Stagecoach under fire over 176% leap

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The rail and bus group Stagecoach ran into a fresh barrage of criticism yesterday after unveiling a 176 per cent leap in profits and announcing that Sandy Anderson was quitting the board less than a year after making a pounds 36m profit on the sale of the Porterbrook train leasing company.

The huge increase in profits from pounds 43.6m to pounds 120.5m outstripped even the most bullish of analysts' forecasts and was due to the acquisition spree Stagecoach went on last year. It addition to Porterbrook and the South West Trains franchise, it also picked up the Isle of Wight rail service and a Swedish bus company.

Stagecoach said the widely publicised problems with South West Trains earlier this year had cost it pounds 3m in fines and lost revenues after the company gave passengers a day of free travel as compensation for the cancellation of hundreds of services due to a shortage of drivers.

Brian Souter, the Stagecoach chairman, blamed the fiasco on junior management who had made the "elementary error" of failing to take into account holiday entitlements when SWT cut driver levels by 10 per cent and had to retrain large numbers of remaining drivers on new routes.

Mr Souter maintained, however, that SWT could make similar manpower reductions over the next two years and not affect services. In its first full year of ownership, SWT made an operating profit of pounds 7.7m on revenues up by 8 per cent to pounds 283 after receiving pounds 63.4m in government subsidy. Staff levels fell by 400 to 3,600 - largely reflecting the cut in driver numbers - but SWT took on an extra 70 revenue protection inspectors.

Porterbrook, which was bought for pounds 815m, netting Mr Anderson and his City backers a pounds 300m profit just six months after they acquired the company from the Government, made a profit of pounds 80m on turnover of pounds 180m.

But Mr Souter stressed that since the takeover, it had won new train orders worth pounds 280m from five of the 25 train operating companies and was in the vanguard of investment in the privatised rail industry.

Mr Anderson is to step down as a Stagecoach director at this year's annual meeting "to devote more time to his other business interests". But Mr Souter said he would remain as Porterbrook's chairman and work closely to find a new chief executive for the business over the next year.

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