Sir Brian Souter remains upbeat about Stagecoach’s prospects despite a drop in the transport group’s profits following a £6.9m loss in its railway operations.
The firm posted pre-tax profits of £88.7m in the six months to October 31, down by £20m on the same period last year.
However, group performance was slightly ahead of market expectations and overall revenues increased to £1.29bn, significantly ahead of the 2010 figure of £1.13bn.
Stagecoach said its interim dividend would increase to 2.4p up from 2.2p last year.
John Lawson of analysts Investec Securities said Stagecoach is still returning good margins and is ”arguably the best operator in the sector”.
He said: ”Whilst profits fell as anticipated due to expected losses at East Midland Trains this should not detract from strong underlying trends elsewhere.
”Like-or-like revenue growth remained strong and the North America business, Megabus, has been given a big vote of confidence with a large new bus order. Investors should like this performance.”
The results show strong growth in the UK regional bus operation with operating profit rising to £80m for the first half of 2011 a rise of 9.1% on 2010 while there was also expansion in the North American bus division.
Stagecoach said its plan to turn around the previously loss-making London bus operation which it acquired in October 2010 was on track and an operating profit of £5.5m was achieved in the first half of 2011 on turnover of £117m.
The company’s UK rail division provided the major blip on the balance sheet after the East Midlands Trains recorded a £6.9m loss compared with a £22.9m profit during the same six months last year a £30m decrease over the 12-month period.
Sir Brian said he expected the rail operator to return to profitablity in the second half of the year after the Department of Transport started to make revenue support payments from November 1.
”We knew this was going to happen,” he said. ”We have £30m in losses in East Midland Trains in the first half but in the second half of the year it reverses and it becomes profitable.
”We are still ahead of the projected numbers at this point, which is what the City looks at. We had already told them about this problem and in the second half we will recover these losses.”
The most signficant growth in the Stagecoach group of companies has been in the American bus portfolio.
From zero sales four years ago, revenues have now reached 120m dollars and the various American divisions employ more than 9,000 people.