Bus and rail firm's surprise gains

Apr 29 2008 by Tony McDonough, Liverpool Daily Post

MERSEYSIDE’S second biggest bus operator, Stagecoach, saw its shares make strong gains yesterday after the bus and rail firm said it had been trading ahead of expectations.

The Perth, Scotland-based company said UK Rail, which includes the commuter service South West Trains and its Virgin Rail joint venture, were the main contributors to the out-performance in the year to April 30.

Shares rose by 7% and built on the gains seen in the transport sector on Friday, after Go-Ahead also produced a reassuring trading update.

While Stagecoach remained mindful of economic conditions and rising fuel prices, it said it was encouraged by the current trading performance.

Revenues in UK Rail rose 13.1% in the 48 weeks to March 30, a period which included the Easter holiday. However, the competitive bidding environment for new franchises has knocked margins, and Stagecoach recently said half-year rail operating profits declined to £25.3m from £31.4m.

The group has also warned its government subsidy will reduce by more than £100m over the next two financial years, resulting in some variability in profits.