National Express Group PLC ("the Group") today announces its pre-close trading update for the half year ending 30 June 2008. The Group is trading in line with management expectations, with significant year on year earnings growth expected for the half year and full year.
In the UK, the integration of our operations into a single division based in Birmingham is now complete and has delivered the anticipated annualised £11m cost savings.
Across our UK business, we expect our continued focus on providing excellent value fares to drive revenue growth and we anticipate increased interest in our products as the price of fuel encourages a switch from car to public transport as part of a broader national trend. As a percentage of our revenue, fuel does only represent 5% in trains, 14% in coach and 10% in bus. We remain confident that we can recover additional fuel costs through a combination of innovative pricing mechanisms and improved operating efficiency.
Our trains business has performed strongly in the first half of the year achieving 9% growth in passenger revenue.
Specifically, National Express East Coast continues to see excellent revenue growth of 11%. Punctuality, which we made a priority, is improving and daily performance is now regularly above 90%. Our focus on first-rate customer service, a key tool in attracting more people back to rail, is seeing positive results. The franchise plan for the first year is on track.
The relaunch of 'one' as National Express East Anglia ("NXEA") has been well received and the completion of the inner suburban train fleet refurbishment programme improved service standards for many passengers. NXEA has seen revenue growth of 6%, notwithstanding the previously reported trend of a softening of demand on Stansted Airport routes.
In 2007, we launched dot2dot, our new airport transfer service. Revenue growth in the second quarter of the year has not been as strong as anticipated, although plans are in place to maximise the growth potential over the summer period. Any increased start up costs we see will not affect our outlook for the year.
Revenue growth in our bus business was 7%. The West Midlands saw 6% growth driven by higher patronage, fares increases and the continued strong performance of our Quality Partnership routes. In London, we have achieved a 9% increase in revenue.
Our Coach network saw revenue growth of 5%. We continue to develop new revenue streams and the first half of this year has seen a strong performance from both our rail replacement coaching business and our special events business.
In North America we have achieved like-for-like revenue growth of 10%. This growth is built on a combination of the successful 2007 bid season and organic route growth, but has also benefited recently from increased field trip revenue.
The 2008 bid season is nearing completion and we are pleased with our performance to date. Despite a bid season where less new business has been available for tender than in a normal year, we have won contracts with net annualised revenue of $15m and have enjoyed our best ever conversion season securing four new contracts. In terms of our own business, we retained over 95% of our existing contracts, again maintaining the excellent performance of recent years.
We continue to focus on the Business Transformation project which we believe will make National Express extremely competitive in both the traditional bid season as well as in respect of conversions, where we will be able to offer a quality, cost effective solution to those school Boards considering outsourcing. Overall the project is proceeding well and we are very encouraged by both employee and customer response in anticipation of our rollout, which starts in August.
We continue to enjoy 5% revenue growth in Spain, which is in line with our expectations. The integration of Continental-Auto into our Alsa operation is proceeding to plan and will be largely complete by the half year.
As the number one private operator of public transport services in Spain, we are well positioned to take advantage of the expected further liberalisation of the Spanish transport market. We believe that the positive regulatory environment enjoyed by the coach and bus industry will continue to support the growth of our business.
The Group has made a good start to 2008 and expects significant year on year earnings growth for the half year and full year.
As previously stated, the Group has all its fuel hedged for 2008 and is 47% hedged for its total requirement in 2009.
Group Finance Director
We are delighted that Jez Maiden, currently CFO of Northern Foods Plc will be joining us as Group Finance Director later in the year. Jez has a strong track record in strategic and financial planning, business development and investor relations and we look forward to welcoming him to the National Express team.
The revenue growth figures disclosed above are the like-for-like growth in revenue achieved when comparing the five months ended 31 May 2008 to the five months ended 31 May 2007. For acquisitions and train franchises, the like-for-like adjustment restates the 2007 results to assume ownership of the business in both periods. Like-for-like revenue growth is assessed in local currency and so is not affected by changes in foreign exchange rates.
The interim results for the six months to 30 June 2008 will be announced on Thursday 31 July 2008.
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For further information, please contact:
National Express Group PLC +44 7795 267 453
Richard Bowker, Chief Executive
Gareth Wright, Acting Group Finance Director
Maitland +44 20 7379 5151
Neil Bennett / Suzanne Bartch / Brian Hudspith