Stagecoach Share Discussion Threads

[zho] 09/12/2015 11:55

Griffiths said Stagecoach’s bus service in Cumbria ... was “under water”. Hmmm.

[sawadee3] 09/12/2015 09:49

Agreed, overeaction, but this is why i love the market so much.

Opportunity :-)

Happy days chaps :-)

[soulsauce] 09/12/2015 09:49

Agree, and with the oil price set to stay low any softening of passenger numbers will surely be off-set by lower fuel costs across bus and rail.

[alexisk] 09/12/2015 09:43

Drop in price here looks like a gross overreaction given that these are good results with 12.6% increase in adjusted eps and 9.4% percent increase in first half dividend. Looks like an excellent buying opportunity.

[zho] 09/12/2015 09:05

Stagecoach issues sales warning as Paris attacks discourage passengers

Shares slide 14pc as transport company cuts earnings forecasts after terrorism hits demand for rail and coach services

[tsmith2] 09/12/2015 08:37

Looks like shorters about to attempt to take this another leg down

[amencorner] 09/12/2015 07:49

half year results good financial results in line with expectations but outlook a touch cautious with what to me looks like a very mild profits warning?

[bscuit] 05/12/2015 14:59

IC recommends SELL. high margins could look vulnerable. Buses Bill creates potential problemI am surprised by lack of focus on MMC implications in respect of interest in Anglo-Scot rail travel on ECML and WCML. My suspicion that will count against SGC in respect of awaited award of re-let TPE franchise.

[zho] 04/11/2015 09:33

London's congested roads slow Stagecoach's growth

Roadworks in the capital have rendered Stagecoach's bus services less reliable

[sawadee3] 03/11/2015 09:27

I'm just happy that i loaded up + re-invested my dividend in Sir Brians quality company.

Unshakeable faith :-)

[getscenic] 03/11/2015 09:20

Trading statement out tomorrow, somebody must know something!

[m4rtinu] 03/11/2015 09:15

Well that was a mistake!!

[m4rtinu] 27/10/2015 16:17

My short, small flirtation with these has just ended.

[sawadee3] 16/10/2015 11:27

Public Transport Operators sector report

15 Oct 2015



As a Londoner, I both rail against and marvel at our public transport network in roughly equal measure. But whether I'm silently seething at the service of Go-Ahead (GOG) as a put-upon commuter damned to using London Bridge or, from an investor's perspective, assessing the group's chances in the three UK rail franchises for which it has been shortlisted, what is clear is that the bus and train segment - as characterised by Go-Ahead, National Express (NEX), Stagecoach (SGC) and FirstGroup (FGP) - faces some material headwinds. These include regulatory changes, increasing staff costs from the living wage and rebate cuts.

The risk is that these entirely negate widely trumpeted positive factors including a growing population, rising employment and higher real disposable income as well as lower fuel costs. The majority of downside risk affects the bus segment with rail exposure offering greater visibility for investors. Our favourite pick is Go-Ahead as, despite the legitimate concerns on the wider sector, it looks well positioned across both bus and rail.

Limited growth

Department for Transport (DfT) figures show local bus journeys in Great Britain declining by 0.2% in the year to March 2015. The only notable bright spot was London where bus use grew by 0.4%. It was flat in non-metropolitan areas of England and declined everywhere else.

On the rails investors can probably expect some kind of revenue growth from the various Train Operating Companies (TOCs) but this growth is likely to slow from its current range of 5-6% to 3% in around five years' time according to Investec. Margins are likely to remain flat, at least until franchises expire.

Matters of general concern in the public transport space going forward are likely to centre around issues like devolution and how this will impact on the provision of public transport. Political risk as a result of the election of a decidedly left wing Labour Party leader cannot be discounted and it's worth remembering that in successive polls, the public have not shown themselves averse to the notion of taking the rail network back into public ownership.

The living wage remains a concern for a number of operators in the bus space. A regional driver earns an average of £10 per hour and a London driver earns an average of £10-12 per hour. Rail pay levels are substantially higher.

When the living wage is introduced it is possible that bus drivers will want to maintain the same differential that exists against the minimum wage baseline. Investec analyst Alex Paterson reckons that in this scenario, before any efforts were made to mitigate through improved efficiency or fare increases, 'group margins could be impacted by around 40 to 120 basis points with FirstGroup the least impacted and Stagecoach the most, given its higher exposure to regional bus.'

The decline in oil price is feeding through to lower fuel prices which is good news for bus operators. Brent crude has fallen from $108 per barrel in August 2014 to around $50 per barrel. As a result of fuel-hedging, there's a long lead-in on reaping the benefits of lower fuel costs. As operators already have high levels of fuel hedging in place for 2015 the fuel feel-good factor isn't likely to kick in until the second half of 2016. And that's assuming oil prices remain depressed.


London-centric

In terms of passenger journeys, London is by far the biggest bus market and cumulatively since 2005, passenger journeys have increased by 32.8% in London, by 10.7% in non-metropolitan areas of England and declined by 6.1% in English metropolitan areas, 8.6% in Scotland and 16.0% in Wales.

London bus operators face their own particular set of challenges. Foremost among these is maintaining profit margins when near-ubiquitous utilities roadworks and ambitious schemes like the city's cycle superhighways are likely to add to delays and potentially take a bite of out operators' performance-related QICS (Quality Incentive Contracts) payments.

Given the intensity of land restraints in London, the availability and location of bus garages is crucial to the operation of a successful London franchise. If, for an example, an operator has a garage in a location near to the route being operated, this should lead to a significant cost advantage compared to an operator that does not, as time spent getting to and from the operational routes is minimised.

Restrictive planning regulations make the conversion of buildings into bus depots both problematic and expensive. Paterson points out that 'Go-Ahead has a particularly good concentration of garages in central London, allowing it to minimise the dead time of driving buses to the start of their route, with limited overlap from other operators' garages. Conversely, Stagecoach has garages in east London that are in close proximity to those of other operators making the competition on those routes more intense.'

Devolution has the potential to make significant changes to the regional bus market. Current proposals centre around a Quality Contract Scheme (QCS) of regulated buses. This scheme is similar to the London model, where operators bid for contracts administered by the Passenger Transport Executive (PTE), rather than operating on a commercial basis.

Tyne & Wear’s North East Combined Authority (NECA) proposal is currently being reviewed and how the board deals with the public interest criteria surrounding the QCS issue should offer a read on how schemes in other areas may work.

Other regulatory issues of note in the bus operators' space include the Bus Service Operator’s Grant (BSOG). This is a fuel rebate recovered by bus and coach operators in the UK. Total BSOG recovered by bus operators in England alone was £244 million and around £300 million across the UK for the year to March 2015. The grant effectively lowers operators' fuel costs by around 35%.

The last time the rebate was cut was in April 2012 and this was by 20%. When this happened, bus operators were given several months notice. Given that the Conservatives are feverishly slashing any government departmental budgets that aren't ring-fenced and the fact that fuel costs are currently so low, there is something of an expectation among industry observers that further cuts to the BSOG could be imminent.

While this is still only a possibility, putative cuts to the rebate could be implemented at the start of April 2016. If this were the case, the decision would almost certainly be trailed in the Autumn Statement (25 Nov) with the cut likely to be around 20-25%. Stagecoach is the operator with the greatest downside exposure should these cuts to the rebate come into force.


On track

Compared to the bus segment, rail offers a good deal more security in terms of factors like visibility of earnings and stability of margins.

Go-Ahead's London exposure and its portfolio of depots in the capital give the group something of an edge in the bus space while its rail exposure in the form of the London Midland, Southeastern and GTR franchises offers stability. The company (through its joint venture with Keolis) is also shortlisted for a further three UK franchises as well as being in the running for services in both Germany and Singapore.

In a trading statement on 2 October FirstGroup warned a decline in oil drilling and exploration in the Canadian oil sands region was leading to a fall-off in demand for First Transit's shuttle services. As a consequence, US dollar revenues are expected to be approximately 5% lower in the first half. Management maintains that further contract awards and organic growth in the rest of the division should substantially mitigate these impacts over the course of the financial year.

Panmure Gordon analyst Gert Zonneveld thinks FirstGroup's valuation is attractive but sees few catalysts going forward. Paterson at the Investec on the other hand is impressed by FirstGroup's disciplined approach to margins and restructuring, believing that these benefits will feed through over time. While he reduced his target price from 141p to 125p in the wake of the statement, he maintains a 'buy' recommendation. It presently trades at 101.6p.

National Express is considered to have dealt with a number of problematic legacy issues and the business is generally viewed as being on a much improved footing. The bullish view suggests that upside exists in UK rail where it is in the running to up its exposure with a potential win of the Greater Anglia franchise which could add as much as £75 million to the £1.4 billion cap's valuation according to Investec.

With greater exposure to issues like the living wage and BSOG rebates as well as proximity issues for its London depots, Stagecoach looks less attractive than its peers in the bus space. Furthermore, maintaining its current high rail exposure may not be achievable (it currently holds a 23.4% market share).

[sawadee3] 09/10/2015 16:05

Generous day all around :-)

[m4rtinu] 09/10/2015 12:04

VG. And further generous rise today. So far.

[m4rtinu] 09/10/2015 09:22

With yesterday being National Poetry Day, we could have a rhyme going:

Very strange blip
Generous dip

[sawadee3] 08/10/2015 23:02

Very happy with the generous dip. Can never have too many SGC :-)

Cracking recovery today :-)

[m4rtinu] 08/10/2015 16:37

Looks like yesterday has just been erased from history. Very strange blip?

[m4rtinu] 08/10/2015 09:36

Doesn't seem a good idea to employ such old people as drivers. But also sad if the driver had to work at 77 to make ends meet. Although, if the passengers are mostly elderly (with bus passes), an older driver, if fit, might be better suited to dealing with customers.

[getscenic] 08/10/2015 08:20

Yep, using 77 year old drivers caught my attention as well. I thought PSV drivers had to stop at 65 in most major bus co's

[zho] 08/10/2015 08:16

>>Any reason for the drop late today ??>>

Possibly related to