East Coast franchise relief triggers rally in Stagecoach shares
Shares in transport operator Stagecoach (SGC) jumped by 13% on 29 November after the Department for Transport said it would end the group’s underperforming East Coast rail franchise in 2020, three years ahead of plan, and replace it with a partnership model.
Stagecoach operates the rail franchise in a joint venture with Virgin. The East Coast rail franchise has been problematic with Stagecoach saying in June that the profit outlook for 2018 and 2019 was worse than previously expected.
Ending the partnership early theoretically reduces significant losses for Stagecoach, hence why its shares shot up on the news.
The company in June took an £84.1m onerous contract provision to cover losses forecast for the next two years. (LMJ)