Stagecoach's Souter in the money but SWT struggles

Revenue growth and profit margins are fast disappearing at South West Trains. But despite warnings that the business is heading toward substantial losses boss Brian Souter has awarded himself a bumper dividend.

Stagecoach, the trains and buses group, today reported that up to the end of April like-for-like revenues in its rail businesses, which also include St Pancras-based East Midlands Trains, increased 6.2%, slower than the 8.2% six months earlier.

Stagecoach does not break out figures for Waterloo-based SWT but its St Pancras franchise is showing steady revenue growth of 10.3%, which indicates the depths of the problems at SWT.

Profit margins across the rail businesses are down from 7.6% to 5.7% with fewer passengers prepared to pay for a first-class or last-minute expensive "walk-on" fare.

And things are set to get worse. Stagecoach is in dispute with the Department for Transport over the terms of the state handouts SWT will get if revenues begin to fall too low.

The case is in arbitration and Stagecoach is warning of "a significant operating loss" in the 2010-11 financial year

One person not worrying at present is Souter's bank manager, who is set to receive a cheque for £6.3 million from the company's 11% rise in the dividend to 6p.

In the year to April group pre-tax profits rose 2% to £170 million.