Stagecoach bullish on year ahead despite profit dip

LONDON (Reuters) - Bus and rail operator Stagecoach expects to benefit from cash-strapped commuters and business travellers turning to public transport, it said when reporting a 1.5 percent fall in full-year profits.

The Scotland-based company, which increased the full-year dividend 10 percent to 7.8 pence, said that it had started the new year well and expected to deliver further growth in 2012/13.

"High fuel prices and motoring costs have resulted in commuters, business customers and leisure travellers switching from the car and airlines to our better-value bus, coach and rail services," chairman George Mathewson said.

Shares in the company, which have risen 6.3 percent in the past month, were up 5 percent at 262.35 pence by 8.30 a.m, valuing the group at about 1.5 billion pounds.

Charles Stanley analyst Peter Ashworth said: "Market conditions remain generally weak in terms of freight rates, but the group believes it is in a strong position to capitalise on the upturn in the market when it occurs. The longer-term growth prospects for the group remain strong."

Stagecoach reported that pretax profit for the year to April 30 fell 1.5 percent to 202.5 million pounds on revenue 8.4 percent higher at 2.59 billion pounds.

The fall was principally because of first-half losses at Stagecoach's East Midlands rail franchise, where revenue was below the level forecast when the contract was awarded, the company said.

Since November 2011, East Midlands Trains has received revenue support payments from the Department for Transport.

Stagecoach, which transports 2.5 million passengers a day, added that its British bus and North American coaches unit performed well during the year.

The company, shortlisted for a number of new franchises, said that East Midlands Trains had returned to profit by year-end and South West Trains continued to perform well.

Stagecoach agreed last month to buy some of struggling Coach America's U.S. businesses and said that the deal is likely to be completed in the next three weeks.

Rival transport group Go-Ahead said last week that, despite performing well in recent months, tough economic conditions are likely to hit profits at its rail business over the next year.

(Editing by Kate Holton and David Goodman)