Megabus' poor U.S. performance worries its owner Stagecoach

Stagecoach US operations have been weker than expected, but strength in the UK means profits growth is "good"

Bus and rail operator Stagecoach warned that profits from its US business will be lower than expected but strength in its UK operations meant overall profitability remained “good”.

“Recent extreme weather in North America and the ongoing costs of our continued focus on building our business in the increasingly competitive North American inter-city coach market has resulted in us lowering our short-term operating profit expectations for the division,” the company said.

However, revenue in the US, where the group also operates some yellow school bus services, still rose 10.4pc.

“We remain excited by the long-term prospects for our businesses in North America as we continue to develop the business and the megabus.com brand,” Stagecoach said.

Gert Zonneveld, an analyst at Panmure Gordon, said: “Severe weather conditions in North America have impacted divisional profits but this should be largely offset by good trading in the UK and lower than expected finance costs.”

In the 40 weeks to February 3, like-for-like sales at the company’s UK regional bus operations rose 3.8pc, while rail sales were up 6.6pc. Its London bus business saw like-for-like sales up 1.5pc and its Virgin Rail venture, which continues to run the West Coast mainline, following the recent fiasco over awarding the next franchise, reported sales rising 3.3pc in the period.

Stagecoach has run the West Coast line for the past 16 years, in partnership with Sir Richard Branson’s Virgin Trains but was controversially told last August that it had lost out on a new operating contract to FirstGroup.

The decision was overturned by Patrick McLoughlin, the Transport Secretary, in the face of a legal challenge by Virgin Rail.