rail operator Stagecoach Group PLC said its full-year profits were boosted by environmentally-conscious travellers switching from cars to trains and buses.
The Perth-based company's pretax profit for the year ending April 30 rose to 184.1 mln stg from 91.5 mln last year. The group's revenues increased by 8.9 pct to 1.504 bln stg, and its EPS shot up to 25.9 pence from 10.7 pence last time.
The group will pay a dividend of 4.1 pence to shareholders -- 0.4 pence up on last year's handout of 3.7 pence.
'I think environmental concerns have had a major impact on both our rail and bus revenues, particularly in the south of England where people are choosing to use the bus as part of their carbon footprint plan,' Stagecoach's CEO Brian Souter told reporters on a conference call this morning.
'I also think a fair chunk of rail growth is coming from people who are choosing to use the train in preference to the car because of environmental benefits.'
Souter added that trains were starting to take passengers away from domestic airlines, especially on routes to and from Manchester and Liverpool.
'There has been a big shift from the airlines back to the trains in Liverpool and Manchester in particular. With trips of up to 300 miles there is definitely a pattern of movement from airlines to trains,' said Souter.
Earlier this month, the UK Department for Transport said it has awarded Stagecoach the contract to run the East Midlands rail franchise.
The new franchise, which brings together current Midland Mainline services from London St Pancras and the eastern section of Central Trains, will begin on November 11 2007 and end on April 1 2015. The company said it expects the new franchise to deliver at least an extra 10 mln stg of operating profit per annum.
'This is a railway that has base revenues of around 235 mln stg - we would expect that to perhaps be between 250 mln and 260 mln in the first full-year of the franchise,' said Souter. 'It's a competitive bidding market at the moment so the margins in the early years are quite tight - between 3.5 pct and 4 pct.'
Stagecoach said it has made a strong start to the new year and expects further growth in 2008.
'I am pleased to report that we have made a strong start to trading in the new financial year in line with our expectations and we are excited by the potential for future growth,' said Souter.
The group further strengthened its position in the UK during the year by winning the franchise for Manchester's Metrolink.
In North America, the company said it had achieved further growth in scheduled services and leisure markets, with the launch of new products and the expansion of its budget inter-city coach service, megabus.com.
Revenue in the group's UK bus division, excluding acquisitions during 2005 and 2006 and discontinued operations, increased by 10.3 pct to 608.0 mln, with the unit's operating profit coming in at 82.5 mln, compared with 65.0 mln in the previous year. The firm has also invested 58.5 mln in the modernisation of its UK bus fleet to provide more low-floor buses offering greater accessibility.
In North America, where Stagecoach's main brands are Coach USA and Coach Canada, the firm's revenue for the year increased to 463.6 mln usd from 439.5 mln usd last time. On a like-for-like basis, operating profit came in at 34.6 mln usd, up from 30.0 mln usd last time.
The group's budget coach operation, megabus.com, was launched in the US in the spring of 2006 and has generated some 4.7 mln usd in revenue.
The group's rail division saw revenue from its UK rail subsidiaries increase by 12.8 pct to 571.5 mln stg. Operating profit came in at 58.8 mln stg, slightly below last year's figure of 58.9 mln stg.
The group completed the disposal of its entire London bus business to Macquarie Bank Ltd in August 2006. The cash received for the sale was 267.8 mln stg before disposal costs and resulted in a net profit after costs on disposal of 132.2 mln stg.
The group also said it had appointed Garry Watts as a non-executive director of the company. Watts is a chartered accountant and was previously an executive director of Celltech PLC, finance director of Medeva PLC and prior to that, a partner at KPMG.
Merrill Lynch analyst Paul Butler said the investment bank would likely make upgrades to Stagecoach's 2008 numbers as a result of the group's impressive results this time.
'The strong result was driven by outperformance in rail compared to our expectations; bus and North America also had good results and we are likely to make upgrades to 08 numbers,' Butler wrote in a research note on the company.
At 11.55 am shares in Stagecoach were up 10 3/4 pence or 6 pct at 181 3/4 pence.
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