STAGECOACH TO WITHDRAW FROM FRANCHISING

News Front

STAGECOACH HAS confirmed it has no plans to bid for new UK rail franchises with the current risk profile.

The company says it expects its UK franchised rail operations to end in November, when the current Virgin Trains franchise in which it is a partner with Virgin is due to conclude.

Announcing its results for the year to 27 April 2019, the company has restated its disappointment at being disqualified from bidding for the East Midlands, South Eastern and West Coast Partnership franchises for submitting non-compliant bids, principally in respect of pensions risk. The company says it is challenging the Government’s disqualification decisions and seeking to have these overturned, with its objective being to encourage a more sensible risk profile for rail contracts and restore confidence in the procurement process.

However, the company says it has no intention to bid for new franchises on the current risk profile offered by the Department for Transport.

Stagecoach’s revenue from its UK rail operations was down 62.1% in the year, due to the end of the South West Trains and Virgin Trains East Coast franchises, although on a like-for-like basis revenue was up 2.3%. The company grew its rail margins from 1.6% to 4.5%. In its results Stagecoach says growth at East Midlands Trains was affected by the timetable changes in May 2018 to accommodate Thameslink services and the resignalling at Derby last summer. The Virgin Rail Group joint venture which operates the West Coast franchise, in which Stagecoach is a 49% partner, saw a fall in both revenues and profits during the year, with Stagecoach attributing the drop in profit to the business moving to new contractual terms.

The East Midlands franchise is due to transfer to Abellio in August, with the current West Coast franchise running to November, but with an option to extend to March 2020. The award of the new West Coast Partnership franchise has not yet been announced by the Department for Transport.

With its exit from franchising and the completion of the sale of its North American division, Stagecoach says its management team is focused on driving long-term profit growth from its UK bus businesses and has reshaped its management structure and reduced overheads to reflect the scope of the business. While Stagecoach continues to hold the Supertram operating concession in South Yorkshire, it may still have involvement in heavy rail in the UK if a new open access service between Liverpool and London for which it has applied to the Office of Rail and Road in partnership with Virgin and Alstom is approved.

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