Corporate news releases
National Express Group PLC ("National Express" or the "Group"), a leading international public transport group, operates bus and coach services across the UK, continental Europe/North Africa and North America, together with rail services in the UK.
National Express Group PLC ("National Express" or the "Group") issues its Interim Management Statement for the third quarter ended 30 September 2010.
Continuing the good progress reported at the Half Year, the Group has delivered strongly against its recovery targets in the third quarter of 2010. We have achieved overall revenue growth despite a continuing backdrop of challenging economic conditions. Margin improvement has been good, driven by our cost reduction, operational efficiency and yield management initiatives. Strong progress has been made in the UK Bus margin improvement programme, whilst in UK Rail we have extended our profitable East Anglia franchise and we are progressively delivering our business recovery programme in North America. We remain on track to achieve the Board's profit expectations for the 2010 full year.
The economic climate in Spain has remained subdued but broadly unchanged during the third quarter. Underlying1 revenue is broadly flat year-to-date, set against a sharp decline over the same period in 2009. The trend in passenger demand for inter-city travel has steadily improved, aided by a reduction in rail fare discounting on competitive routes. Growth in urban revenue has reduced but there has been limited direct impact from government austerity measures.
In this environment, the Alsa business continues to perform well. Greater operational efficiency is reflected in a reduction in kilometres operated of 3% year-to-date. The cost reduction programme implemented over the past 12 months continues to deliver margin benefit, alongside lower fuel costs. September saw the successful commencement of our major new urban bus contract in Agadir, Morocco, with the first 80 buses now operating.
The North American business returned to revenue growth in the third quarter with the successful start-up of 1,600 new routes secured in a productive 2010/11 bidding season which saw 5% net new revenue growth. Encouragingly, existing contract volumes are broadly flat year-on-year. Year-to-date underlying revenue is 1% lower, with an improving trend reflecting contract wins for the new school year.
With increasing revenues in a highly competitive market, our operating margin recovery programme remains on track to steadily improve profitability during the remainder of 2010 and through 2011. Benefits of operational cost control and overhead cost reduction have been secured. We are now embarking on the more complex areas of fleet and procurement efficiency to complete the $40 million annual cost saving target by the end of next year, with new dedicated resource in place to support this process. We are pleased with our progress to date.
Progress on the Bus recovery plan has been excellent. Third quarter normalised2 operating profit was up by £5 million year-on-year, reflecting significantly stronger yield management and operational efficiency gains. Patronage fell slightly, reflecting the restructuring of ticket prices and continued network optimisation. Underlying revenue was up by 2% year-on-year in the third quarter, with passenger revenue per mile 5% higher year-to-date.
Fare adjustments during the summer of 2010 have delivered a rebalancing of the fare basket. This is reflecting appropriate incremental journey pricing, whilst driving more efficient network usage, with a 5% reduction in driver hours in September compared to the prior year. Focused marketing is increasing awareness and reach locally, whilst investment in fleet has included 20 hybrid vehicles to drive the greener transport agenda. With one depot closed and restructuring of driver wages underway, our recovery programme targeting industry average margins is set for further delivery.
The underlying revenue in UK Coach increased by 4% year-to-date. Competition from advanced purchase rail tickets remains strong. However, we have continued to enjoy good growth in airport and event business, once again partnering the Glastonbury Festival and providing coach transport for pilgrims to the recent papal visit to Birmingham. Ongoing investment in marketing, new coach stations to improve customer experience and a focus on maintaining market leadership have continued to limit margin, as expected. New divisional leadership is working to further improve customer service and leverage our existing network and channel strengths.
The Rail business has performed strongly, driving better customer service and profitability, whilst also seeking contract extensions. c2c achieved a rail industry punctuality record3 of 98.8% in August, reinforcing its leading position in UK rail franchise delivery. National Express East Anglia secured an extension in its franchise to October 2011, as part of the UK government's rail franchise review. With underlying revenue 7% higher in the third quarter, profitability in our rail business continues to grow.
Net debt in the third quarter increased in line with seasonal norms. We have completed the majority of our £125 million second half year capital expenditure programme, adding new fleet in the North America and Spain businesses. Our focus on operational cash generation continues and the Group's debt gearing ratios are expected to remain robust at the end of the year. Following completion of the Group's refinancing programme in July, we now have an average debt maturity of 6 years and no refinancing is planned before 2014. The Group reconfirms its expectation of a return to dividends at year end, subject to final overall trading performance.
National Express Chief Executive, Dean Finch, commented as follows:
"Whilst the economic outlook remains challenging, National Express is well placed to drive margin improvement through its growth, yield management and cost control initiatives. We are making great progress in UK Bus, Rail and North America, whilst delivering strong, stable returns in our other two businesses, Spain and UK Coach. We are driving real improvement for shareholders and customers alike."
|National Express Group PLC|
|Jez Maiden, Group Finance Director||0121 460 8657|
|Nicole Lander, Group Director of Communications||0121 460 8401|
|Stuart Morgan, Head of Investor Relations||0121 460 8658|
|Maitland||020 7379 5151|
There will be a conference call for research analysts at 09:00am, 19 October 2010. For details please contact Rebecca Mitchell at Maitland on +44 20 7379 5151.
- Underlying revenue 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.
- 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.
- PPM 4-week period ending 21 August 2010