Stagecoach Group cancels dividend amid dwindling demand

Perth-based transport company Stagecoach Group has axed its final dividend for the year after its revenues plummeted following its exit from the railway franchise market and lower bus passenger numbers.

The Megabus owner recorded a higher net loss of £46.5million in the year to 2 May, after seeing its earnings fall by a quarter to £1.42billion.

Demand from passengers has dropped off a cliff since the end of March when governments across the world began to impose tight restrictions on travel.

Stagecoach said its regional bus and tram operations in the UK had been ‘adversely affected’ by the pandemic, which forced them to temporarily suspend their Megabus service.

Commercial revenues are now back at 40 per cent of their pre-Covid level, having been at around only 10 per cent at one point during the lockdown, but its final dividend has been scrapped. Shares in the firm nonetheless surged 11.4 per cent to 56.2p after it revealed its latest results were published today.

The FTSE 250-listed business believes it will be ‘some time’ before its services return to pre-Covid levels and admitted it was finding it ‘difficult to reliably predict’ what its profits for this financial year would end up looking like.

‘Prior to the COVID-19 pandemic, the business was on track to meet its expectations for the full year,’ stated chief executive Martin Griffiths.

He said Stagecoach had taken decisive action so that the business remains in as strong a position as possible and well placed to secure the significant long-term opportunities we see for public transport.’

The company now hopes the UK Government’s new National Bus Strategy, which is due to be launched sometime this year as well as new funding for the sector, will lead to more passengers travelling on their services.

Since March, Government support has helped bus operators to maintain services despite user numbers plunging because of advice to avoid public transport during the lockdown.

The Government announced a £254million investment package for bus, tram and light rail for operators based outside London in late May, a proposal which was welcomed at the time by Stagecoach.

That funding is set to continue to the end of October and Stagecoach, the UK’s biggest bus and coach operator, said that talks had already begun regarding a further 12 week extension.

‘Supportive short-term actions by government and our local authority partners have helped protect public transport networks, which are critical to the country,’ Griffiths said.

‘We have also been encouraged by the good momentum created by the positive direction of government bus policy and investment.’ 

The company’s UK bus division registered a modest decline in revenues during the financial year, but remained its highest-earning division, making an operating profit of £90.6million. 

Most of the drop in earnings came as a result of its loss of the Virgin Trains east coast and East Midlands rail franchises in the last two years. 

Stagecoach was also disqualified last year by the Department of Transport from submitting bids for three rail franchises, including the East Midlands route because it offered a bid that was unwilling to take on pension liabilities worth over £1billion.

Soon after it ceded control of the West Coast franchise in December, the firm announced that its founder and chairman Sir Brian Souter would step down as its chairman at the end of the year.

Sir Brian, 65, said he wanted to spend more time with his family and pursue other interests. He remains on the company’s board as a non-executive director.

The grandfather of three started the Perth-based company with his sister, Dame Ann Gloag in 1980, providing coach, bus and train services for passengers.