Shares in Stagecoach Group (LSE: SGC), operator of buses and trains across UK, North America and Europe were down 1% in early trading today as the company published a steady trading update for the six months ending 12th October.
The core UK Bus department, which accounted for 68% of operating profits in 2014, reported that continuing passenger volume growth resulted in a 3.2% like-for-like revenue increase. This figure excludes the one-off earnings from Commonwealth Games transport contracts. While revenue from fare-paying passengers was the main driver of growth, concessionary, tendered and school custom also contributed over the period.
UK Bus London grew revenues by 9.4% over the quarter. The departmental focus continues to be on keeping costs under control and bidding competitively, to retain existing and win new contracts.
Operations in North America, including Virgin Rail Group and Twin America, continued to grow faster than Stagecoachs other divisions. Megabus.com, which now covers more than 30 states in the US, grew sales by 13.5%, while management are satisfied with the progress of the most recent network launch in Florida.
Stagecoach and their joint venture partners are in ongoing discussions with the US Department of Justice and the New York Attorney General to conclude the litigation relating to Twin America.. The litigation alleges that the formation of the Twin America joint venture was anit-competative. In the 2014 annual report, management warned that until the government action resolves, the total financial cost of litigation cannot be determined. No update was given on expected results.
Looking forward, management said Although there are a number of challenges to growing profit in the year ending 30 April 2015, overall current trading is satisfactory and we are on course to meet our expectations for the year.
The group will announce its interim results for the six months ended October 2014 on 10th December 2014.
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Zach Coffell has no position in any shares mentioned. The Motley Fool UK recommendsshares of Stagecoach Group. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
