Stagecoach warns of rail slowdown

By Philip Waller

LONDON (Reuters) - Bus and rail operator Stagecoach Group warned of a potential slowdown in its UK train business due to the impact on London commuters of the economic downturn, sending its shares down over 20 percent.

Announcing first-half results Wednesday, Stagecoach described the outlook for its rail operations in the next year to 18 months as challenging and said it was expecting a sharp fall in jobs in London's financial sector and a decline in the British economy.

Shares in Stagecoach, whose operations include South West Trains, a predominantly commuter service running from London to southwest England, were down 35.6 pence or 20.8 percent at 136.9p by 11 a.m.

They touched a more than 2-year low of 133.9p.

Finance Director Martin Griffiths said the rail business was still experiencing good growth, although it had slowed in the last six to 12 months.

"We don't know how much further that will deteriorate, but there's a lot of uncertainty out there in the economy and we suspect there will be further job losses in the City," he told journalists in a conference call.

The company also announced job cuts and said it was still planning to impose inflation-busting fare rises in January.

It said it believed its UK and U.S. bus operations would be relatively immune to the impact of the downturn, although the rail unit's short to medium-term outlook was tough and staff reductions were needed to stay competitive.