More on Stagecoach
Stagecoach: Full year results
Stagecoach Group, the bus and rail operator reported a 10.8% growth in turnover and stable operating margins for the year to April 2005. The company succeeded in maintaining operating margins (excluding restructuring costs, goodwill amortisation and exceptional items) at 11.5%, despite significant increases in fuel and other costs.
Turnover from continuing operations rose to £1,787.6m (2004: £1,641.1m) and total operating profits rose to £156.7m (2004: £147.5m). Operating profit growth was strongest in UK buses (up 10.3% to £82.5m) and UK rail (up 10.2% to £48.6m).
The better performance in UK buses is attributed to “innovation, targeted marketing and consistent service delivery”. The company’s new telemarketing unit has been successful, attracting thousands of new bus users. A two-year campaign focusing on a new location every six-weeks is expected to generate further organic growth in our provincial bus operations.
UK rail has performed better due to improved service following the
introduction of the new timetable at South West Trains in December 2004, with
more frequent departures from the busiest stations. Train punctuality has
progressively increased, with over 90% of trains now arriving on time.
The company says trading for the current year is within expectations. The concern with this stock is the exposure to oil prices, Stagecoach uses the equivalent of 1.8m to 1.9m barrels of diesel fuel annually. A change in oil prices of US$10 would affect Stagecoach’s fuel costs by US$18m-US$19m per annum. The company has an ongoing hedging programme to minimise volatility in fuel cost with 85% of requirements for the year to April 2006 being capped at US$48 per barrel.
The share trades at 117.75p on a prospective PE (2005 earnings) of 14.7x, at the upper end of the sector range. the yield is 2.8%.
Random picks: Alba | Barratt | Friends Provident | Kingfisher | Liberty International | Spirax Sarco | Vedanta | Wimpey | Jardine Lloyd Thompson | John Wood