Increasing competition sees Stagecoach write down the value of North American assets and consider whether to exit the US market or adapt

 
There’s a new kid in town: Flixbus began operating in the US in May

 

Stagecoach has started discussions with a potential buyer of its North American coach business. The option of a total or partial sale is being considered as part of a strategic review prompted by increasing competition.

In its half-year results released on December 5, Stagecoach reported that operating profit in North America had fallen from £21.2m to £16.1m during the six months to October 27, 2018, on revenue down from £256.3m to £245.7m. It also announced it had written off £85.4m from the value of its US assets after forecasting that future profits would be lower than previously anticipated.

Recognising the increasingly competitive market environment, and the associated financial impact, we consider it appropriate to revise our view on the long term profitability

“Recognising the increasingly competitive market environment, and the associated financial impact, we consider it appropriate to revise our view on the long term profitability,” Stagecoach said.

Stagecoach’s review of its position in the US follows warnings from FirstGroup that its Greyhound national coach business is experiencing similar trading issues. Industry sources have predicted that UK companies will face increasing difficulty competing against airlines and coaching rivals with deeper pockets. They include Flixbus, which acquired Stagecoach’s European Megabus business in 2016 and began operating in the US in May.

In the UK, Stagecoach reported that profits fell in all divisions apart from regional bus where network revisions, fare rises and rail replacement work contributed to strong financial performance. Rail profits were hit by the loss of the SWT franchise while strong competition for tenders hit London bus profits. Across the group, operating profit fell 10% to £103.4m. After exceptional items, principally the write down of US assets, Stagecoach reported an operating loss of £6.2m.

 
This article appears in the latest issue of Passenger Transport.

DON’T MISS OUT – GET YOUR COPY! – click here to subscribe!