Stagecoach has warned that Labour's plans for re-regulation of English city and regional bus services would impact public spending and lead to higher fares and worse services.
It has also warned that falling fuel prices in the UK and US have made car journeys more competitive with buses.
The Perth-based transport giant led by Sir Brian Souter saw its shares slide by 7 per cent yesterday, giving up most of the gains made on its capture of the east coast rail franchise last month, despite reporting modest rises in half-year revenues and profits. Whilst reassuring that overall performance was largely on track, Stagecoach said it had revised down its profit forecast for both its UK bus and North American divisions for the rest of the year, and admitted that Labour's bus plan "does present some risk to the future financial performance of the group".
Echoing comments made by Sir Brian at August's shareholder meeting in Perth, Martin Griffiths, chief executive, said of the Labour plan: "At a time when we hear more and more about the potential for further cuts in government spending, I have not seen any sensible economic analysis of why you would pursue this agenda."
Mr Griffiths said he was "slightly surprised" at yesterday's market reaction to what were specific issues in two markets, which were anyway being offset by the uplift in revenues from extending the franchise for its Virgin Rail west coast line.
Mr Griffiths said the group was investing more heavily to shore up its strong position in a competitive bus market in Manchester, with a short-term impact on profits, and also in developing its low-cost Megabus network in Europe. He said Stagecoach was having more difficulty recruiting up to strength as the economy improved, and that it had seen a slowing of growth in its bus markets in the past six to eight weeks. "Eight weeks is not a long time, but in the light of our biggest competitor the motor car having a 30per cent reduction in its cost of fuel, we are being a bit cautious about the rest of the year."
In North America, weather conditions during November, particularly around the high revenue Thanksgiving week, had been worse than forecasts had allowed for, and the group was also taking into account "the likely impact of falling fuel prices on demand for our services in an already competitive market", the group said.
Stagecoach said there was no material change to its full-year expectations, with revenue up from £1.47billion to £1.54bn and pre-tax profit up £3m to £108.6m. Adjusted earnings per share were up 3.4 per cent to 15.1p, and the interim dividend rises from 2.9p to 3.2p.
Mr Griffiths said passenger volumes on its South West and East Midlands trains had been very strong, with both franchises due for 'direct award' extension next year, while the West Coast franchise was performing strongly and would run to 2017 at the earliest.
He said the landing of the east coast franchise, which earned £660m of revenue last year, was "a really good example of how we want the model to work". Whichever government came into power, Mr Griffiths said, rail's challenges were "for the next 20 years not 20 months", and the government-run east coast line had been starved of investment.
The Virgin Rail bid for the east coast franchise had now been broken down, Mr Griffiths said, to show that the £3.3billion premium promised to government had not been "back-end loaded" - the flaw in the process which had prompted the cancelling of the west coast franchise award to FirstGroup in 2012 and its recapture by Virgin.
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