Bloomberg News

Stagecoach Says Set for Profit as Virgin Rail Lifts Revenue

November 01, 2011

(Updates with companies exonerated in regulatory probe in eighth paragraph, today’s share prices in 11th.)

Nov. 1 (Bloomberg) -- Stagecoach Group Plc, the operator of Britain’s busiest commuter-train service, said it’s on course to meet a target of posting a profit this fiscal year after U.K. rail revenue increased 8.7 percent in the 24 weeks to Oct. 16.

Sales at Richard Branson’s Virgin Rail Group, in which the company has a 49 percent stake, rose 9.7 percent in the period, according to a statement today, while revenue at Stagecoach’s own North American unit advanced 12 percent in five months.

“The group has performed well and remains on course to meet its expectations of profitability for the year,” Stagecoach said. “Overall current trading remains good and the prospects for the group remain positive.”

Competitor National Express Group Plc said separately that profitability in the first nine months improved in line with the London-based company’s forecasts as bus and rail revenue increased, spurring overall sales by 5 percent.

The company, which was stripped of the East Coast rail route by the U.K. government in 2009 and failed to make the shortlist to keep the Greater Anglia franchise, aims to re-bid for its remaining C2C commuter line, which expires 2013, while “selectively considering” other rail opportunities, it said.

Bus Probe

The U.K. Competition Commission meanwhile said today that a probe has shown three large bus companies to have engaged in anti-competitive behavior to create and protect individual “core” areas, especially in northeast England.

This “segregation” resulted from “extensive communication between certain large operators, signaling, retaliation to entry through competitive responses on other routes, and the sale and acquisition of rivals’ assets,” a statement said.

The regulator said it found no evidence of Stagecoach or National Express being involved. Other large operators probed in studies in the northeast and northwest included Newcastle upon Tyne-based Go-Ahead Group Plc, Aberdeen, Scotland-based FirstGroup Plc and the Arriva unit of Deutsche Bahn AG.

“The issues raised in relation to the northeast relate to historical issues in one subsidiary,” Go-Ahead said today.

While the Competition Commission has previously found that the No. 1 bus operator in a given area often faces little or no competition, leading to less-frequent services and higher fares, it has also has “expressly ruled out” structural change, price controls or increased regulation,” Go-Ahead said in a statement.

Stagecoach traded 3.2 percent lower at 240.1 pence as of 10:21 a.m. in London, while National Express dropped 1 percent at 228 pence. Go-Ahead and FirstGroup were down 1.9 percent as the FTSE 350 Index lost 2.6 percent.

--Editors: Chris Jasper, Tony Aarons.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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