Stagecoach blames weak economic conditions for slowdown in revenue

Transport operator Stagecoach reiterated its earnings forecast for the year, even though revenue in the third quarter declined across all its operations.

In the 44 weeks to 4 March, like-for-like revenue in the group's UK regional and London-based operations declined 1.7% and 0.9% respectively compared to 12 months earlier, while revenue in its North American business were 2.8% lower year-on-year in the 10 months to 28 February.

The performance in North America was heavily influenced by a 5.4% drop in revenue for the region's Mega Bus coaches.

The FTSE 250-listed company attributed the decline to "weak underlying local economic conditions in some parts of the UK and sustained lower fuel prices", although it added the rate of decline was slower than that recorded in the first quarter.

Stagecoach's rail division performed better, with UK rail and Virgin Rail Group recording a 1.6% and 5.3% year-on-year increase in revenues in the 44 weeks to 4 March.

However, while the rate of growth in both businesses was higher than in the first six months of the financial year, it was slower when compared with the corresponding period a year ago.

The company added the trading environment in the US remained challenging, while growth in the UK rail sector has slowed down markedly over the past 18 months, although it remained confident to meets its financial targets for the year.

"Our expectation of the group's adjusted earnings per share for the year ending 29 April 2017 has not changed from when we announced our interim results in December 2016," it said.

Earlier this week, Stagecoach lost the franchise to run South West Trains, after it was announced Hong Kong Exchange-listed MTR and First Group will take over the service for seven years from 20 August.

Stagecoach had run the franchise since privatisation in 1996.