Stagecoach today said a strong performance from its rail division put it on track to notch up a 13 per cent rise in profits but cautioned that high oil prices could weigh on parts of its business.
Group pre-tax profits in the year to April 30 rose to £108.3 million from £95.8 million a year ago, on an 8.9 per cent increase in turnover, to nearly £1.8 billion.
The Perth-based bus and train operator said the introduction of new trains and improved operational performance had contributed to a 9.2 per cent rise in turnover in its rail arm, which runs South West Trains and the Island Line on the Isle of Wight.
It said its UK bus division had also had a good year, with passenger volumes and turnover up by 1.5 per cent and 7.1 per cent respectively in its non-London operations, and turnover up by 21 per cent in London.
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Chief executive Brian Souter said Stagecoach had achieved the strong results despite significant cost pressures in the transport industry, particularly for fuel.
He added that the group, which is bidding to run the new Greater Western, Thameslink and Integrated Kent rail contracts, was well placed to benefit from new franchising opportunities.
“I am confident our cash-generative portfolio will produce further significant growth,” he said.
Stagecoach said it expects analysts to hike profit forecasts for the current fiscal year after the British bus and train operator delivered an unexpectedly sharp rise in earnings in the year to April
2005.
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But the company flagged that some caution was warranted in view of record oil prices and a likely slowdown in the growth rate of its London bus operations.
“It (the median profit forecast) will move up a little bit but by the same token we do have additional fuel costs to absorb this year,” finance director Martin Griffiths told reporters on a call.
He explained that higher fuel costs are set to slice £15 million off the company’s earnings in the current year if crude prices stay at current near-record levels.
Mr Griffiths added that there was unlikely to be a repeat of the 21 per cent revenue growth generated last year by the company’s London bus operations.
“We would expect to see growth above inflation but we certainly wouldn’t expect to see the 15-20 per cent top-line growth we’ve had over the last two to three years,” he said.
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The group added that train punctuality had increased, with more than 90 per cent of trains now arriving on time.
Stagecoach said its new telemarketing unit had been attracting thousands of new bus users and it expected its two-year campaign focusing on a new location every six weeks to generate further organic growth in its provincial bus operations.
The group’s low-cost long distance bus service, megabus.com, has expanded to cover more than 30 towns and cities in the UK and it expected further growth in its revenue between now and next April.
It said North American trading had been very encouraging, with operating profits lifting to $27.4 million from $25.4 million a year ago, while its New Zealand businesses saw operating profits fall by 19.6 per cent, in line with expectations.