Trading StatementSource: RNS
26 March 2021
Stagecoach Group plc is today providing a trading update in respect of its financial year ending 1 May 2021. Our outlook for the year ending 1 May 2021 is unchanged from when we announced our half-year results in December 2020.
While it is difficult to accurately forecast the precise timing and extent of how our profitability will recover as we emerge from the COVID-19 situation, we continue to see good long-term prospects for the business. The UK Government's recently announced National Bus Strategy for England shows a commitment to increasing bus patronage with significant funding to support that.
Martin Griffiths, Stagecoach Chief Executive, said: "We continue to make good progress in delivering our immediate priorities at this time. Our focus is on protecting and promoting the health and well-being of our colleagues and customers; working in partnership with government and local authorities to deliver the critical public transport the country and our communities need; and protecting the long-term sustainability of our business.
"Our continuing thoughts are with all of those affected by COVID-19, particularly those we have lost in our own Stagecoach family. We remain grateful to the incredible efforts of key workers and our people in keeping the country moving. More than ever our services are critical to our regional economies, young people returning to education, and giving communities access to the vaccination programme.
"We remain confident that there is a strong and positive future for public transport as we emerge from the COVID-19 pandemic. Government commitments in the recently published National Bus Strategy provide a huge opportunity to fundamentally transform mobility in our communities, moving away from towns and cities built around cars to more vibrant and prosperous places well-connected by easy-to-use sustainable public transport and active travel.
"We have strong fundamentals, despite the immediate short-term uncertainties, and good ESG credentials. Looking ahead, our bus, coach and tram services have a critical role in tackling climate change, delivering economic recovery, and ensuring healthier and more connected communities."
Regional bus operations
We see a positive long-term outlook for our regional bus business, with supportive government policy, including the new National Bus Strategy for England. Our regional bus services have a critical role in tackling climate change, delivering economic recovery, and ensuring healthier and more connected communities.
Demand for our regional bus services has continued to follow the changing pattern of COVID-19 restrictions across the UK. Commercial sales are currently at around 46% of the 2019 level and we are currently operating vehicle mileage in excess of 86% of 2019 levels. We saw commercial sales recover to around 60% of 2019 levels in autumn 2020, and we are confident that as COVID-19 restrictions are eased, our sales will grow.
As previously reported, the respective governments in England, Scotland and Wales, and our local authority partners, have put in place measures to protect the continuity of local bus services. We expect these measures to be in place for longer than previously anticipated, due to the extended national restrictions in response to COVID-19 and the latest "roadmaps" for the expected easing of COVID-19 restrictions.
The Department for Transport ("DfT") has indicated that COVID-19 Bus Services Support Grant Restart ("CBSSG") for local bus services in England, excluding London, will continue to cover the period until when social distancing is no longer required on buses. Based on the current roadmap for the easing of COVID-19 restrictions in England, we would expect CBSSG or a similar arrangement to now continue until mid to late summer 2021. The DfT has confirmed that it remains the case that it will give eight weeks' notice of CBSSG coming to an end.
We, and other bus operators, continue to work closely with the DfT to establish a framework to ensure bus networks successfully bridge from the current CBSSG arrangements to long-term commercial sustainability. We welcome the recent publication of a National Bus Strategy for England, and in particular the Government's commitment to grow bus patronage and maximise the potential of buses.
The COVID-19 Support Grant Restart ("CSG") payments for continuing bus services in Scotland have now been extended to cover the period to 27 June 2021. Transport Scotland has committed to continue to support bus services in Scotland while social distancing remains in force. We continue to work with other operators and Transport Scotland on the development of a mechanism to see bus services successfully transition from the current framework to that of long-term commercial sustainability.
Our bus business in Wales represents around 3% to 4% of our overall regional bus business. In Wales, a new voluntary partnership arrangement, Bus Emergency Scheme 2 ("BES 2"), is expected to run from April 2021 until July 2022. Under BES 2, there is scope for bus operators to earn a modest profit under a form of "cost plus" arrangement. A bus operator can opt out of the BES 2 scheme if it feels ready to return to the more usual form of commercial operation.
While these various arrangements are in place, we expect to continue to generate positive EBITDA and operating profit. We will then look to re-build profitability closer to pre-COVID levels as the COVID-19 restrictions are eased.
London bus operations
We are pleased with the continued strong operational and financial performance of our London business. We are operating at normal levels with full service restored, and continue to work collaboratively with Transport for London in response to the COVID-19 situation. Our expectation is that operating profit in 2020/21 will be slightly ahead of the prior year, reflecting the good performance from our new contracts in the year.
We continue to make positive progress in unwinding the affairs of our former train operating companies.
Similar to our local regional bus businesses, our ongoing Sheffield Supertram business is receiving government payments in the form of Light Rail Revenue Restart Grant ("LRRRG") income for continuing the essential tram services it provides. The LRRRG payments are committed through until 21 June 2021, and UKTram and the Urban Transport Group continue to engage with the Department for Transport around arrangements beyond that date.
The Group maintains a solid financial position with investment grade credit ratings and appropriate headroom under its debt facilities. Since our interim results announcement on 9 December 2020, we have seen further positive cash flow (excluding movements in borrowings), and continue to have available liquidity of over £850m. The £300m that we borrowed in 2020 under the Covid Corporate Financing Facility ("CCFF") was repaid during February and March 2021. We have re-borrowed £300m under the CCFF, which is due to be repaid in February and March 2022.
We are pleased that the trustees have now concluded the 2020 triennial valuation of our main defined benefit pension scheme, having assessed the impact of recent events. The planned increase in employer contributions to the scheme is within the range we had expected. The trustees estimate the funding deficit at 30 April 2020 across the two sections of the main scheme to be £94.7m, and now expect employer contributions to the scheme to rise by £6.3m per annum, with £4.5m of this increase commencing from the start of May 2021 and the balance from May 2022.
Zero emission fleet investment
We have set an aspiration for our bus fleet to be 100% zero-emission by 2035. Earlier this month, we successfully applied for around £9m of funding available under the Scottish Ultra-Low Emission Bus Scheme ("SULEBS"), which will support the purchase of around 46 new zero-emission buses and related infrastructure investment at three depots. Our net investment will be around £12m and underlines our confidence in the positive long-term outlook for buses in the UK.
The next planned update is the announcement of the Group's preliminary results for the year ended 1 May 2021 on Wednesday 30 June 2021.
For further information, please contact:
Stagecoach Group plc www.stagecoachgroup.com
Investors and analysts
Ross Paterson, Finance Director 07714 667 897
Bruce Dingwall, Group Financial Controller 07917 555 293
Steven Stewart, Director of Corporate Communications 07764 774 680
This announcement contains certain forward-looking statements with respect to the financial performance, financial position and businesses of Stagecoach Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Except as required by law, Stagecoach Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.