£46m bail-out for East Midlands Trains helps rail division post profit
DERBY train operator East Midlands Trains is making a profit again – thanks to financial support from the Government.
In the summer, it was revealed that East Midlands Trains received a £46 million bail-out from the Government after making losses which, under the terms of its franchise agreement with the DfT, made it eligible for "revenue support".
The firm's parent company, Stagecoach Group, admitted that the turnaround in profitability of its whole UK rail division – made up of East Midlands Trains, South West Trains and Virgin Rail (jointly owned by Stagecoach and Virgin Group) – was largely due to the East Midlands Trains bail-out.
Half-year results released by Stagecoach Group yesterday showed that, in the six months to October 31, its UK rail division saw profits bounce back from a £6.9 million loss in the same period last year to a £22.7 million gain.
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There was no breakdown of the results for each individual franchise.
The rail division also achieved sales of £600 million, compared with the £563 million it achieved in the same period last year, a rise of 6.6%.
In its results, Stagecoach, which also owns bus companies in the UK and US, says East Midlands Trains incurred "a significant operating loss" in the six months ended October 31, 2011.
The group says: "Following the macro-economic downturn, its revenue was below the levels anticipated in the bid for that franchise.
"But, from November 2011, East Midlands Trains was entitled to revenue support, which returned it to profitability and the turnaround in the profitability of the UK rail division is largely due to that factor."
But group, which overall reported a rise in sales and profits, said that the overall performance of East Midlands Trains had also contributed to its success.
It says: "Strong revenue growth in our UK Rail division has been underpinned by consistently high levels of punctuality and customer satisfaction.
"In terms of punctuality, East Midlands Trains has been the best performing long-distance train operator in the UK for the last four years.
"Passengers are continuing to benefit from our ongoing programme of investment in trains and stations.
"At East Midlands Trains we recently completed a programme of over £30 million to fully refurbish our entire fleet of nearly 100 trains.
"We expect the division to deliver a good profit in the full year to April 30."
Stagecoach chief executive Sir Brian Souter, who will take over as chairman from Sir George Mathewson in May, said: "Our success is built on strong partnerships across our bus and rail networks.
"We are delivering a better service for passengers, growing our business sustainably and helping support local communities and the economy."