PERTH-based bus and train operator Stagecoach is looking at once again selling off or restructuring its operations in the US market after revealing that it has recorded an £85.4 million impairment of goodwill charge on its assets there.
Having originally entered the US market via the £1.2 billion acquisition of Coach USA in 1999, Stagecoach sold the bulk of that business to private equity firm Kohlberg & Company four years later after suffering millions of pounds of losses.
It went on to expand the no-frills megabus operation it launched in the US in 2006, before buying back much of the business it sold to Kohlberg – Coach America - in a £101m deal sealed in May 2012.
READ MORE: Stagecoach back in US via £101m deal
However, in its results for the first half of the current financial year, the company said that revenues in the US arm fell by three per cent to $323.3m in the six months to the end of October while operating profits fell from $27.6m to $21.2m, a decline of 23%.
That brought US turnover and profits back to where they were immediately after the Coach America acquisition, with US revenues sitting at $316.4m and profits at $21.7m in the six months to October 2012.
The company has revised its long-term view on the profitability of the division and written down the value of the goodwill attached to its assets as a result. Chief executive Martin Griffiths said Stagecoach is now “reviewing strategic options for the North America division and that includes ongoing discussions regarding a possible sale of all or part of the business”.
READ MORE: Stagecoach declares it is still making money from UK rail
Despite this, the firm said it is focused on growing the scheduled service and contracts part of the business in the US, including megabus, with investments in technology expected to support the growth of these services.
Elsewhere, despite turnover in the company’s UK rail business falling from £899.2m to £335.1m and operating profits from £21.7m to £11.5m as a result of it losing the South West Trains and Virgin Trains East Coast franchises, Mr Griffiths said that division is “well positioned” for future growth.
In addition to running the East Midlands Trains network and holding a 49% shareholding in Virgin Rail Group, which operates the West Coast rail franchise, Stagecoach is currently bidding to take over the South Eastern, East Midlands and West Coast Partnership networks. The results of those tenders are expected in the first half of next year.
“We are well positioned in UK rail, with three live contract bids and more than 20 years’ experience of delivering innovation and investment for customers,” Mr Griffiths said.
READ MORE: Stagecoach exits New York venture after losses
Overall, total revenues at the business fell by 31%, from £1.8bn to £1.2bn, with much of the drop down to the expected loss of the UK rail contracts.
Pre-tax profits were down by a smaller margin, falling by 10% from £96.7m to £87m, although that tipped into a loss of £22.6m when the goodwill charge as well as a £24.2m expense related to the equalisation of benefits between men and women in the firm's defined benefit pension were factored in.
The market reacted positively to the results, with the company’s shares yesterday rising by 15% to 177p.
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