National Express Group PLC
22 October 2001
22nd October, 2001
National Express Group PLC
Following an assessment of the likely impact of the tragic events in the USA
on 11 September, the recent developments at Railtrack PLC and a review of our
businesses in Australia, National Express announces the following trading
Whilst trading for the year ended 31 December 2001 will only be marginally
below current market expectations, the combined effect of these developments
is likely to have a greater impact on profitability for the year ended 31
This is as a result of the following factors:
* 11 September. Since the terrorist attacks, there has been a significant
decrease in levels of in-bound USA traffic through Gatwick airport.
Although difficult to assess when confidence will return to this market,
indications to date suggest there will be a material effect on Gatwick
Express' profits in 2002. In addition, there has been a downturn in
leisure and discretionary travel following the attacks which will impact
on the performance of our UK train operations.
Trading at Travel West Midlands continues in line with expectations and in
the UK coach division, there has been no material change in volumes since 11
Within the USA, our school bus and transit operations continue to perform in
line with expectations. We have not seen any change in levels of business
since 11 September as we take no revenue risk on our contracts.
We are currently reviewing our worldwide insurance cover, which is due on 31
October each year. The terrorist attacks in the USA have fundamentally
affected the whole insurance market. This is likely to result in a doubling
of the Group's worldwide insurance premiums to £30 million.
* Railtrack. At the time of our interim statement we advised that a
year's growth on rail had been lost as a result of temporary speed
restrictions ('TSRs') that had been introduced following the Hatfield
accident. Future growth will depend on a return of customer confidence in
rail travel. This will only be achieved if passengers are convinced that
pre-Hatfield levels of punctuality and reliability have been restored.
Moreover, our trains' division continues to be affected by significant
numbers of TSRs imposed by Railtrack across the network. There are still 700
TSRs on the network of which 450 are on our franchises. Silverlink, which is
also being affected by the West Coast Main Line upgrade, and WAGN are still
suffering extreme disruption. Reliability and punctuality remain severely
Unfortunately, it is expected that this situation will not improve
significantly in the short to medium-term as Railtrack has estimated that
there will still be over 500 TSRs on the network until March 2002 at the
earliest. Therefore, we believe that it is unlikely that we will see a
return of passenger growth during 2002.
Our franchise subsidy declines by a further £35 million in 2002.
* Australian operations. We have been working to address three key
issues in our Melbourne train and tram businesses - the adverse effect of
the introduction of the goods and service tax ('GST') in June 2000; the
failure to achieve significant improvements in labour productivity; and the
levels of endemic fare evasion across the metropolitan system, which are
higher than expected and are proving difficult to rectify. Furthermore,
there has been a recent deterioration in the Victorian economy following
several recent large corporate failures.
In conjunction with our fellow franchisees we are actively working on a
range of initiatives to tackle fare evasion more effectively and launch
joint marketing schemes to stimulate growth in the metropolitan area. We
are also working on other proposals in partnership with the Victorian
Our franchises receive a reducing annual subsidy from the Victorian
Government, which in 2002 will decline by A$30 million (£12.5 million).
Performance at the Australian bus division continues to be in line with
expectations and, therefore, we expect that overall our Australian
operations will be marginally profitable in 2002.
Phil White, Chief Executive said:
'The uncertainty following the events of 11 September has impacted our UK
train operations, which also continue to be severely affected by the
continuing effects of network disruption following Hatfield. We believe that
patronage growth, particularly in the leisure and discretionary sector, will
only return when punctuality and reliability levels are back at the
The Group's profitability has been further effected by the unprecedented
increase in our insurance premia worldwide.
The recent deterioration in the Victorian economy, compounded by several
recent large corporate failures, and increased fare evasion, continue to
restrict growth. However, together with our fellow franchisees and the
Victorian Government, we are developing a package of initiatives with a view
to addressing the issues.
Despite the difficulties of our rail businesses, our bus and coach businesses
worldwide remain strong and I am confident of the Group's longer term
- ENDS -
There will be an analyst conference call at 0900 hours. For details please
contact Ben Foster/Abigail Forbes at Financial Dynamics on 020 7269 7247/020
For further information, please contact:
Phil White, Chief Executive
William Rollason, Finance Director
Nicola Marsden, Director of Group
National Express Group PLC 020 7529 2000
Andrew Dowler/Ben Foster
Financial Dynamics 020 7831 3113