National Express (NEX) - Interim Management Statement
RNS Number : 3726P
National Express Group PLC
24 October 2012
24 October 2012
National Express Group PLC
Third Quarter 2012 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 reports its Interim Management Statement for the third
quarter ended 30 September 2012 (the "third quarter") and the nine months
ended 30 September 2012 (the "year-to-date").
Overall, Group trading remains resilient, despite the increasing challenges of
austerity. Group profit is on target to meet the Board's expectations for the
Key developments in the third quarter have included:
· Strong performance in UK Bus, reflecting continued investment in fleet and
improved customer service;
· Excellent operational performance in Rail, supporting good revenue growth
· Successful start-up to the new school year in North America school bus,
following a strong bid season and 97% contract retention;
· Initial signs of a return to overall passenger volume growth in UK Coach
through fare promotion, to begin to offset the adverse impact of the
withdrawal of the government's concessionary travel scheme; and
· Continuing resilient performance in Spain, in the face of increased
Dean Finch, Group Chief Executive, commented:
"We continue to deliver a robust performance, despite austerity pressures on
public and consumer budgets. We are focused on our fleet investment, on
driving greater cost efficiency and are relentless in our focus on customer
service. We are playing an active part in the current review of the UK rail
refranchising programme and are developing a pipeline of opportunities across
our portfolio in the US, Europe and North Africa to drive medium-term growth."
Trading at Alsa has remained resilient, reflecting the great value services
provided by our bus and coach operations. Urban bus revenue has continued to
grow, although we have experienced cutbacks to contracted services by some
municipal authorities. Our long-term contracted business in Spain grew revenue
by 3% year-to-date, while Morocco was up 20%. The third quarter saw some
slowdown in the Intercity business due to vacation travel, with sales 2%
lower. We expect these challenging conditions to continue, with profit in
local currency slightly lower year-on-year.
The concession to operate urban transport in Marrakech has recently been
extended for a further five years, to June 2019, whilst the process of
intercity concession renewal has been deferred, with existing concessions
extended. This programme is expected to restart over the next 12 months.
Overall revenue continues to grow, benefitting from previous acquisitions and
bid wins, including Agadir, Pamplona, Bilbao and Madrid City Tourist services.
We continue to develop a good bid pipeline of further opportunities in Spain
School bus revenue grew 2% year-to-date. Start-up of the new school year has
progressed well, with over 800 net new buses added in 2012 from 26 new
contracts, including 8 conversions. Contract retention was 97% and average
renewal pricing rose by nearly 2%, an improvement over 2011. Continued
budgetary pressures on our school board customers have resulted in the
curtailment of some discretionary routes on existing contracts.
The integration of Petermann has progressed smoothly and is on track to
deliver the forecast synergy benefits. During 2012 we have completed three
small acquisitions in the transit market, giving us a presence in each of our
target segments of paratransit, shuttle and suburban fixed route. Our
investment in business development in this market is generating a good
pipeline of bid opportunities.
The UK Bus business is performing well. Revenue and profit have continued to
grow, with commercial revenue up 3% year-to-date. Overall ridership is stable,
with positive results seen from the deployment of over £30m of capital
investment in 2012. Both labour costs and increased concessionary fares have
been secured under new medium term arrangements.
This has been a difficult year for the UK Coach business. The withdrawal of
the government's concessionary scheme has severely affected the affordability
of travel for our senior citizen passengers, with a million fewer
concessionary journeys expected in 2012. To offset this, we have invested in
our network, adding new routes and frequencies, with non-concessionary revenue
on the express coach business up 1% year-to-date. With intense price
competition on competing rail journeys, we have discounted fares through the
summer, driving stronger non-concessionary volume growth, up 4% year-to-date
and fully offsetting the concessionary passenger shortfall for the first time
in September. Olympic-related contract work also benefitted the third quarter;
however, we expect the majority of the £15 million annual concessionary income
loss to impact profit in the current year.
Our c2c rail franchise continues to lead the industry, winning Train Operating
Company of the Year at the National Transport Awards. Revenue continued to
grow, supported by a successful Olympic and Paralympic Games, which saw c2c
provide an extra 1.5 million seats. The franchise has now set a new record for
punctuality at 97.2%*. We had submitted a strong bid to retain c2c from May
2013, prior to the overall refranchising process being frozen by the
Department for Transport on 3 October. Our Great Western bid is also ready for
submission. We are working with the Department on its current review and
continue to support the refranchising programme.
Our business development team is working on a pipeline of smaller rail
contract tenders in Germany, and is monitoring planned future rail
liberalisation in Spain.
Financial position and outlook
The Group's financial position remains strong, with substantial headroom under
our debt facilities and a sound dividend policy. Fitch Ratings recently
reaffirmed its stable, investment grade rating of the Group.
The Group has completed its fuel hedging programme for 2013, at an average
Brent oil equivalent price of $100/barrel (48 pence/litre, compared to 43p for
2012). This will result in 2013 fuel costs increasing by approximately £11
million year-on-year (UK Bus £3m, Spain £4m, North America £4m).
Further analysis of the forthcoming IAS 19 pension accounting change in 2013
has confirmed a limited adverse impact, of approximately £2 million to the UK
Bus division earnings, with negligible effect on operating profit in other
divisions or on the Group interest charge.
The Group remains on track to deliver its profit expectations for 2012. The
outlook for 2013 remains challenging with low economic growth, government
funding pressure and fuel cost inflation likely to constrain progress.
However, our developing pipeline of opportunities in new and liberalising
markets will present attractive avenues for growth. With our proven management
team, the diversity of our businesses and continued growth in demand for high
quality public transportation, we have confidence in our long term prospects.
2012 revenue growth
First First Third Year to
quarter half quarter date
Underlying Intercity 3% -1% -2% -1%
Urban - Spain 4% 4% 2% 3%
Urban - Morocco 7% 20% 20% 20%
Other operations -23% -22% -28% -24%
Total revenue 1% 2% 3% 2%
Underlying School Bus 6% 3% -1% 2%
Total revenue 8% 11% 25% 14%
Underlying Commercial 4% 3% 3% 3%
Concession -3% -2% 2% -1%
Total revenue 2% 1% 3% 2%
Underlying Express 6% 3% 0% 1%
Express -37% -37% -43% -39%
Total revenue 1% -2% 2% 0%
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
There will be a conference call for investors and analysts at 0900 on 24
October 2012. Details are available from Laura Dean at Maitland.
All references to revenue and profit are on an underlying basis (unless
otherwise stated), 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.
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.
*c2c achieved a PPM (punctuality performance measure) of 97.2% on a moving
annual average (MAA) basis and a 4-week PPM of 98.7% in the period to 15
This information is provided by RNS
The company news service from the London Stock Exchange
IMSLLFVDIELVFIF -0- Oct/24/2012 06:00 GMT
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