Further to its announcement on 23 March, Stagecoach Group plc is providing an update on the impact of COVID-19, the actions it has taken and the sector-specific support from Government.

Our priority remains to protect the health and wellbeing of our people and our customers, while taking action so that the business emerges from this period in as strong a position as possible and well placed for the significant long-term opportunities that we still see for public transport.   We extend our thanks to our employees, other public transport workers and the country’s healthcare workers for the huge efforts they are all making as part of the national effort to tackle the current situation.

We are helping with the national effort to deal with the COVID-19 crisis where we can, in addition to following government and public health advice across our operations.  Examples include providing an evening demand responsive transport service for NHS staff between their homes and NHS Raigmore hospital in Inverness; providing depot space to the London Ambulance service for commissioning new and recommissioning restored ambulances; operating NHS shuttle services in Mansfield, Hull and Grimsby; providing additional bus services to key distribution and food manufacturing sites.

Since our statement of 23 March:

• The respective governments have confirmed measures in each of England, Scotland and Wales to support the continuity of bus services.   While it remains difficult to reliably estimate and forecast short-term income statement effects, the measures announced reduce the risk of substantial ongoing operating losses.
• Commercial sales at our local regional bus operating companies are now at around 15% of “normal” levels.
• Vehicle mileage at those companies is now at around 50% of “normal” levels with plans to reduce that closer to 40% over the next week.
• Our regional bus business has already furloughed a significant proportion of its staff as part of plans to furlough around 55% of its bus drivers and engineering staff.  Other employees have also been furloughed. 
• Fuel hedging has been reduced to take account of the reduction in regional bus mileage.
• We are temporarily winding down our megabus.com inter-city coach services in England and Wales, and will suspend all such services by 5 April.
• We have around £506m of available cash and undrawn, committed bank facilities.  
• We have reduced our previously planned 2020/21 capital expenditure (c.£105m of cash capital expenditure and c.£38m of new leases).  For the time being, our planned 2020/21 capital expenditure is limited to c.£40m of cash capital expenditure and c.£20m of new leases.

Government support

Our transport services play a critical role in getting key workers, such as healthcare and other staff, to work during this crisis as well as ensuring people can access medical care, food and other essentials.  We are pleased that the UK, Scottish and Welsh governments have recognised this important contribution to the national effort and have announced specific support for the country’s bus networks.

London bus

Transport for London has indicated that contracted revenue amounts will continue to be paid to London bus operators with any variable cost savings achieved by operators as a result of reduced service levels being returned to Transport for London.   

Rest of England bus

The Department for Transport has confirmed bespoke arrangements for bus operators in England.   Subject to State Aid clearance, up to £14m per week of additional funding will be made available to the sector to support the continuity of bus services during the COVID-19 period.  The additional funding will be for a twelve-week period effective from mid-March 2020.  We look forward to seeing the details in due course of how this additional funding will be applied.

The Department for Transport has also confirmed the ongoing payment of Bus Services Operators Grant (“BSOG”) in England at pre COVID-19 levels.  Other income from government bodies may also continue, such as concessionary revenue, tender revenue and school revenue.  

The arrangement with the Department for Transport does not cover bus operations in other parts of the UK and nor does it cover inter-city coach operations such as those we operate under the megabus.com brand.  We are temporarily winding down our megabus.com services in England and Wales, and will suspend all such services by 5 April. 

Scotland bus

The Scottish Government has confirmed that it will maintain payments of concessionary revenue and BSOG to bus and coach operators at the levels forecasted prior to the impact of COVID-19.

The Convention of Scottish Local Authorities (“COSLA”) has issued guidance to local authorities to ensure they continue to pay for school transport.  COSLA guidance has also been issued regarding the continuation of tender revenue payments in respect of supported bus services.

Wales bus

The Welsh Government has confirmed that it will:
• Maintain payments of Bus Services Support Grant (“BSSG”), concessionary revenue and “MyTravelPass” revenue to bus operators at 100% of the prior year amounts.
• Maintain payments of tender and school revenue to bus operators of at least 75% of the amounts forecasted prior to the impact of COVID-19.

Regional bus: financial performance and actions taken

Daily commercial sales at our local regional bus operating companies are now at around 15% of “normal” levels.  We are reducing weekly vehicle mileage by around 60% of normal levels and are, regrettably, furloughing around 55% of our regional bus drivers and engineering staff.  The furloughed staff will be paid the lower of 80% of their reference pay and £2,500 per month.  The furloughing of staff is in addition to the actions we set out in our statement of 23 March, which include pay sacrifices for all Board directors and other executives.  We continue to review opportunities for further cost savings.

Given the fast moving and extreme situation, it remains difficult to reliably estimate and forecast the effects of the COVID-19 situation on our regional bus income statement.  Forecasting is affected by the need for further information on the detail of the various arrangements with Government, the challenges of forecasting passenger demand and staff sickness levels over the coming weeks, and the difficulty of definitively determining our ongoing cost base in such an extreme situation.   

We are compiling our regional bus financial results for the four weeks ended 28 March 2020.  During that four-week period, there were extreme and continual changes in passenger demand and significant cuts in mileage across our UK operations.  The now announced support for English bus operators also has a bearing at this stage on the results for that period.  In light of those factors, we do not yet have a reliable estimate of the result for the period.

Taking account of the Government support confirmed, we do not expect the regional bus business to earn a profit for the time being and for the weeks ahead. 

Subject to our comments on the challenges of forecasting at this time, we currently expect regional bus to operate at break-even or at a modest operating loss for the time being.

South Yorkshire Supertram: financial performance and actions taken

Sales at South Yorkshire Supertram are at around 10% of “normal” levels and vehicle mileage is at around 30% of “normal” levels.   Employees have been furloughed as a result of the reduced operation and we are in discussions with the relevant authorities regarding the continuing operation of the tram system.

Fuel hedging

Prior to the impact of COVID-19, we had hedged approximately 96% of our anticipated regional bus fuel consumption for the remainder of our year to 2 May 2020, and our year to 1 May 2021.    As a result of the reduction in vehicle mileage, we have reduced our forecasts of fuel consumption.  We have entered into financial derivatives for the months of April to September 2020 inclusive to reduce the volume of fuel hedged for those months by approximately 63%.

Given recent falls, fuel prices are now significantly below the original hedge prices for 2019/20 and 2020/21.  For the 63% of the volume for which new derivatives have been put in place, we have effectively locked in a cost of approximately £6m for April to September.  

Liquidity

We have over £500m of availability liquidity and have £94m of net rail liabilities outstanding. Our consolidated liquidity position as at 2 April 2020 was as follows:

Cash balances	200
Undrawn, committed headroom under bank facilities expiring March 2025	166
Undrawn, committed headroom under bank facilities expiring October 2021	140
Available liquidity	506
Less: net rail liabilities	(94)
Adjusted liquidity	412
Less: facilities expiring October 2021	(140)
Adjusted liquidity, excluding facilities expiring October 2021	272

Capital expenditure

In our statement of 23 March, we outlined a number of actions we had taken in response to the impact of the COVID-19 situation on the business.   Those management actions include reducing our capital expenditure.  Prior to COVID-19 having an effect on the business, our capital expenditure plans for 2020/21 envisaged around £105m of cash capital expenditure and around £38m of new leases.  For the time being, we have scaled down the planned expenditure to around £40m of cash capital expenditure and around £20m of new leases.  The scaled down plans reflect vehicles ordered which are either already built or largely built, vehicles required for new London bus contracts secured, electrical infrastructure work required for new London bus contracts secured, completion of some ongoing land and buildings work, and a reduced spend on technology and change projects.

Dividends

Further to our statement of 23 March, no further dividends will be proposed in respect of the year ending 2 May 2020.  

The COVID-19 situation and its business impact are dynamic.  We will continue to closely monitor the business impact and review the actions taken to respond.
Martin Griffiths, Stagecoach Chief Executive, said: “I am proud of the tremendous efforts and sacrifices of our people and the country’s healthcare workers during such a challenging and uncertain time.  We are continuing to work hard to ensure Stagecoach comes through this difficult period well placed for the significant long-term opportunities that we still see for public transport.

“We would like to thank the respective governments and our local authority partners for their support through this very challenging period. It is welcome recognition of the importance of maintaining bus services at this time, and it will enable key workers to continue to travel to and from work, as well as ensuring communities can still access food, medical care and other essential services.”