Stagecoach could bid again for failed East Coast franchise

Stagecoach could bid again to run the East Coast mainline rail franchise controversially taken back into state hands this week after its boss on Thursday refused to rule out the move.

The newly nationalised London North Eastern Railway began services again on Monday after Stagecoach and partner Virgin Trains were stripped of the loss-making deal for breaching financial covenants three years into what was due to be an eight-year franchise.

But the boss of Stagecoach, Martin Griffiths, said he was “incredibly proud” of FTSE 250-listed Stagecoach’s work on the East Coast, which the firm was forced to hand back in May.

When asked twice if he would re-bid for the franchise connecting King’s Cross to Edinburgh when it returned to the private sector, Griffiths would not rule it out, responding: “The government still needs to do its thinking about what will emerge on the East Coast. The business we handed over is in terrific shape. That’s not a decision for today.”

His comments came as Stagecoach shares sank to a 12-year low after the company, which moves three million people each day, took an £85.6 million hit from the failure of the East Coast contract, and slashed its dividend.

Shareholders saw their full-year payout cut to 7.7p per share, down from 11.9p. Adjusted pre-tax profits fell 4% to £144.8 million for the year to May. The shares rapidly went into reverse, down more than 3%, or 4.6p, to 129.5p.

Despite claims from critics including former transport secretary Andrew Adonis that Stagecoach was rewarded for “leaving taxpayers in the lurch” over the East Coast route, it flagged up a Government agreement to “reduce revenue risk on new franchise opportunities”.

Griffiths, who is overseeing Stagecoach bids for the new South Eastern, West Coast Partnership and East Midlands franchises, claimed that was “sensible”: “there needs to be recognition that the risks should sit with those best able to manage and to take them.”

Finance boss Ross Paterson added: “We’re not saying we have no revenue risk, we’re saying we have less. That’s in the interest of everyone to ensure we have financially stable and deliverable franchises.”

Stagecoach still runs the East Midlands rail network and the West Coast franchise in a joint venture with Virgin. The end of its South West Trains franchise last August contributed to its rail division’s annual revenues sinking to £1.5 billion from £2.2 billion.