SGC.L Share News (SGC)

(Sharecast News) - Passenger transport operator Stagecoach Group said in a trading update on Tuesday that passenger demand for its regional bus operations had been recovering in recent weeks alongside the return of schools and universities.
The London-listed company said that journey numbers were over 70% of the equivalent 2019 pre-pandemic levels by the end of September, as it was operating vehicle mileage at around 94% of 2019 levels.

For the week ended 2 October, journey numbers were 70.1% of the figure for the equivalent period in 2019, with fare paying journey numbers were at 74.4% and concessionary journey numbers at 60.2%.

Commercial sales as a percentage of the 2019 levels were higher than fare-paying journey numbers, which the firm said was partly attributable to travel patterns during the Covid-19 recovery period, whereby single tickets represented a higher proportion of sales than in 2019, while weekly and monthly tickets represented a lower proportion.

Stagecoach said it was progressing a number of ticketing initiatives to reflect the changes in travel patterns.

It said governments across the UK were still making payments to ensure the continuity of bus services in the wake of the coronavirus pandemic, although the Covid-19 Bus Services Support Grant Restart (CBSSG) for local bus services in England, excluding London, ended on 31 August.

The Department for Transport had put in place a £226.5m Bus Recovery Grant (BRG) funding package to cover the period from 1 September to 15 March 2022.

Stagecoach, along with other bus operators, said it was working "closely" with the DfT on the terms of the scheme, under which funding was allocated to operators with reference to revenues and mileage operated.

In Scotland, the Covid-19 Support Grant Restart (CSG) payments for continuing bus services had been extended until 31 March 2022.

"We are continuing to seek new opportunities to diversify and grow the business," the board said in its statement.

"We are pleased to have successfully retained the rail replacement contract for LNER following a competitive tender, and continue to actively pursue other UK rail replacement bids."

Looking at its London bus operations, Stagecoach said it was pleased with the continued strong operational and financial performance of the business, where it said it had made progress to develop its commercial activities to supplement its core Transport for London contract work.

In the rail division, the company said that similar to its local regional bus businesses, its ongoing Sheffield Supertram business was receiving government payments for continuing the essential tram services it provides.

The Light Rail Revenue Restart Grant (LRRRG) scheme ended on 19 July, and was replaced by a £56m funding package to light rail operators from 20 July to April 2022.

"We continue to work with the South Yorkshire Passenger Transport Executive and the DfT on arrangements for allocating this funding."

On 21 September, the company announced that it was in discussions with National Express Group in relation to a possible all-share combination.

Discussions between the parties and reciprocal customary due diligence were ongoing, and the board said there could be no certainty that any offer would be made.

Stagecoach Group said it was maintaining a "solid" financial position with investment-grade credit ratings, "substantial" available liquidity and appropriate headroom under its debt facilities.

S&P Global recently revised its outlook from negative to stable, and affirmed the BBB- rating, while Moody's recently confirmed its rating remained unchanged at Baa3, with a negative outlook.

"The momentum in passenger journeys and sales reflects a pick up in activity and travel across the UK, and growing confidence to return to public transport," said group chief executive officer Martin Griffiths.

"While there remains some uncertainty around how the recovery continues, our outlook for the year ending 30 April is unchanged from when we announced our full year results in June.

"Strong partnership working between bus operators, national government and local transport authorities is fundamental to transforming the country's bus networks and tackling climate change."

Stagecoach said it would announce its interim results for the half-year ending 30 October on 8 December.

At 0857 BST, shares in Stagecoach Group were down 1.87% at 81.4p.