venture for the West Coast Partnership (Stagecoach 50 per cent, SNCF 30 per cent, Virgin 20 per cent); and is shortlisted for the new East Midlands franchise.

Stagecoach expects UK rail operating profit to fall in 2018/19 as profits from East Midlands Trains are partly offset by bidding costs for new opportunities.

Source: Transport Extra

Stagecoach takes hit from East Coast franchise

June 30, 2018

STAGECOACH has seen profits tumble as the Perth-based transport giant booked a hefty charge linked to its problems on the East Coast rail franchise, and slashed its total dividend for the year.

And it warned operating profits from its UK rail operations will fall in the current year, with the cost of bidding for new franchises expected to offset profits from its East Midlands Trains contract.

The Edinburgh to London line was renationalised this month after the UK Government stripped Stagecoach and partner Virgin Trains East of the franchise in May. The partners had won the contract in 2014 with a deal to run the franchise until 2023.

The renationalisation came after Stagecoach reported mounting losses on the £3.3 billion franchise last year, with the company admitting its operation of the line had not led to the revenue and profits it anticipated when it won the contract.

Related: Stagecoach East Coast rail line franchise ‘to be axed in days’

Boss Martin Griffiths repeated that he was “surprised and disappointed” at Transport Secretary Chris Grayling’s move to renationalise the line as the company reported “significant exceptional costs” of £85.6 million relating to the franchise. Underlying profits at the group, founded by Sir Brian Souter and sister Ann Gloag in 1980, fell to £144.8m from £151m.

Group revenue was also down at the bus and rail giant, falling to £3.2 billion from £3.9bn as a result its South West Trains franchise ending in August. Revenue from UK rail dipped to £1.5bn from £2.1bn, with operating profit down 12.6% to £24.9 million.

However, Mr Griffiths highlighted “positive changes” to the franchise model, which he said will lead to the revenue risk being more evenly shared between operators and the Government.

He said: “We are pleased with the group’s underlying financial performance for the year ended 28 April 2018, when compared to our start of the year expectations.

“We were, however, surprised and disappointed by the Secretary of State for Transport’s decision to appoint an operator of last resort to take over the operation of InterCity East Coast train services from our Virgin Trains East Coast business. We are also disappointed to report significant exceptional costs in relation to that business.”

The company slashed the full-year dividend to 7.7p from 11.9p on its reduced exposure to rail. “Whilst the board understands the importance of dividends to its shareholders, the board also feels the dividend needs to be set at a level from which it can grow over time as well as being covered by normalised non-rail cash flows,” Mr Griffiths added.

Helal Miah, analyst at The Share Centre, said: “This slashing of the dividend may have been more drastic than expected but there was additional disappointment from management’s view that the rail business would continue to face declining profits while being exacerbated by new franchise bidding activity. Its bus operations however are doing well both in the UK and North America.”

The group said regional UK bus revenue was down 0.3% at just over £1bn. Its bus operation in North America saw revenue fall by 0.4% to $630m. Shares rose 4.3% or 5.8p, closing at 139.9p.

Source: Herald Scotland

South Western Railway passenger journeys dropped by 18m last year as franchises veer off track

June 17, 2018

Embattled train operator South Western Railway (SWR) saw a dramatic drop of 18m passenger journeys over the past year as it grappled with engineering works at Waterloo, a switch in franchise ownership and industrial action.

London’s busiest station underwent an upgrade in a bid to boost capacity by 30 per cent, which has largely contributed to the drop as platforms closed and industrial works are carried out.

However, SWR has also been hit with industrial action over the past year, with the latest round of strikes due to hit commuters later this month between the 21st and 23 June.

The data from the rail regulator the Office for Road and Rail (ORR) paints a bleak picture for the franchise model that dominates the UK rail industry. It has come under serious scrutiny over the past year owing to collapse of the joint venture between Stagecoach and Virgin Trains on the East Coast franchise.

Overly optimistic predictions on the growth of passenger numbers led to losses of £200m, forcing the government to renationalise the line. The formal handover will take place at the end of the month.

Another franchise that has had a kicking from commuters has been Govia Thameslink Railway (GTR), which suffered a 2m drop in passenger numbers over the past year thanks to staffing shortages, industrial action and planned cancellations.

The dramatic drop marks the second year in the row that passenger numbers have fallen on the franchise. GTR, which runs the Thameslink, Southern, Gatwick Express and Great Northern services, still recorded the largest of passenger journeys, however, at 319m.

The ORR data is another blow for the rail industry. Franchised rail passenger journeys dropped for the first time since the financial crash, falling to 1.7bn. The decline was driven by a 9.2 per cent fall in season ticket journeys as customers shifted towards using ordinary tickets as strikes and cancellations make it harder to plan ahead.

A decade ago, season tickets accounted for 48 per cent of market share; this has now dropped to 38 per cent. However, while the volume of season ticket journeys has fallen in the last two years, advanced, anytime and off-peak tickets have increased over the same period.

Revenue for season tickets was at its lowest level since 2013-14, but the price of an individual ticket rose to £5.66, an increase of 3.7 per cent compared to the previous year.

Rail Delivery Group chief executive Paul Plummer said: “There are over 1.7 bn rail journeys made every year and despite some slowing down, this growth isn’t expected to hit the brakes in the long term. While technology may mean fewer people are travelling into work every day, anyone taking the train into our major cities will know that investment to run more trains is essential.

“To meet the increased demand for rail over the coming decades, rail companies are working together to deliver record investment in rail to improve for customers, communities and the economy, including introducing 6,400 extra services a week by 2021.”

Source: City A.M.

Stagecoach East Coast rail line franchise ‘to be axed in days’

June 4, 2018

The UK Government is set to axe the East Coast rail line franchise in a matter of days after heavy losses for operators Stagecoach and Virgin.

According to the FT, an announcement is due before the end of the week – months after Transport Secretary Chris Grayling admitted the existing franchise was unsustainable.

The ending of the contract would mean it’s the time time in under a decade that the UK Government has been forced to intervene on the London to Edinburgh line.

It now has the option of nationalising the line temporarily or putting the line in the hands of a temporary not-for-profit management agreement with Stagecoach and Virgin.

Stagecoach owns 90 per cent of the franchise while Virgin holds 10 per cent.

The deal was signed in 2015 but passenger numbers have not met expectations, meaning it has suffered heavy losses.

In November last year Chris Grayling announced the franchise would be replaced three years earlier than expected in 2020.

And he admitted the franchise would only be able to continue in its current form for a “very small number of months”.

The public accounts committee found last month that the passenger growth forecasts by Virgin and Stagecoach had been “wildly wrong” and proved that rail franchising was a “broken model”.

In February the Transport Committee said it was launching an inquiry into it, saying there were “serious questions” to be asked and added that they would look at the best way forward as well as the wider implications for the rail franchising system.

Lilian Greenwood, chair of the Transport Committee, said at the time: “This failure – not once, but three times – has drawn criticism from all corners.

“There are serious questions to be asked of the train operator, Network Rail and ministers, and the Transport Committee intends to ask them.

“The failure of the East Coast franchise has wider implications for rail franchising and the competitiveness of the current system.

“Lessons need to be learned by all concerned. In the meantime, the Department for Transport must take the right steps to protect passengers and taxpayers.

“Safeguards must be put in place to restore public confidence in the sustainability of our railways.”

Virgin Trains East Coast said it had “met or exceeded all of our contractual commitments on the East Coast”. It added: “We believe we are best placed to continue the transformation already under way on East Coast . . . and provide a smooth transition to the new East Coast Partnership.”

A Stagecoach Group spokesman previously said: “Virgin Trains East Coast is a well-run, profitable railway and we are continuing to meet our contractual commitments, as we have done throughout the past 21 years in operating train services on behalf of the government.”

Source: Insider

Stagecoach at 30: How a small Surrey stage school became a worldwide business

April 18, 2018

Stagecoach, which this year celebrates its 30th birthday, has provided a platform for actors, singers and dancers. Nick Smurthwaite looks at its humble beginnings and discovers how today it is filling the gap left by school cuts

From its modest beginnings in the Thames Valley in the mid-1980s, Stagecoach Performing Arts has grown into a worldwide franchise, with some 700 schools serving 45,000 young people across nine countries.

The UK’s largest stage-school franchise, Stagecoach has provided a launch pad for, among others, Emma Watson, Jamie Bell, Danny Mac, Tom Fletcher from McFly and the opera singer Carly Paoli.

In April 1988, a stage-struck single mum, Stephanie Manuel, then working in telesales, and former bank manager David Sprigg scraped together £8,000 to set up the first three Stagecoach schools in Redhill, Woking and Richmond upon Thames. Their ethos was not to promise false dreams, but to help children boost personal confidence and learn important communication skills.

Then as now, the formula was small classes, three-hour sessions, tight discipline and equal attention to drama, dance and singing – the so-called ‘triple threat’.

Spurred on by the immediate success of those first outlets, they soon found venture partners in the regions and by 1993 Manuel and Sprigg were masterminding 24 schools, run by other people, from a small office in East Molesey, Surrey. They launched Early Stages, classes for four to six year olds, in 1997.

Because the administrative burden was becoming so heavy, they turned to franchising, with each franchisee paying an upfront fee, plus 12.5% of the turnover. In 2001 they floated the company on the Alternative Investment Market, raising almost £3 million to expand the business. As a result, they were able to move to more spacious premises in Walton-on-Thames.

When interviewed by The Stage in 2006, Manuel put the company’s success down to “rigorous quality control”, which included restricting class numbers to 15 and scrupulous vetting of potential franchisees. Teaching qualifications were never insisted upon and the franchises were often taken up by performers whose careers had stalled for one reason or another.

This business is full of wonderful professionals who have an awful lot to give

“We have never been precious about saying our teachers have to be qualified from the outset,” Manuel said in an interview. “This business is full of wonderful professionals who are not working and have an awful lot to give.”

Stagecoach runs its own foundation course for would-be teachers three times a year. There are more than 3,000 teachers engaged by Stagecoach franchises in the UK and overseas, who can either be multi-disciplined, or specialise in acting, singing or dancing.

After the departure of Manuel and Sprigg in 2012, following a £6.5 million buyout, the chief executive role was taken on by Sarah Kelly, the former head of weight-loss franchise LighterLife.

“My aim with Stagecoach was always to have a collaborative approach to the franchisees, to have an open dialogue,” says Kelly. “We have a team of 46 at Stagecoach HQ to deal with things that come up, from providing business and marketing support to education, training and running events.

“Our job is also to ensure they have an asset value they can sell on when they quit. Every year we expect 20 or so franchisees to pass the business on to someone else.”

With the reduction of funding for performing arts education in schools, a growing area of Stagecoach’s remit is to provide an outlet for non-academic young people who might be looking for a future in entertainment.

Photo: Stagecoach
Photo: Stagecoach

“Not all young people are academic,” says Kelly. “We’re looking at replacing GCSE drama and BTec qualifications with our own assessment procedures, so that older children in Stagecoach can build up UCAS points that will help them move on to further arts education.

“We estimate that about 25% of our intake now is from parents wishing their children to have the kind of performing arts study that is no longer available in schools. It has been shown that children who engage in the performing arts perform better in school, so we’re really pleased we can provide that service.”

For five years Stagecoach has enjoyed a working relationship with Disneyland Paris, which welcomes some 1,500 children from the UK, Germany and Malta every year to join in the annual parade down Main Street. They also get the opportunity to perform on stage in front of an international audience, take part in voice-coaching sessions and sing in front of the Disney Castle.

“A significant number of our older students are looking for pathways into the industry and our connection with Disney opens up audition opportunities,” says Kelly.

Disney’s Beauty and the Beast is also playing a lead role in Stagecoach’s 30th anniversary celebrations. The company is hoping to set a Guinness World Record for the most simultaneous performances of the show.

On July 1, more than 6,500 children from 150 schools, at home and abroad, will put on a one-off performance at 6pm GMT. The one to beat is Stagecoach’s record of 66 simultaneous performances of Glad Rags, set in 2008.

Source: The Stage