Stagecoach chiefs take Covid pay cuts

Public Transport

Stagecoach directors have taken pay cuts and forgone their 2019/20 bonus because of the impact of the Covid-19 pandemic on the business.

Board members reduced their basic pay by 50 per cent throughout April, May and June 2020, and by 20 per cent from July, a reduction that continues for the time being. 

Executive directors – chief executive Martin Griffiths and finance director?Ross Paterson –  agreed to forgo their bonus for 2019/20, which could have been worth up to 130 per cent of annual salary. Griffiths and Paterson received bonus payments of £848,000 and £565,000 respectively in 2018/19. 

Griffiths’ overall remuneration in 2019/20 was £949,000 – down from £1.80m in 2018/19. Paterson received £644,000, down from £1.22m. 

The remuneration details appear in the group’s annual report for the year ended 2 May.

Group revenue was £1.417bn, down from £1.878bn in 2018/19. The reduction reflects the early impact of Covid-19 and Stagecoach’s exit from the UK rail franchise market during the year. It relinquished the East Midlands Trains franchise last August and its joint venture with Virgin for the West Coast franchise ended in December. 

Stagecoach’s business interests are now focused almost entirely on the UK bus market. In addition it holds the contract to operate the South Yorkshire Supertram until 2024, and has a joint venture with ComfortDelGro for the Scottish Citylink express coach network and Megabus-branded services to, from and within Scotland (ComfortDelGro 65%/Stagecoach 35%).  

Stagecoach has had no overseas business since the North American operations were sold in December 2018. 

UK bus regional operations (i.e. those outside London) generated revenue of £1.012bn in 2019/20, down from £1.043bn in 2018/19. For the pre-Covid-19 period, about 24 per cent of revenue was concessionary fares reimbursement (£256.6m); ten per cent was council tendered service contracts (£104.4m); and six?per cent was Bus Service Operator Grant (£68.7m).

The UK regional bus division recorded a margin of 9.0 per cent and an operating profit of £90.6m. 

London bus operation revenue was £246m, down from £253m. Operations in the capital recorded a margin of 6.5 per cent and an operating profit of £16.1m. 

UK rail revenues for the year were £161m, down from £590m. 

Discussing Covid-19, the company says: “We expect a lasting effect of the Covid-19 pandemic on travel patterns with an acceleration in trends of increased working from home, shopping from home, telemedicine and home education.

“We anticipate that it will be some time before demand for our public transport services returns to pre-Covid levels and we are planning for a number of scenarios. We are continuing to review our cost base, to reduce overheads and plan for adjustments to direct and semi-direct costs.”

Stagecoach’s base case scenario for Covid-19 modelling assumes that regional bus commercial revenue does not return to pre-Covid levels until financial year 2022/23.

The company has more than £800m of undrawn, committed bank facilities, and available cash/deposits. “The board has a reasonable expectation that the company and the group will each continue to operate as a going concern for at least 12 months from the date of approval of the financial statements... [and] will be able to continue in operation and meet their liabilities to 29 April 2023.”

Group adjusted profit before tax fell from £132.9m to £90.9m. 

The statutory results show profit before tax of £40.6m, down from £101.2m.

Adjusted earnings per share were 13.5p, down from 22.1p in 2018/19. 

Stagecoach paid an interim?dividend of 3.8p per share at the beginning of March but, because of Covid, made no further payment during 2019/20. The dividend in 2018/19 was 7.7p.

Stagecoach is seeking business opportunities abroad, and has recently bid for rail and bus contracts in Sweden and bus contracts in Dubai. “The markets we are focusing on are those where we see relatively low political/regulatory risk, contract opportunities that offer an appropriate risk-reward balance, a positive economic outlook and positive demographic factors.”