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By BFN News
National Express PLC ORD 5P (NEX)
Bus and train operator National Express said overall, trading remains resilient, despite the increasing challenges of austerity. Group profit is on target to meet expectations for the year. In the third quarter to end-September there was a strong performance in UK Bus, reflecting continued investment in fleet and improved customer service. An excellent operational performance in Rail supported good revenue growth and profitability. The successful start-up to the new school year in North America school bus, following a strong bid season and 97% contract retention. There were 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. The group enjoed a continuing resilient performance in Spain, in the face of increased austerity pressure. Dean Finch, Group CEO, 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.” Spain 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 and Morocco. North America 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. UK Bus 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. UK Coach 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. Rail The 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. The 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). The Group said it 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, the developing pipeline of opportunities in new and liberalising markets will present attractive avenues for growth. Story provided by StockMarketWire.com
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