Stagecoach counts cost of loss-making East Coast line

Marco Green
June 28, 2017

"We have been proved right".

Rail union RMT has demanded that the Government return the East Coast rail routes to public ownership after it emerged this morning that Stagecoach are in talks with the Government over financial difficulties on the franchise.

Uncertainty about the future of the economy after last year's Brexit vote and an increase in vehicle journeys as fuel remains relatively cheap is also taking a toll on train bookings, Chief Executive Officer Martin Griffiths said Wednesday in an interview.

Chief Executive Martin Griffiths said revenue growth on the East Coast rail line had not met expectations when it bid for the franchise in 2013-2014, and it was making provisions to reflect losses over the next two years.

Predicted losses on the East Coast mainline have forced rail company Stagecoach to take a major multi-million pound charge leading to an 83pc drop in group profits.

Stagecoach and Virgin have teamed up with French state train operator SNCF to bid for the next London-Glasgow West Coast franchise, Britain's premier long-distance route, which the pair now control.

Stagecoach runs the Virgin East Coast rail service and said it is in discussions with the Department for Transport (DfT) regarding the terms of the continued operation. We are working closely with public sector partners to deliver the full benefits of high quality public transport for customers and our business.

It also said planned improvements to infrastructure and rolling stock had not materialised as expected at the time Virgin Trains East Coast - 90% owned by Stagecoach - had won the franchise, and that the Government ought to bear the impact of this.

Chief executive Martin Griffiths said: "We have made financial provisions to reflect the short-term outlook for that business over the next two years, including in view of the weak growth environment affecting the United Kingdom rail sector as a whole".

Revenue is not growing as strongly as anticipated as sales are hit by "increased terrorism concerns and political uncertainty", as well as "macroeconomic" factors, the firm said.

Those troubles with its east coast network offset a modest rise in overall revenues for the period, which nudged 1.8% higher to £3.94bn (2016: £3.87bn).

The firm said it is taking action across its bus network, including targeted network, pricing and management changes.

Stagecoach and Virgin have also joined forces with French high speed operator SNCF to bid for the renewed West Coast Partnership franchise, which it would probably run under the Virgin brand.

Despite the positives, shares were down more than seven per cent to 188.6p as investors digested the news of the issues on the East Coast line.

Shares in Stagecoach were down 11% to 180.0 pence on Wednesday, having touched a low of 180.20p, their lowest level since late 2010.

The company, which is now in the race for a handful of new franchises including East Midlands, South Eastern and the West Coast Partnership, estimated that VTEC will become profitable from 2019.

Other reports by Click Lancashire

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