In December 2018, the Stagecoach share price topped 180p on the back of stronger-than-expected first-half figures, and the transport group has this morning announced a 10% fall in adjusted pre-tax profit to £87m for the full year, above the consensus estimate of £81.1m.
At the back end of last year, the company announced it was selling its North American business to a private equity firm for over £200m. Stagecoach took a hit of over £85 million in relation to the writedowns associated with the asset sale, but exiting a non-core business is better for the firm in the long-run.
Stagecoach share price on a bumpy ride
Stagecoach posted a respectable set of full-year figures as profit-before-tax increased by 3.58%, while revenue dropped by 33%. The regional bus division and the London bus operation posted increases in revenue of 2.9% and 0.4% respectively. The end of rail franchises was the reason behind the decline in total revenue, but on a continued basis, rail revenue rose on the year.
The full-year dividend was maintained at 7.7p. The net debt position dropped by nearly 36%, which is a step in the right direction as that should help take the pressure off the company.
The stagecoach share price has been under pressure recently as investors were predicting poor numbers today, but all things considered, the firm is in good shape. Stagecoach has had it issues in relation to rail contracts, but it managed to eke out a small profit in the face of falling revenue, which is impressive. The stock dropped to a 10-year low on the open, but quickly rebounded.
The trading update in April lifted the share price as the group raised its full-year profit outlook, and the company cited an improved performance in the UK rail division for the optimistic outlook.
Stagecoach launches legal action
Stagecoach has had a run-in with the Department of Transport (DoT) as the government body prevented the company from bidding for three rail franchise contracts on the grounds of not meeting pension requirements. The move by the DoT has prompted Stagecoach to take legal action against the government body's decision. It was alleged that the DoT breached its statutory duties when it blocked the group form bidding for the contracts.
The poor performance of Stagecoach is similar to FirstGroup’s situation, as the London-listed firm announced plans to sell-off its iconic Greyhound business in the US. The division has been holding back FirstGroup for some time. It has come under pressure from Coast Capital, an activist investor, who want the organisation to be broken up. The group stated the ‘risk and reward’ balance will be addressed in the UK business, and that sounds like restructuring is in the pipeline.
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