Trading Statement

RNS Number : 3480I

National Express Group PLC

02 July 2013

 



Press release

2 July 2013

National Express Group PLC

First Half 2013 Pre-Close Trading Update

National Express Group PLC ("National Express" or "the Group") is a leading international public transport operator, with bus, coach and rail services in the UK, Continental Europe, North Africa and North America. It today updates on trading for the First Half Year ended 30 June 2013, ahead of its Half Year results to be released on 24 July 2013.

Overview

Trading in the First Half Year has been in line with our expectations. Total revenue in the First Half Year has grown by 7% at constant currency.

We continue to make strong progress in our three core areas of focus:

·     Organic growth and operational excellence: across our five divisions, underlying revenue trends have improved during the second quarter, supported by a clear focus on cost efficiency and return on capital. In UK Bus, commercial and concession revenues are growing. In UK Coach, lower pricing, alongside new services, is driving volume growth. In Spain, fare increases and new contracts are supporting the business through austerity. North America School Bus is driving an improved return on capital.

·     Cash generation: we are on course to deliver between £125 million and £150 million of free cash flow in each of 2013 and 2014. We continue to target a gearing of two times EBITDA by the end of 2014 and drive returns for our shareholders. This is supported by a dividend policy prudently covered by non-rail earnings.

·     Business development: we are strengthening our pipeline of new business opportunities. During the First Half Year, we have:

o  increased our North America Transit annual revenue to $75 million,

o  profitably integrated our recent acquisition in Bilbao,

o  secured an extension to the c2c UK rail franchise,

o  pre-qualified for the Crossrail project,

o  secured and commenced mobilisation of two new German rail contracts,

o  launched scheduled coach services in Germany,

o  secured 2 major partnerships in UK Coach, with Luton Airport and Ryanair,

o  successfully commenced our new Guadalajara contract in Spain, and,

o  been selected as preferred bidder for a third Moroccan bus contract, in Tangiers.

Our contract pipeline is developing well, with the potential for meaningful earnings enhancement in the medium term.

Dean Finch, Group Chief Executive, commented:

"I am pleased with our revenue improvement across the business, reflecting the attractive value and quality service we offer our customers. I believe that the combination of organic growth and operational excellence, cash generation and new international contract opportunities will drive returns for National Express and our shareholders."

Continental Europe

Overall revenue in Spain has increased by 3%. Alongside continued strong growth in Morocco, up 30%, the launch of the Guadalajara contract and successful integration of the Bilbao acquisition have driven this increase.

Intercity Coach revenue was down 3%, reflecting constrained passenger volume, with fare increases offsetting cost pressures. Whilst passenger demand has been affected by wider austerity, there are signs that the rate of decline is diminishing. The business also continues to benefit from its flexible operational model, with kilometres operated 6% lower. The urban bus market remains resilient, with like-for-like revenue in Spain declining by 1%, reflecting the re-phasing of some bonus income.

Alsa has been selected as the preferred bidder to operate the Tangiers urban bus service, our third city operation in Morocco. Due to commence in the first half of 2014, the proposed 10 year contract will initially deploy 120 buses, with expected total contract revenue of €125 million. This contract will build on the Group's successful operations in Marrakesh and Agadir.

In April we launched our Intercity Coach business in Germany. Our initial three routes are performing well, with two further services to be launched this month.

North America

Total revenue grew 19%, with the anniversary of the Petermann acquisition in May marking the delivery of synergies as planned.

In School Bus, days lost to earlier poor weather have been recovered in the second quarter, along with some of the discretionary routes withdrawn at the start of the school year. We continue our focused discipline on improving our return on capital, in preference to unconstrained growth. We have targeted capital investment carefully and secured price increases on contract retentions that are a significant improvement over previous years. We expect to end the current school bus contract bid season close to flat in terms of the number of buses operated. 25 new contracts have been secured to date, with 17 lost. Our contract retention remains high at 96%.

In our US Transit business, we have successfully started operating the 4 contracts won since integrating our three acquisitions in 2012. With a bid success rate of 30%, we are pleased with progress and the opportunities offered in this capital-light market. Our active bid pipeline exceeds $200 million of annual revenue.

UK Bus

After a weak first quarter for passenger volume, reflecting poor weather and the impact of austerity measures, the second quarter has seen a turnaround in patronage for UK Bus. Commercial passenger volumes have grown and the reduction in the number of concession passengers all but eliminated. As a consequence, network mileage is broadly flat and like-for-like revenue has increased by 3%. Despite higher fuel and pension costs in 2013, with the reduction in BSOG now lapped, the outlook for the remainder of the year is positive. Operational performance is excellent, with record levels of punctuality reflecting our investment in vehicle tracking systems. Fleet investment continues, with 90 new vehicles delivered so far this year.

UK Coach

Core revenue rose 3% in the First Half Year. Our focus on low fares is proving attractive to consumers and driving volume growth. This has been supplemented by the successful start-up of our Luton Airport services and additional passengers booking through our Ryanair marketing agreement. Growth in Eurolines and a new Airlinks contract have offset weak Rail Replacement revenue, which followed the cessation of our East Anglia franchise.

Rail

Rail continues to perform well, with the c2c franchise extension secured until at least September 2014. c2c continues to deliver industry-leading punctuality and customer satisfaction. These credentials will support our bid for the full Essex Thameside tender expected later this year.

We are pleased to have been shortlisted for the Crossrail tender, further demonstrating our credentials as a high quality international rail operator. The bid process is expected to start later this year, with the winner to be announced at the end of 2014.

We have begun the mobilisation of the two German rail contracts secured earlier this year and due to start in December 2015. Significantly, a new fleet of 35 Bombardier trains has been procured on behalf of our customer, the regional rail authority. This market remains attractive and we have a focused bid pipeline.

The Group will announce its Half Year Results on 24 July 2013.

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 0830 on 2 July 2013. Details are available from Laura Dean at Maitland.

Notes

Unless otherwise stated, revenue is on an underlying basis, which 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.

The c2c Public Performance Measure (PPM) of punctuality was 97.3% moving annual average to 22 June 2013.

 

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