National Express Group PLC on Oct. 29, reports its Interim Management Statement for the period from July 1, to Sept. 30.
Overview
The Group has continued its strong progress in the period. Revenue has grown year on year in every division on a constant currency basis over this important core summer period. Our focus on operational excellence continues to open new market opportunities, deliver strong cash flows and secure widespread external recognition for us as the leader in the markets we serve.
Year to date, like-for-like Group operating profit is 6 percent higher after excluding rail and Middle East bid costs on a constant currency basis and up 16 percent on a reported basis. Our businesses have performed well in the period and as we enter the final quarter, we remain on course to deliver our cash flow target for the year and are confident of delivering good-quality growth for 2015 as a whole.
Highlights:
- Revenue growth in every division
- Group revenue up 3 percent on a constant currency basis with revenue up in every division.
- Like-for-like Group operating profit up 7 percent in the period, after excluding rail and Middle East bid costs and at constant currency.
- Continued excellent performance in c2c ahead of bid plan’s forecasts, with 10 percent growth in revenue and 5 percent passenger growth year to date.
- Record passenger numbers, the on-going successful roll out of our Revenue Management System and continued strong growth in Morocco have delivered increased revenues of nearly 3.5 percent on a constant currency basis in our Spanish division.
- Revenue growth in North America of 3 percent excluding targeted exited contracts, resulting in further progress on our margin improvement strategy.
- Commercial revenue growth of 2 percent in UK Bus and approval for a five year ‘Bus Alliance’ by the West Midlands ITA, succeeding our existing partnership.
- Strong revenue growth of 3.5 percent in our core UK Coach business, including a record for July passenger numbers
Delivering on new market opportunities
- Announced as preferred bidder to operate bus services in Porto, our first entry into the Portuguese market.
- Won three new US transit contracts this year, taking annualised revenues to over $100 million, an increase of over 20 percent.
- Begun operating services in Khouribga, our fourth contract in Morocco.
- We have been provisionally awarded one of three contracts under the Spanish government’s Imserso pensioner holiday scheme – this is currently the subject of a legal challenge from competitors which we understand will be concluded within the next few weeks.
- First rail service to begin operating in Germany in December; bid submitted for another German rail contract and an active pipeline of attractive bidding opportunities during 2016.
- Preparing our bid for the East Anglia rail franchise, to be submitted in December.
- Shortlisted for the Manchester Metrolink contract, with bid submission next year.
Dean Finch, National Express Group Chief Executive, said, “I am delighted that our focus on operational excellence and delivering for our customers is being recognised in our results, our success in new markets and the many awards we have recently won. Our reputation for delivering excellent services for our customers at great value has helped us grow our business, open new markets and generate strong cash flows and grow shareholder returns.
“In recent months we have won or started new contracts in Spain, Portugal, Morocco and North America and we will shortly start running our first trains in Germany. I look forward to continuing to build on this success in the coming months and years.”
Delivering operational excellence
During the period, National Express’ focus on providing excellent services to its passengers and the communities it serves has helped drive growth.
National Express was named as the highest ranked public transport operator in the UK Customer Service Index.
Our rail service, c2c, continues to deliver industry-leading punctuality and was named Passenger Operator of the Year at the National Rail Awards. This performance helped c2c to deliver a performance above the original bid forecasts, with revenue growth up 10% and a 5% rise in passenger numbers year to date.
In UK Bus, a recent customer satisfaction survey by Transport Focus delivered the best results we have ever achieved and we were delighted to win Improvements to Bus Services for our West Midlands operations at the National Transport Awards. This has helped commercial revenues in UK Bus grow by 2% and secure approval for our five year ‘Bus Alliance’ with the West Midlands ITA, which will succeed our existing partnership.
UK Coach attracted record passenger numbers in July, which helped to deliver 3.5% core revenue growth. This has been complemented by new commercial partnerships, such as one with raileasy.co.uk. We have secured a five year extension to our operations at Heathrow’s Central Bus Station and have strengthened our presence at Stansted Airport through a new contract to operate coach services to and from the airport and a new staff shuttle contract commencing in the period.
ALSA carried record passenger numbers during the period as it continued to benefit from the Revenue Management System put in place last year to improve its performance against deeply discounted rail tickets. Morocco continued its strong revenue and passenger growth.
In North America, our continued focus on excellent customer service has helped us maintain a contract retention rate of 99% excluding those contracts we have chosen to exit. This has helped drive a year on year growth in revenue.
Achieving significant success in bids and new services
We have continued to secure a series of significant new contracts that have broadened our footprint as an international public transport group.
We begin our first rail services in Germany in December; and have already secured a total €2.6 billion worth of German rail contracts with the RME and RRX services. We have provided the information required by the Munich High Court to the local authority so it can determine the award of the €1.4 billion Nuremberg S-Bahn contract, with a decision expected in mid-November. We have an active pipeline of attractive bids in Germany during 2016.
We have been provisionally awarded one of three contracts under the Spanish government’s Imserso pensioner holiday scheme. Our award is currently the subject of a legal challenge from competitors which we understand will be concluded within the next few weeks so this important scheme can begin to provide its services. Significantly, we expect to retain our first two concessions to come up for renewal under the new system, having achieved the highest technical scores, demonstrating our ability to compete under the changed arrangements.
Morocco has also maintained its strong growth and has recently begun operating its fourth contract, in Khouribga. We believe there are further growth opportunities in Morocco.
We have also been named preferred bidder in Porto, worth a total of €500 million across the 10 years of operation. This is our first entry into the Portuguese market and we look forward to delivering the necessary improvements to enhance passengers’ services.
In North America our Transit business has continued to grow with another three contracts added this year. This takes the division to an annualised turnover of over $100 million, an increase of over 20%.
In Bahrain, our operations were fully rolled out ahead of schedule, with a fleet of 141 buses and a smartcard system in place. Over four million passenger journeys have been made on our services since the start of operations in February. We continue to believe there is further opportunity for growth in Bahrain and other countries in the Middle East as they look to bring international transport expertise to their local services.
In the U.K. we are working on our bid for the East Anglia rail franchise which will be submitted in December and we have been shortlisted for the Manchester Metrolink contract, with a decision due next year.
Financial position
We remain on track to deliver our target free cash flow of £100 million in 2015. We expect to close the year within our target of 2-2.5 times net debt to EBITDA.