Stagecoach without horses

Stagecoach I believe is familiar for everyone, no matter where you stay in the country somehow sometime you have used their services. Because its such a big Group and it covers bus, coach, and train for all the regions. Basically you will see Stagecoach everywhere. They even cover the North American region and Canada transport. I would say this is a very good business and it benefits themselves, their loyal customers and anybody interested in any investment. Some people will say good transport services are of vital importance to the heart and survival of the city these days and I totally agree. Mega bus. com is one of the coach services run and owned by stagecoach. We often see the advertisement below from their website or elsewhere:

                                                 

Most of the people would say it is a very good deal starting at £1 even though when you book it you have to pay a 50p booking fee, but it is still a very good price for the individuals (working class people, students, etc.). Well, sometimes people would not believe it and they would ask one question, if they charge £1.50 for each journey in total how do they make any money and how are they going to break even? They do this by looking for opportunities where there are a lot of people that need to be moved. Such as in and around large cities and conurbations. This provides a good strategy to keep the buses full which makes them more efficient and improves the profit margin. (bums on seats)

When we look at the Group strategy the firm has a long-term goal on delivering shareholder value through, organic growth in their day to day operations, complementary acquisitions with good returns and targeting to attractive rail franchise opportunities, they seek to improve performance, drive up customer satisfaction, and maintain a long-term efficient capital structure.

Stagecoach started trading at the Main Market (LSE) since 1998, the current market capital is £1,906.89m and it has a recorded 89 major shareholders with a recorded 185 subsidiaries companies across UK, USA and Canada. According to the annual report earnings per share at 2011 has increased to 23.80p (almost 27%) compared to 18.70p in 2010. As the table below shows almost 40,000 individuals hold almost 160,000,000 of ordinary shares and it amounts to 22.2% of total shares, on the other hand 71% of the shares are owned by the banks and varies nominees, the other small percentage of the shares are owned by different organisations. (Investment trusts, etc.) But anybody who owns 3% or more has to be named and listed. Because Stagecoach is a listed plc that means they are able to offer shares to a wide range of potential investors, as a private company has restrictions on the type of purchaser who can be offered shares in the enterprise. Therefore the Stagecoach group could raise any funds they need for further investment easily. On the other hand the payment of dividends are not promised to the investors, thus there are certain risks as well as the share value drop caused by low performance of the company or the macro environment changes.

Analysis of shareholders as at 30 April 2011

Range of holdings	No. of holders	%	Ordinary shares held	%
1 – 25,000	40,249	98.7	42,861,872	6.0
25,001 – 250,000	325	0.8	27,459,025	3.8
250,001 – 500,000	56	0.1	20,366,374	2.8
500,001 – 3,750,000	117	0.3	158,623,083	22.0
Over 3,750,000	38	0.1	470,814,596	65.4
	40,785	100.00	720,124,950	100.0

Classification of shareholders	No. of holders	%	Ordinary shares held	%
Individuals	39,239	96.2	159,875,685	22.2
Other corporate bodies	74	0.2	22,085,965	3.1
Banks and Nominees	1,356	3.3	512,064,798	71.1
Limited companies	103	0.3	21,984,239	3.0
Investment trusts	11	0.0	4,110,309	0.6
Pension funds	2	0.0	3,954	0.0
	40,785	100.0	720,124,950	100.0

The current one Stagecoach share price was 264.80p on 17th Feb 2012. The question is how do they make their shares attractive to the investors? On 7th December 2011 Stagecoach announced a £44m double -deck coach investment in new vehicles for budget coach networks (Megabus. com) for expanding the North American and UK operations. As we can see from the graph below when they announced this news the share price went up to 265.40p (from 243.80p on 05th December 2011). This investment could create up to 500 jobs and I think it is really good for society, and it also give these new staff job opportunities and as a result the accumulated savings of the pension fund gets invested in different ways to create a good return for their retirement. 

Because the rising fuel costs and increased living costs shift people from cars to affordable transport buses or trains to make their journeys, this contribution surely makes Stagecoach more profit in the future. The other reason I think Stagecoach attracts the investors is they have a very good strategy, a strong management team and the intangible value of their reputation. However this research on Stagecoach has shown me that they have a very good website that is easy to understand and full of useful information suitable for potential investors. It also make me think about some investment with them in the future.

Sources: FAME Report, London Stock Exchange, Stagecoach investors-relation, Arnold, G.