Stagecoach Group was founded by ‘Brian Souter’ and his sister ‘Ann Gloag’ Aim to provide public transport across the UK, USA and Canada. The group splits its operations into smaller divisions consisting of UK buses, UK rails and North America. Their main clients are general public, tourists, elderly and the disabled.
During the London Olympics 2012 the key clients branched to tourists, athletes and media. London Olympics 2012 led to an increase in the demand of public transport thus the company’s revenue increased. The group may face some problems due to the fact that there has been a rise in overtrading.The company has taken many measures to reduce energy costs and their carbon footprint significantly. The group currently has the highest share price, which shows that the company has a strong market position and is developing steadily. Companies profit has increased £157.
9m in 2011 to £188.3m in 2012. One of their main targets is to reduce carbon use throughout all divisions by the end of the financial year 2013-14. The main shareholders of Stagecoach Group are Highland Global Transports and two co-founders – Brian Souter and Ann Gloag.
The company has many strengths and opportunities to build upon. In addition a few weaknesses and threats.Stagecoach, similar to other companies, has been working on reducing ethical issues that it faces. By reducing the car usage and providing greener and smarter public transport, they have contributed to the environmental greenness. The group has recognition for the health and safety which are strictly monitor by the regulations.The firm also does a lot of charity concentrating on health, education and local community projects.
Overall, based on the research, Stagecoach Group is a good investment decision With a stable turnover, increasing each year, return to shareholders was strong Even through the recession people need to travel, the company may have taken a hit with share prices but came through Recommended to invest for the long term based on research and forecast Short term investment is unwise as share price does fluctuate and is reducing The upcoming weather climate will affect share prices and revenue in short run Forecast show a general increasing trend in comparison to competitors and this is seen to continue with the company developing and growing making new acquisitions and recognised for achievements and awards.Background Stagecoach Group is an international transport company that has become one of the largest transportation companies across the UK. The company is public limited that is incorporated and registered in Scotland, placing its registered office in Perth. It has been operating for over 30 years. Stagecoach operates 10,600 buses and 2,200 trains and serves about 3,000,000 customers per day. Stagecoach’s main business is operating public transport such as coaches, buses, trams and trains.
The initial aim was to connect Scotland and London through bus/train transportation. The group has developed and expanded globally and is currently active in the provision of public transport services in the UK and North America.Geographical OperationsUK Buses: Stagecoach connects hundreds of towns and cities within the UK from Scotland to South West England including major city bus services operating in London, Manchester, Newcastle, Oxford and many more. The network provides 7900 buses and coaches across 19 regional areas. Stagecoach also runs the inter-city coach service, megabus.com which covers around 40 locations; and the Europe’s express coach service.
The services in the UK are operated on a commercial basis in a largely deregulated market, which carries almost 1 billion passengers a year . UK RAILS: Stagecoach rail network is one of the largest rail operators in the UK transporting 230 million passengers annually. The service splits into separate franchises which have its own managing directors: South western: incorporated with South West trains and Island Line networks it runs roughly 1700 trains daily in South West of London.East Midlands: runs between London St Pancras station and key destinations throughout the East Midlands. North america: Stagecoach provides majority of public transport in North America including commuter and tour services, charter, sightseeing and school bus operations. Stagecoach runs around 2,600 vehicles in the United States mainly in New York, New Jersey, Pennsylvania, West Virginia, Ohio, northern Indiana, northern Illinois and southern Wisconsin.
In Canada, the group operates two other companies and provides about 400 vehicles under the coach Canada Brand. The inter-coach service megabus.com connects around 80 cities in the USA and Canada . Key Client GroupsStagecoach’s main client group is general public as they use their service for everyday transport.
In addition, Stagecoach supported the London 2012 Olympic Games by providing 160 additional bus routes as well as 1300 extra vehicles operating hourly on the Olympic Routes Network to deal with extra demand. Therefore, during the Games Stagecoach was targeting to transport tourists, athletes and media. In addition, Stagecoach operates school buses, student trips and additional services thus students is a main client group which is also shown through there discounted travel for all students. Finally they also focus on the elderly and the disabled by providing affordable travel and investing in new buses to meet new disability legislation.CompetitorsIn the UK, Stagecoach has a market share of around 20% of the bus market.
They run around a fifth of the UK passenger rail market. The graphs below show the market share of operating bus and rail in UK. It can be seen that FirstGroup has higher market shares both in UK rail and bus divisions, while companies such as Go-Ahead have very close position to Stagecoach. It shows how intense the competition in this sector is.
Competing with such strong companies, which have larger financial resources and larger growth, may be troublesome for Stagecoach.Main Competitors: UK RAIL UK BUS First Group: The leading public transport company in the UK and North America. Revenue, of over £ 6.5 billion per annum, is much higher compared to Stagecoach. Their service has been used by 2.
5 billion passengers annually. The UK rail division became the group’s strong point because of its sustainable growth in profit and revenue. However, due to low employee productivity, the firm is facing a significant decline in revenue compared to UK bus division .Go-Ahead Group:Provide buses and trains across the UK which focuses on South East England.
Their bus service is leading in London, running for TFL. It becomes the group’s strength due to a steady growth in the revenue annually (it is still lower than Stagecoach’s revenue). The UK Rail division nevertheless marked as their weakness because of an increase in cost of production, which leads to a decrease in profit every year .Arriva Group:Arriva is part of Deutsche Bahn, one of the world’s leading passenger and logistics service providers.
They provide buses, coaches, trains, waterbuses and airport transportation services for 1.5 million passengers a year in mainland Europe and the UK. Their revenue and profit are quite competitive with Stagecoach’s .National Express Group:The group provides buses, coaches and trains to 700 million consumers a year across the UK, North America and Spain. In comparison with Stagecoach, their revenue is lower and has been decreasing recently .Financial DataTheir income statement shows the comparison of figures between 2011 and 2012.
Looking at the revenue, there is an increase from £2389.8m in 2011 to £2590.7m in 2012 for results of the year. This is mainly due to the fact that more and more people are choosing to use buses, trains and coach as means of transport rather than their own car due to increase in fuel price.
Also, as London was host to the 2012 Olympics, Stagecoach played a huge role in providing transport for not only the public but athletes and the media too. As a result of this, operating profits were higher than the previous year.The significant demand for transport in 2012 reflects in the increase in profit from £157.9m to £188.
3m. Overall Stagecoach are growing and expanding as they acquired new vehicle and spread across the UK as well as North America. Stagecoach Group PLC has successfully managed to increase revenues year after year as well as reduce general, production and administrative costs highlighting an increase in growth and also benefitting from Economies of Scale. Furthermore, the increase of inflation and the recession as a whole have led to increases in operating costs from £2199.2m in 2011 up to £2352.2m in 2012; which in turn has resulted in lower revenue .
Even with public sector spending on transport being reduced and the recent weakness in the economy; commuter and travellers are still opting to take public transport rather than travelling by car. (Appendix A)In the current year, Stagecoach Group plc has increased its liabilities from £1580.2m in 2011 to £1727.3m in 2012, leading to a decrease in net assets to -£57.
3m in 2012 which means more money is leaving the business than is coming in. Additionally, looking at the current assets; receivables shows no real change which shows that collection of debt owed to Stagecoach Group is not being collected effectively. Furthermore, cash has dropped from 2011 to 2012, which is adding to problems as the company’s debt is increasing as well as the company’s debtors still outstanding. This is why the equity for 2012 is negative. From this information it is clear that Stagecoach may be facing a few risks which may have accumulated from overspending on acquisitions or fuel price and fare prices. The balance sheet clearly shows that there are not enough resources to cover payment of debt in the short term.
However the fiscal year for stagecoach ends in April and the London 2012 Olympics took place in July and this was significant for Stagecoach Group as they played a lead role in transportation for many entering London.The Olympics increased traffic in London encouraging many people to use public transport instead as well as other influencing factors such as parking, fuel price, fare price and congestion. (Appendix B) Comparing 2011 and 2012, the cash flow generally shows more outflows in 2012. Cash reserve at the end of the year fell by £117.
3m. On the other hand, finance for investing activities decreased from 2011 to 2012 to £75.6m and there be a vast increase for financing activities from £49.7m to £299.
4m paid in 2012. From operating activities, the company earned £257.5m for a 9.94% cash flow margin.
(Appendix C)Outline of the company’s finances over the last 5 years; as equity is fluctuating the company shows a slight lack in stability when it comes to shareholder returns. This is further discouraged with the increase in current liability and the decrease in current assets; so obligation cannot be covered and the vast increase in net debt from 2011 to 2012. However, Stagecoach looks promising with increasing revenue each year showing that they are improving and growing each year and customers are choosing to travel with Stagecoach transport. Also, profit at the end of the year did take a dip from 2008 but is slowing increasing again as we recover from the recession. (Appendix D)Share Price PerformanceThe main shareholders of Stagecoach Group are Highland Global Transports (25.93%) and two of the company’s co-founders – Brian Souter - (up to 30.
25%) and Ann Gloag (10.85%) . The recent share price for Stagecoach Group plc (blue line) is 275.40GBp. The chart above compares Stagecoach’s share price performance with 3 of its competitors; FirstGroup (grey line), Go Ahead Group (green line) and National Express Group (orange line).
Stagecoach generally has had the highest share prices over the last 5 years. However Stagecoach had a sudden decline near 2009 as an aftershock to the recession, other than that the company has had a steady incline with minor rise and falls. From this information Stagecoach may not be the best investment choice for short term reasons but are defiantly a strong and developing company which is stable.Future Targets and ChallengesStagecoach Group is well known for its environmentally friendly approaches with transport, sustainability and awareness of their group’s carbon footprint. The company has taken many measures since 2007/2008 to reduce energy costs and their carbon footprint significantly applicable to each of their divisions.
One of their main targets is to reduce carbon use throughout all divisions by the end of the financial year 2013-14. Alongside this they also wish to reduce CO2e . In the United States, the company wants to reduce CO2e emissions by 2% from annual fleet transport and by 12.4% from buildings emission. Additionally, Stagecoach Groups have a 5 year carbon reduction plan which incorporates use of technology to improve their carbon footprint.
For example, a monitoring system on 7000 UK bus fleets which uses a computer and LED system. This system will pick up on driving omissions such as over-revving; harsh breaking/accelerating; speeding and more. This will help to improve drivers’ performance overall benefitting the company by reducing their carbon footprint. Another aspect of their plan is to introduce ‘Envirox’ fuel to the Canadian buses (already in use with UK Stagecoach buses) to improve on fuel efficiency.
The company say that their 5 year plan is aimed to reduce group annual CO2e emissions by 40,000 tonnes and; save a total of 15,000 tonnes of CO2e. The company invests money to achieve these targets, which results in a cleaner environment and a good reputation for the company with its shareholders and customers, as well as with its employees and workers .Apart from the environmental targets, Stagecoach Group also set targets with their shareholders in mind. For example, one target of STG is to acquire complementary business to the Group’s existing operation. Similarly, maintaining and growing the rail business by seeking out new opportunities and franchises to secure where the return/risk trade-off is suitable .
The Chief Executive mentions that, “We are also excited about the next phase of our growth plan for our budget coach brand, megabus.com, in the UK and North America, as well as testing the market in mainland Europe.”
