Virgin Rail on track for new West Coast franchise

Although first half profit had 'fallen slightly' year-on-year, its West Coast rail franchise had continued to perform well, with like-for-like revenue growth of 3% for the six months to October 28, and a good profit margin.

Revenue rose £8m to £288.5m while pre-tax profits fell to £12.1m from £13.9m a year ago.

Virgin Trains had broken new records for passengers travelling between Liverpool and London and sales of digital tickets have more than trebled in a year, with around 20% of Virgin Trains customers now choosing this form of ticket on the West Coast route.

Stagecoach added: "Virgin Rail Group is making good progress towards agreeing a new direct award contract with the Department for Transport to run from April 2018. We are hopeful that this will be concluded shortly."

Meanwhile the rail and buses group has not ruled out bidding for the loss-making East Coast rail franchise despite the Government ends its existing franchise contract three years early.

Stagecoach chief executive Martin Griffiths said the company was "working with the Department for Transport towards new contracts at Virgin Trains East Coast", that could effectively set fresh terms until 2020.

It has also not ruled out plans to bid for a fresh contract on the same franchise once it comes back up to tender, a spokesperson for the company confirmed.

Stagecoach and Virgin had together agreed to pay the Government £3.3 billion to run the service until 2023, but last week the Department of Transport confirmed controversial plans to prematurely end the franchise contract three years early.

Stagecoach was forced to take on a one-off charge of £84 million earlier this year due to "anticipated losses" over the next two years under the "onerous contract".

Transport Secretary Chris Grayling has said a new East Coast Partnership will take on responsibility for both intercity trains and track operations on the route after 2020.

The news comes as Stagecoach reported an 8% jump in half-year pre-tax profits, hitting £96.7m in statutory pre-tax profits.

Stagecoach has maintained its full-year targets, but cautioned that UK rail profits will be "modest" over the second half of the financial year.

The group reported an overall drop in revenue from £2 billion to £1.8 billion after seeing its South West Trains franchise expire in August.