More on Stagecoach
Stagecoach: H1 trading statement
Bus and rail operator Stagecoach Group said trading for the half year to October 2005 was in line with expectations despite increasing costs, particularly fuel costs.
The company said bus and rail operations in the UK, North America and New Zealand have all seen revenue growth, which the company attributes to effective marketing and investment in new vehicles.
Stagecoach is bidding for several new rail franchises, and seems confident of winning them, on the basis of awards received by South West Trains, recently named Passenger Operator of the Year. The operational performance of South West Trains is also claimed to be the best amongst rail operators in London and the South East.
Bids have already been submitted for the Thameslink/Great Northern and Greater Western franchises. Prequalification documentation is to be submitted next month for the new South West franchise, which runs from February 2007.
Rising fuel costs are the key concern with this company and are likely to keep margins under pressure. Margins were maintained last year due to a heavy cost cutting programme-whether this is sustainable in the medium term is doubtful. Growth is likely to come from the expansion of the franchise, and while developments on this front look positive none have been awarded as yet.
The share trades at 107.47p, on a prospective PE (2006 earnings) of 10.4x, in line with the sector with a yield of 3.6%.
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