National Express Group PLC
16 December 2002
For immediate announcement on 16th December 2002
National Express Group PLC
Pre-close trading update and withdrawal from train and tram operations in
National Express Group ('the Group') today reports on trading for the twelve
months to 31 December 2002, prior to entering its close period. The Group
confirms that trading remains in line with market expectations.
Our UK bus operations made good progress despite the on-going construction work
in the centre of Birmingham which presents daily challenges for Travel West
Midlands. However, we are encouraged that a number of new stores, which will
attract patronage, will be opening towards the end of next year. A rebranding of
our Coventry operations was undertaken in early December together with improved
customer information together with additional easy-access buses.
Our UK coach division made good progress with the airport services division
experiencing good growth over the summer. We are focussed on developing our
shorter shuttle route schedules.
The UK trains division, particularly the regional services, continued to face a
number of challenges during the second half. Patronage growth over the period
remained static compared to the previous year excluding the effects of Potters
Bar and the ScotRail strike. We have submitted plans for a two-year extension to
our Central Trains franchise and are also preparing a two-year extension for our
Wessex franchise. In addition, we have submitted our initial bid for the Wales
and Borders franchise and are an interested party in the Greater Anglia
In North America and Canada, the new school year has commenced well with work
progressing on the integration of Stock Transportation. We are focussed on
reducing costs in our public transit division.
The Group's preliminary results will be announced on 12 March 2003.
Withdrawal from train and tram operations in Australia
As reported in the interim results announcement in September, our Australian
subsidiaries have been in extensive negotiations over the past year with the
Government of the State of Victoria ('Government') regarding the future of our
train and tram operations there.
As negotiations have continued, we have become increasingly concerned at the
future viability of our tram and train operations as the financial terms of the
revised agreements under discussion have become more stringent, particularly
against the background of a declining subsidy profile. Both parties
acknowledged that the process was taking longer than they had originally
anticipated and the Victorian election, called early in November, further
delayed the process.
After a year of negotiation, we have concluded that we are not prepared to fund
losses on these operations as we are unable, despite significant efforts by the
Victorian Government and ourselves, to reach a revised financial arrangement
with the Government without incurring an unacceptable level of operational and
financial risk from next year onwards.
In view of this we have given notice today to the Victorian Government that we
will stop providing funds to enable the train and tram subsidiaries to meet
their liabilities as and when they fall due with effect from 23 December 2002.
We are currently in discussions with the Government with a view to providing an
orderly handover of these operations in order to keep disruption to a minimum.
The one-off cost to the Group of writing down our investments in Australia is
estimated to be £135 million, including a potential £48 million cash payment to
indemnify the providers of the performance bonds for these operations and
approximately £87 million as a non-cash asset writedown which will be taken as a
charge in the Group's accounts for the current year. Turnover for the train and
tram operations in the year to 31 December 2001 totalled £153 million with
operating profit of £9.4 million. Turnover in the first half of this year
totalled £84.9 million with an operating loss of £2.3 million after an interim
payment of £16.5 million provided by the Government during the first half. These
operations are projected to incur significant losses in 2003 and beyond.
Our bus operations in Melbourne, Brisbane, Sydney and Perth are unaffected by
Commenting on today's announcement Phil White, Chief Executive, said:
'Although UK rail remains challenging, progress within our UK and North American
operations continues to be good. We are, however, very disappointed at having
to make today's announcement relating to our Australian train and tram
Our Australian subsidiaries have been in negotiation with the Victorian
Government for more than a year in an attempt to put our train and tram
businesses on a firmer financial footing. As previously acknowledged by
Government, considerable hard work and effort have been employed on all sides.
Despite our best endeavours, our team has been unable to conclude revised terms
which are acceptable to both the Government and ourselves and, therefore, we
have decided that it is in the best interests of the Group and our shareholders
to withdraw from the Victorian rail market. Whilst we have given the Government
notice that we are to end funding, we are committed to an orderly handover of
our train and tram operations, working alongside the Government, and will
endeavour to ensure minimal disruption for both passengers and employees.'
- E N D S -
There will be an analyst conference call at 1000 hours on 16th December -
details are available from Financial Dynamics on 020 7269 7211/7247.
For further information, please contact:
Phil White, Chief Executive
Nicola Marsden, Group Communications Director
National Express Group PLC Tel: 020 7529 2000
Steve Jacobs/Ben Foster
Financial Dynamics Tel: 020 7831 3113
Notes to Editors
1. National Express was awarded three of the five franchises on offer in
the privatisation of the Victorian transport system in June 1999:
> The 10-year V/Line Passenger franchise, which operates rail and coach
services linking central Melbourne with destinations throughout the State of
> A 15-year franchise for Bayside Trains (renamed M>Train), which operates
a network of nine rail lines serving the northern, western and south-eastern
suburbs of Melbourne.
> A 12-year franchise for Swanston Trams (renamed M>Tram), which operates
a fleet of 275 trams across a network of 18 routes in the inner north-western
and south-eastern suburbs of Melbourne and the Central Business District.
This information is provided by RNS
The company news service from the London Stock Exchange