Interim Management Statement

RNS Number : 8136R

National Express Group PLC

31 October 2013

 



Press release

31 October 2013

National Express Group PLC

Third Quarter 2013 Interim Management Statement

National Express Group PLC ("National Express" or "the Group") is a leading international public transport group with 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 ("the period").

Overview

Trading in the third quarter of 2013 improved across the Group. Revenue grew 5% in the quarter and 3% in the year to date. We have delivered strong passenger volume growth in UK Coach and Morocco, and are growing patronage in UK Bus. Our investment to develop our pipeline of new capital-light business opportunities continues to show good progress. The Group remains on target to deliver its expectations in the full year.

Key developments during the third quarter of 2013 have included:

·     9% growth in UK Coach core service revenue

·     Commercial patronage growth in UK Bus, supported by our ground-breaking initiative with Centro and the launch of commercial smartcards in the West Midlands

·     New Transit contract in North America, three further conversion contracts in School Bus since the summer, and a successful school year start-up

·     Improving intercity coach revenue trend in Spain, further mileage efficiencies and strong growth in Morocco

·     Ongoing excellent delivery in c2c Rail, with Essex Thameside and Crossrail bids underway, and prequalified for the prestigious Berlin Ringbahn tender in Germany

·     On target to deliver £150 million of free cash flow and gearing objectives.

Dean Finch, Group Chief Executive, commented:

"We continue to perform well, driving passenger growth, increasing revenue and focusing our investment where it makes the biggest difference to our customers. With our strong cash generation and our developing pipeline of capital light opportunities, we are well positioned to generate significant further value."

Spain

Alsa's revenue was flat in the third quarter and increased by 2% in the year to date. The impacts of austerity and recession in Spain were offset by new contracts, with third quarter profit slightly higher year-on-year. The revenue trend in intercity coach in the busy summer period improved, with underlying revenue just 1% lower year-on-year, compared with a 3% reduction in the first half of the year. Selected promotional fares were used to defend volumes on those routes affected by aggressive high-speed rail price discounting. With a flexible operating model, we reduced total kilometres operated year to date by 5%. There has been no new progress on the national programme of intercity coach concession renewal.

The urban bus business has continued to benefit from new contracts and network improvements in Morocco and Spain. Like-for-like revenue in Urban Bus in Spain increased by 1% year to date; limited changes to volumes and bonus payments on city council contracts have been offset by recent contract gains, including Guadalajara. In Morocco, Urban Bus like-for-like growth was 11% year to date. Our Marrakech contract has been extended from 2014 to 2019 and our third Moroccan city contract, in Tangiers, is scheduled to begin operation in November 2013.

North America

Total North America revenue grew 15% in the year to date, reflecting the full year impact of the Petermann acquisition and new Transit operations. In School Bus underlying revenue increased by 3% in the period. Our focus on improving the quality of our business, measured through its return on capital, has continued to show success. Pricing for the new school year has increased by 2%. We retained over 97% of targeted contracts. We exited 1% of our contracts, where capital returns were inadequate, and made a small disposal as part of this programme. We added a further three conversion contracts during the summer break to take the total to 13 in the bid season.

The new school year operational start-up has gone well. The number of routes on existing contracts is flat year-on-year and discretionary route volumes are also similar to last year. We continue to drive efficiencies through technology and process standardisation. Net of the above contract changes, overall bus volumes are expected to be about 1% lower year-on-year.

In Transit we have secured our fifth new contract since acquiring the business last year, a paratransit contract of up to five years in Colorado, with total revenue in excess of $15 million. This enhances our capability in this growing market. Our active pipeline of Transit bid opportunities is worth approximately $200 million in annual revenue.

UK Bus

Like-for-like commercial revenue increased by 3% in the third quarter, with passenger numbers 2% higher. We continue to drive patronage through our investment in fleet, technology (over 40,000 users have downloaded our West Midlands Bus mobile app since its launch in July) and through our partnership with the regional passenger transport authority, Centro. This industry-leading joint initiative to promote bus travel was signed in the second quarter of 2013, with a third of initiatives now underway. Bus travel is being supported by highway priority measures and we have launched commercial smartcards in Coventry. In October we have taken delivery of the first new tram, part of a £140 million publicly funded upgrade to the existing metro network.

UK Coach

UK Coach delivered an exceptional performance in its seasonally important third quarter, with the August Bank Holiday week the best on record for passenger volume and revenue. Core express revenue in the year to date was up 5%. Growth in the third quarter rose to 9%, almost entirely from passenger volume. Improved utilisation has benefitted from significantly lower prices introduced in the third quarter of last year. This is being supported by investment in greater distribution, including several new partnerships with airlines serving UK airports and ticket retailing through over 11,000 Post Office branches nationwide. Overall, UK Coach fully offset almost £10 million of non-repeating Olympic and Rail Replacement revenue from the third quarter of 2012.

Rail

c2c remains the UK's best performing franchise for punctuality and customer service. This has driven good revenue growth. In addition, in August the UK Department for Transport selected c2c to pilot a flagship paperless flexible ticketing scheme using smartcards.

Our c2c credentials have been key in prequalifying National Express to bid for other rail opportunities in the UK and Germany. We are developing our bids for the Essex Thameside and Crossrail contracts in the UK. In Germany we have been shortlisted for the Berlin Ringbahn contract, part of a pipeline of German Rail opportunities worth over €500 million of targeted annual revenue. Mobilisation is on target for our Rhein Munsterland Express services which start in December 2015.

Financial position and overview

The Group remains on track to deliver the Board's profit, cash and new business expectations for 2013. Sterling's recent strengthening will reduce the year-on-year gain on translation of profit from overseas operations.

We remain on course to generate £150 million of free cash flow during the year. Group net debt at the end of September 2013 was over £40 million lower than the prior year comparative. Our target for gearing at the year-end is 2.5 times net debt to EBITDA, reducing to 2 times in 2014.

2013 revenue growth

				First     half	Third quarter	Year to date
Spain
Underlying		Intercity		-3%	-1%	-2%
Like-for-like		Urban - Spain		-1%	3%	1%
Like-for-like		Urban - Morocco		16%	2%	11%
		Other operations		-9%	-10%	-9%
Total				3%	0%	2%
North America
Underlying		School Bus		2%	4%	3%
Total				17%	7%	15%
UK Bus
Like for Like		Commercial		2%	3%	2%
		Concession		-2%	2%	0%
Total				1%	2%	1%
UK Coach
Underlying		Core express		3%	9%	5%
Total				1%	0%	1%

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 0930 on 31 October 2013. Details are available from Laura Dean 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.

c2c Public Performance Measure (PPM) moving annual average (MAA) was 97.2% at 12 October 2013

 

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