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National Express (NEX)

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Wednesday 06 May, 2009

National Express

Interim Management Statement

RNS Number : 7448R
National Express Group PLC
06 May 2009


National Express Group PLC

AGM and Interim Management Statement

National Express Group PLC ('National Express' or 'the Group') is today holding its Annual General Meeting in London.  The following update on trading is provided for the first quarter, ended 31 March 2009.

Trading update

In 2008, National Express delivered strong revenue and profit growth. When we announced these results in February, we cautioned that 2009 would present many global economic challenges, from which the transport sector would not be immune. We noted that, while the majority of our businesses benefit from being less sensitive to economic changewe would nonetheless face difficult conditions, not least in our UK rail business, where the terms of our East Coast franchise were agreed in a very different economic climate in 2007.

In the first three months of 2009, market conditions were indeed challenging.  Total reported Group revenue increased by 7.9% benefiting from currency movements impacting the revenues of overseas operations.  

UK Bus and Coach performance was resilient in the first quarter with underlying* revenue growth of 4.1%.  Whave secured West Midlands-wide Partnership Agreement, enabling greater joint working with Centro and the West Midlands Integrated Passenger Authority, which is expected to lead to new and improved transport links across the region. Coach saw lower growth in the first quarter; however, we have recently seen increased passenger numbers, particularly at Easter, with holidaying in the UK clearly becoming more popular.

There was a continued slowdown in revenue growth in UK Rail in the first quarter.  Underlying revenue growth in the period on East Coast was 0.3%, while East Anglia grew 3.8and c2c 4.6%.  Performance in the East Coast franchise reflected changing consumer behaviour, with the franchise not benefiting from revenue support from the UK Department for Transport ('DfT') until late 2011. By contrast, the East Anglia franchise already benefits from revenue support and, in April, entered into a new contract with the DfT to expand capacity during the peak commuter travelling period, which is expected to be worth £180 million over the remaining franchise period.

We have achieved our target to deliver over £15 million of annual cost savings from the UK rationalisation programme announced in December 2008, of which a significant part is in the rail business, with further savings now identified for delivery later in 2009.  

In Spaintotal revenue in local currency terms was unchanged, as the benefit of small acquisitions in 2008 offset a 3.2% underlying revenue reduction in existing business, due to the impact of the economic slowdown.  However, the adverse impact is being significantly offset through a major cost reduction programme, while Easter has seen some signs of improved travel activity.

The North America school bus business continues to trade positively, with underlying revenue up 9.4 percent and an improving operating cost performance.  Despite an increased level of outsourcing enquiries, this has been a relatively slower period for new contract tendering.  The Business Transformation project continues to progress to plan.

Financial position

In our annual results, we outlined a number of 'self help' initiatives that the Group is undertaking to strengthen its balance sheet against a challenging economic backdrop.  These initiatives included:

  • a rebasing of the Company's final dividend;

  • improvements in cash managementwith a reduction in working capital;

  • ongoing cost reduction in the UK and elsewhere; and

  • a significant reduction in capital investment. 

Since the announcement of these initiatives, good progress has been made towards the goal of realising incremental cash benefits in excess of £100 million in 2009 and the Group remains on track to achieve this target.  In addition, annual benefits from cost rationalisation totalling over £40 million are expected to be delivered across the Group.

As outlined above, the performance of the Group, particularly in UK Rail, is being affected by the challenging economic environment.  As previously announced, the Group is engaged in regular discussions with the DfT which include the impact of the recession on the East Coast franchise.  

In addition, the Group's key debt covenant reverts at 30 June 2009 to a tighter, more typical level**.  The Board continues to review a range of options to accelerate the reduction of the Group's borrowings, to strengthen its financial position and to provide additional headroom around its debt covenants.  We will update shareholders once that review reaches a conclusion.

* Underlying revenue compares the current year with the prior year period on a consistent basis, including adjusting for the impact of currency, acquisitions and disposals, together with the estimated impact of advance travel and Easter.

** As noted in the 2008 results, June 2009 will see the Group's banking covenants returning to their normal level with maximum debt gearing ratio of 3.5 times EBITDA (following a relaxation for the first three half year period end tests after the Continental Auto acquisition in November 2007).


National Express Group PLC   

Jez Maiden, Group Finance Director     

020 7506 4324

Nicole Lander, Director of Communications

0121 460 8401    


Neil Bennett/Suzanne Bartch/Brian Hudspith

020 7379 5151

This information is provided by RNS
The company news service from the London Stock Exchange