Interim Management Statement

RNS Number : 2095R

National Express Group PLC

01 November 2011

 



1 November 2011

National Express Group PLC

Third Quarter 2011 Interim Management Statement

National Express Group PLC ("National Express" or the "Group"), a leading international public transport group, operates bus and coach services in the UK, Continental Europe, North Africa and North America, together with rail services in the UK

National Express Group plc ("National Express" or "the Group") reports its Interim Management Statement for the nine months ended 30 September 2011 ("the period").

Highlights

· Achieving continuing organic growth, with revenue up 5% on prior year, growth in each division and successful North America contract start up

· Delivering further margin improvement, with cost saving plans on track

· Securing targeted expansion through selected fleet investment and announced acquisition of Petermann school bus business in the USA

· Group trading in line with the Board's expectations.

Dean Finch, Group Chief Executive, commented:

"We have continued the strong performance reported at the half year in the third quarter. We have delivered good revenue growth and further improvements in efficiency and we have clear plans to continue to improve revenue and profitability in the future"

Overview

National Express continued the strong performance reported at the half year through the third quarter. Revenue for the period rose by 5% over the prior year. Commercial revenue increased during the third quarter in each business. Our excellent value transport services have continued to benefit from robust levels of customer demand in the UK and Spain, despite weak economic conditions. North America has grown strongly as customers reap the benefits of outsourced school bus transport. Ongoing cost control and targeted investment programmes have ensured that Group profitability has improved, in line with the Board's expectations.

Spain

Our Alsa Bus and Coach business delivered a strong third quarter performance, as customers sought better value transport services in a weak domestic economy. Transport revenue increased by 7% in the period. Both the Intercity and Urban divisions saw strong revenue growth, particularly around Madrid. With an early price rise offsetting higher costs, Alsa delivered further improvements to network efficiency, with operating mileage 1% higher in response to additional capacity requirements. Despite the disruption in North Africa, our business in Morocco continues to show year-on-year growth. Operations commenced for the newly secured Madrid Tourist bus service which will add €10 million per annum in revenue, helping offset reduced airport operations. Margin progression has been sustained. We continue to manage closely working capital collections from regional and local government.

North America

Revenue in the North America school bus business increased by 10% over the period. A successful bid season, with the addition of contracts for a net 600 new buses, has been followed by an effective start-up process. In addition, volume in existing contracts has been stable.

The targeted $40 million cost saving programme is nearing completion; parts procurement has now been consolidated, GPS is now installed on over 16,500 buses and significant opportunities for operating and schedule improvements are expected to be identified. The division has delivered further progress towards achieving best-in-class operating margin for the current year. In September, the Company reached a preliminary settlement regarding putative working time claims, which is expected to result in a one-off charge to operating profit of approximately £5 million in 2011. A hearing is scheduled for January 2012 at which the required court approval of the putative settlement will be sought.

On 13 September 2011, we announced the $200 million acquisition of Petermann Inc., a school bus business with an excellent customer portfolio and an experienced management team. The acquisition will allow National Express to achieve further growth from a quality earnings base in a business that its management knows well. A small paratransit contract provides access to a new market for National Express with significant potential for development. The acquired business is expected to be immediately earnings enhancing, with synergies further adding to value creation. We are currently seeking regulatory clearance for the acquisition, which we expect to complete around the end of 2011.

UK Bus

Revenue in the UK Bus business increased by 2% in the period. Commercial revenue in the West Midlands increased 5%, with the rate of growth continuing to slow as fare rebalancing actions in 2010 have worked through. The concessionary fare settlement declined by 2% year-on-year, in line with the previous trend. Margin for the third quarter has been stable year-on-year. We continue to explore opportunities to promote passenger growth and further margin enhancement. Following the preliminary report into the UK Bus industry by the Competition Commission, we do not anticipate significant changes to our operations.

UK Coach

The Coach business delivered a successful summer trading period, the busiest part of the year, with our nationwide £9 travel offer particularly successful. Revenue growth in the core National Express coach network increased 6% in the period. Eurolines also performed well in the third quarter, whilst the rate of decline in revenue from contract operations reduced. Overall profitability for the division continued to improve. In addition, we have launched our programme to mitigate partially the withdrawal of the UK government's concession subsidy from November this year, with a senior and disabled persons coach card and enhanced promotional activity.  

UK Rail

UK Rail continued to secure growth, with increased Oyster travel availability offsetting the lower yields which result. Revenue in the period grew by 6%. We continue to make good progress implementing the European Framework for Quality Management in our c2c franchise. Following the recent clarification by the UK government on future franchise tendering, we will be seeking prequalification for the replacement c2c franchise due to operate from 2013, whilst selectively considering other franchise opportunities as these emerge.

Financial Position

National Express Group's financial position remains robust, enabling the execution of our strategy of organic growth and expansion, whilst retaining strong resilience to cope with challenging economic conditions. During the period we have invested £125 million in capital for fleet replacement and selected organic growth, including North America school bus contract wins.

Enquiries

National Express Group PLC
Jez Maiden, Group Finance Director	}	0121 460 8657
Stuart Morgan, Head of Investor Relations	}
Anthony Vigor, Director of Policy and External Affairs		07767 425822
Maitland		020 7379 5151
Neil Bennett
George Hudson
Rebecca Mitchell

There will be a conference call for investors and analysts at 0900 on 1 November 2011. Details are available from Rebecca Mitchell at Maitland.

Notes

All references to revenue and operating profit are measured 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.

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.

 

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