Stagecoach warns Scottish independence could hurt business

http://www.theguardian.com/politics/2014/jun/25/stagecoach-scottish-independence-warning

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Stagecoach, the sprawling transport group led by one of the Scottish National party's highest profile backers, has warned investors that September's independence referendum could hit the business.

Anti-independence campaigners seized on the warning given by the bus and train operator in its annual results, as the company's co-founder and chairman, Sir Brian Souter, is a major donor of the SNP and supporter of independence.

Souter, who ran the Perth-based group as chief executive until May 2013, recently gave £100,000 to fringe group Christians for Independence and promised to match up to £1m-worth of donations to the SNP's referendum campaign.

However, in the "principal risks and uncertainties" section of the report, the company states: "There is a risk that changes to the regulatory environment or changes to the availability of public funding could affect the Group's prospects. Such changes may arise as a result of the outcomes of the September 2014 referendum on Scottish independence and/or the 2015 UK general election."

Ian Murray, Labour's shadow business minister in the Commons and a spokesman for the Better Together campaign, said the passage had driven "a coach and horses" through the case for independence.

"Being part of the UK single market works well for firms like Stagecoach," Murray said. "Scottish employers have access to a market of more than 63 million people across the UK, rather than just 5 million people in Scotland. Where is the sense in putting up barriers between Scottish firms and their customers based elsewhere in the UK?"

A Stagecoach spokesman said: "Consistent with other companies, we ensure our investors are aware of relevant matters affecting our business, both risks and opportunities.

"It is not a comment on the merits of Scottish independence, which we have consistently stated is a matter for the people of Scotland to decide. Stagecoach Group remains neutral on the issue, as it has always been."

Stagecoach is the latest in a string of companies to spell out potential problems if Scotland votes to become a separate country. They include Shell, BP, Scottish engineering group Weir and retailer Kingfisher, which has said it is putting Scottish investment on hold until the outcome of the referendum is known.

Standard Life has set up offices in England to prepare for a split and Royal Bank of Scotland on Tuesday reiterated that independence could affect the bank's credit rating, tax situation and regulation.

Meanwhile, Stagecoach announced a slight increase in profits to £180.3m after tax, and pointed to the return of rail franchising as a reason for optimism.

Stagecoach's finance director, Ross Paterson, said: "In rail we're now seeing momentum in the franchise process. We were disappointed not to win Thameslink but encouraged it has been awarded. We are expecting a good opportunity on East Coast."

Stagecoach owns 49% of the rival north-south long-distance and West Coast mainline operator Virgin Trains, and is one of the three shortlisted firms to run East Coast.

The company announced that Virgin Rail had paid Stagecoach a dividend of £4.2m for 2013-14, and a fractionally larger sum to Richard Branson, the majority shareholder. Paterson said: "It was a relatively low shareholder return that reflects the position the franchise was in."

He added: "The existing contract gave us a 1% management fee for running the business … It didn't give us what we wanted but it also wasn't good for customers or taxpayers as it didn't create an incentive to invest and grow the business."

Paterson said a private operator could drive up passenger numbers on East Coast. "It's about trying to be creative, how are you able to make the product even more appealing to customers?"

However, the latest national rail passenger survey released on Wednesday showed East Coast has outperformed its long distance rivals in satisfaction scores. The Passenger Focus research conducted this spring gave the state-run operator a 91% score – just ahead of Virgin and First Great Western.

Elsewhere, Stagecoach's bus business continued to drive earnings. In the US, profits were up 80% year on year, largely due to the growth of Megabus.