Interim Management Statement

RNS Number : 0900E

National Express Group PLC

07 May 2013

 



Press release

7 May 2013

National Express Group PLC

Interim Management Statement

National Express Group PLC ("National Express" or "the Group") is a leading international public transport group which operates bus, coach and rail services in the UK, Continental Europe, North Africa and North America. It today reports its Interim Management Statement for the year to date.

Overview

Trading across the Group is in line with our expectations. Building on last year's success, we have made further progress in developing our pipeline of new business, including recent contract wins in German Rail and North America Transit, as well as the launch of new services in both UK and German Coach. This further demonstrates the international appeal of our market-leading and value for money services.

Key developments so far in 2013 have included:

·     Winning two rail contracts and launching three coach services in Germany

·     UK Coach being selected to run coach services between London Luton Airport and London Victoria, starting in May 2013

·     National Express Transit entering the important California market and growing annual revenue to $75 million

·     A continuing steady performance in Spain, despite the backdrop of austerity

·     c2c maintaining its position as the best performing UK rail franchise, supporting good revenue growth and profitability.

Dean Finch, Group Chief Executive, commented:

"We have made a positive start to the year, continuing to deliver a high level of value and service to our customers and building our new business pipeline through regular contract wins. Our focus on driving up returns on capital, strong cash generation, organic growth and leveraging our international transport skills to deliver new opportunities is proving to be successful."

Continental Europe

Revenue in Spain has been resilient, with no change to the trends seen in the latter part of 2012. Urban Bus in Spain increased like-for-like revenue by 5%. Services have been adjusted to reflect limited changes in city requirements. In Morocco, Urban Bus continues to grow strongly, with like-for-like growth of 25%. We also commenced the recently won Guadalajara contract in April and the previously loss-making Bilbao business, acquired in 2012, is now profitable.

Underlying revenue in Intercity Coach declined by 5%, with limited impact from recent rail discounting. This resilient performance reflects the excellent value offered by Alsa to Spanish consumers. Kilometres operated reduced by 6%, as the flexible Alsa model adapted to changes in demand. Higher fuel costs reduced profitability, partly offset by a one-off 3% regulated fare increase approved in March. The government's intercity concession renewal programme remains on hold.

In April we launched city2city, our German coach network, leveraging our Spanish and UK experience and systems. 10,000 introductory tickets priced at €5 sold out quickly and the three initial routes have already seen promising demand. We are excited about the opportunity in this new coach market.

North America

Total revenue in North America School Bus was up 18%, reflecting the successful acquisition of Petermann in May 2012. Underlying revenue was broadly flat, with new contract wins in last year's bid season offset by a reduction in discretionary routes, as reported last October, and more days being lost to winter weather than in the prior year. The latter will be recovered in the current quarter by extending the school year. Cost efficiency is being driven by our new integrated Compass GPS system and from Petermann synergies. The bidding season for 2013/14 is well underway; we have seen good pricing on contract retention and are targeting to improve capital returns further, in line with our recent strategy.

Transit is now delivering annual revenues of $75 million, following our contract win in California in March, and has an active contract pipeline worth $200 million in annual revenue to be bid this year. We are encouraged by our early success in growing this business building on our initial acquisitions.

UK Bus

Like-for-like commercial revenue increased by 3%, with continued growth in student travelcard sales. We have successfully launched our commercial smartcard scheme in Dundee. Poor weather has impacted overall passenger volume, especially in concessionary travel, and profit has also been constrained by last year's reduction in the BSOG duty rebate. Nevertheless, April has seen encouraging signs of growth, coupled with an increase in concession revenue. With the BSOG cut now lapping prior year, fleet investment continuing to exceed depreciation and the roll out of network enhancements within the West Midlands, the outlook for UK Bus remains encouraging.

UK Coach

Revenue in National Express Coach services has grown by 1%. Strong passenger volume, up 7%, reflects our focus on competitive pricing and the introduction of faster, more direct services. This benefit was offset by a 10% decline in concession revenue, following the previous withdrawal of the government funded scheme. As we entered the busier seasonal period, Easter revenue was encouraging, up 6% year-on-year. UK Coach will also benefit from new contracts to operate services between London Luton Airport and London Victoria, the retailing of tickets through Ryanair and the expansion of our Airlinks services at London Gatwick Airport.

Rail

c2c continues to drive good revenue growth, supported by excellent service performance. It remains the best-performing UK rail franchise with a Public Performance Measure (PPM) of 97.5%. We are in constructive negotiations with the UK's Department for Transport to extend the c2c contract, ahead of rebidding for the long-term Essex Thameside franchise.

Following our success in winning two regional rail contracts in Germany's most populous region, North Rhine-Westphalia, generating revenues of around €1.6 billion over 15 years, we have commenced the mobilisation phase ahead of start-up in December 2015. We are currently progressing a pipeline of new regional rail opportunities totalling €900 million of annual revenue.

Financial position

The Group's financial position remains strong, with ample liquidity and medium term debt maturity. Capital expenditure in the first quarter of 2013 was over £40 million, reflecting core fleet investment across the business; full year capital investment is expected to be £100 million. Capital efficiencies and strong free cash flow will allow us to reduce debt during the year, underpinning our prudent gearing and dividend policies. We are targeting gearing of two times net debt to EBITDA by the end of 2014, whilst continuing to develop our capital-light growth opportunities in US Transit, German Coach, Rail and other selected international markets.

Outlook

The Group is on track to deliver its profit expectations for 2013. We are complementing our trading performance by securing new contracts and launching exciting new services. These successes demonstrate the international appeal of our market-leading and value for money services. In addition to delivering growth, we remain focused on strong cash generation and prudent debt management, which will provide flexibility and shareholder returns for the future.

Enquiries

National Express Group PLC
Jez Maiden, Group Finance Director	}	07770 701797
Stuart Morgan, Head of Investor Relations	}
Anthony Vigor, Director of Policy and External Affairs		07767 425822
Maitland		020 7379 5151
Neil Bennett
Rebecca Mitchell

There will be a conference call for investors and analysts at 0900 on 7 May 2013. Details are available from Julia Grobler at Maitland.

Notes

Underlying revenue compares the current year with the prior year on a consistent basis, after adjusting for the impact of currency, acquisitions, disposals and rail franchises no longer operated. Like-for-like revenue in bus operations adjusts underlying revenue for the impact of changes in mileage operated.

Profits are stated on a normalised basis. Normalised results are the statutory result excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon, for continuing operations. The Board believes that the normalised result gives a better indication of the underlying performance of the Group. EBITDA is earnings before interest, tax, depreciation and amortisation.

PPM is for the 12 months ended 31 March 2013.

 

END

 

 

IMSLIFSEERIDIIV