The Stagecoach Group’s overall defined benefit pension deficits have increased, from £197.7m in April to £285.2m in October 2019, its latest financial report has revealed.

The deficits have increased by £87.7m in the six months since the groups previous financial report (April 2019), and represent the liabilities and assets for a number of schemes which the group contributes to.

This includes the Stagecoach Group Pension Scheme (SPS), The East Midlands Train section of the Railways Pension Scheme (RPS) and a number of UK Local Government Pension Schemes (LGPS).

However, the recent increase in deficits was mostly driven by SPS, with liabilities for the scheme increasing by £86.5m during this period, while the LGPS liabilities fell by £2.2m and RPS was fully removed as a liability since the group ceased participation as of August 2019.

The group is currently pursuing claims against the Secretary of State for Transport regarding the decision to disqualify Stagecoach from three rail franchise competitions after it would not take on open-ended pension liabilities.

All three cases are expected to be heard in High Court in early 2020, and despite acknowledging a maximum liability for costs of £7.3m should the claims be unsuccessful, the group has held no provision in respect of this as at 26 October 2019.

The group reported pre-tax actuarial losses of £87.5m on its DB schemes for the half-year ending 26 October 2019, though this follows a pre-tax actuarial gain of £15.2m reported six months prior (April 2019).

The actuarial losses and broader increases in retirement benefit liabilities were attributed to the general decrease in AA-rated bond yields seen during this period.

The groups also saw its unadjusted operating profit rise from £63.3m in the first half of 2019 to £77m, an increase that was attributed to the non-recurrence of the previous year’s expenses for GMP equalisation.

Broadly, the group reported that increasing pension costs had seen staff costs rise more than revenue over the year.

Having been on The Pension Regulator's ‘watchlist’ since 2016, the group included its pension liabilities as a potential operating risk, also stating that the “the intervention of The Pensions Regulator and/or changes in applicable regulation could also result in increases in required cash contributions”.

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