Newspaper article The Evening Standard (London, England)

Now Australians Buy Up London Buses for [Pounds Sterling]263m; CITY BRIEFING

Newspaper article The Evening Standard (London, England)

Now Australians Buy Up London Buses for [Pounds Sterling]263m; CITY BRIEFING

Article excerpt

Byline: ROBERT LEA

STAGECOACH today called the end of the boom in the London bus market, selling its operations in the capital to Australian finance house Macquarie for [pounds sterling]263 million .

The move by Stagecoach, one of five passenger transport groups that dominate the capital's red bus services, surprised analysts.

"It suggests the good times may be over for London operators, though you could say this was also an offer that was too good for Stagecoach to refuse," said one transport analyst.

Macquarie, which hitherto has had no presence in the British bus market, is paying 14 times Stagecoach London's pre-tax profits last year. Stagecoach, in common with its rivals, has been benefiting from the largesse of Mayor Ken Livingstone's campaign to get people on the buses.

He is reckoned to have pumped [pounds sterling]600 million of investment into London buses.

The operators have been making hay, recording operating profit margins in the midteens as they make the most of generous contracts.

However, the latest Stagecoach London figures suggest those margins are on the wane, with the group's East London Bus and South East London & Kent Bus companies bringing in margins of 11% last year. Stagecoach bought into the London market for [pounds sterling]25 million a dozen years ago, and this deal will net the group a [pounds sterling]120 million profit.

But half that profit is likely to disappear as Stagecoach has pledged to pump [pounds sterling]60 million into the pension fund of its London bus companies, which currently employ 4300 people and run 1300 buses.

The deal is just the latest in the UK for Macquarie and extends its interests from current investments in South East Water, the M6 toll road, Bristol Airport and gas distribution.

It will also be a fillip after highprofile failures to land airports operator BAA, the London Stock Exchange and most recently Associated British Ports.

Stagecoach chief executive Brian Souter today pledged to continue to invest in the group's substantial bus businesses outside London and in its rail operations. …

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