Trusted through testing times
Dear fellow Shareholder
2020 has, without a doubt, been an unprecedented year for both society in general and businesses everywhere around the world. The impact of Covid-19 has been particularly hard for transport companies, with national and local lockdowns in every market necessitating significant travel restrictions – and even when lockdowns were lifted, the guidance from many governments was for people not to travel and to stay at home wherever possible.
During this period we have really seen the essential nature of public transportation to local communities and economies, providing vital services for transporting, for example, key workers to hospitals and shops and children to schools.
Notwithstanding this, the rapid and significant fall in demand for transportation services meant that, at the peak, 40,000 of our colleagues were either furloughed or temporarily laid off. I am proud of all the work that has been done to constantly engage with our employees across each of our businesses throughout this crisis: from weekly management updates and Q&A sessions through to enhanced wellbeing programmes, our colleagues have remained both informed and considered.
As a company we have not been immune to the ravages of Covid-19, and very sadly we have lost 32 valued colleagues – our thoughts go out to their families and friends.
2020 also saw the end of the Brexit transition period and the UK leave the EU. As I have said previously, we do not expect to suffer any direct consequences as we do not run any scheduled cross-Channel services and we have worked closely with our key suppliers to ensure that there is no disruption to our supply chains.
2020 has also been a time of significant change for National Express, specifically in terms of leadership.
In June, Dean Finch announced his resignation as Group CEO, a position he had held for over 10 years. I would like to thank Dean for his enormous contribution to National Express, through which he has transformed the business into a leading international transport group, with significant growth potential in all our main markets and a strong and effective management team at all levels.
I would also like to thank Chris Davies, our Group CFO, who took the reins and provided a steady hand as interim Group CEO, while the Board concluded the search for a new CEO.
And on behalf of the whole Board, I would like to welcome Ignacio Garat who joined the Group as Group CEO on 1 November, bringing with him extensive international operational and strategic experience. Despite the challenges with the pandemic, Ignacio has made a strong start, visiting all of our businesses and engaging widely across all levels, and we look forward to working with him over the coming months and years.
In addition to Dean’s departure, Matt Ashley left the company on 3 April and both Lee Sander and Chris Muntwyler left the Board on 30 December. I would like thank Matt for his contribution and Lee and Chris for their wise counsel to the Board over their tenures. I am delighted that Chris will remain as an adviser to the Board on safety and environmental matters.
Last year I wrote to you about how in, launching our renewed Vision and Purpose, National Express was not only looking to demonstrate leadership but also to ensure that our ambitions and focus reflect the priorities and earn the trust of all our stakeholders. This partnership approach has helped guide us through the crisis:
- Passengers have trusted us to keep them mobile in a safe and secure way
- and throughout this crisis we have operated at pre-crisis levels of service across our bus networks in the UK, Spain and Morocco
- Customers, be they school boards, passenger transport authorities or corporates, have trusted us to respond flexibly and swiftly to changing circumstances and demand for services
- Colleagues have trusted us to prioritise their safety and wellbeing
- Debt and equity investors have provided us with new funding, trusting us to navigate through the crisis and repay them with superior returns as we emerge strongly
Not surprisingly, our financial performance has been severely impacted by the pandemic. It’s important to remember that before travel restrictions came into force, we were performing very strongly, with revenue up 17% across the Group in the first two months of the year.
The pandemic had an immediate and unprecedented impact on our businesses, with the first lockdowns in the second quarter last year resulting in an 80% reduction in demand for our services which we were able to mitigate to a 50% reduction in revenue, through the strength of our customer relationships across the Group. Notwithstanding the multitude of actions taken, we could not mitigate this level of reduced demand and we have delivered our first operating loss in 11 years.
As a result of all the actions taken, we have experienced a steady improvement over the second half of the year, despite further sporadic restrictions being imposed, and as a result delivered EBITDA towards the top end of our guidance.
The financial position of the Group remains strong and, boosted by the share placing and hybrid issuance, we have ended the year with around £280 million less net debt than we had at the start of the year.
Governments around the world have recognised the essential nature of public transport and we are grateful for the support that we have received from governments in the markets in which we operate. In the UK, we have utilised the furlough scheme whenever mobility has been restricted by government policy. We have also received funds through the COVID-19 Bus Services Support Grant where we have been asked to operate services but with limited occupancy to comply with social distancing requirements. In Spain, we have utilised the ERTE (furlough) scheme to flex services up and down to the appropriate level, in line with government requests. And in North America, funding provided through the CARES Act has enabled customers to make partial payments to their school bus service providers while enhanced unemployment benefits have helped those of our staff where we were forced to shut down services.
In light of the exceptional circumstances and performance in the past year, the Group will not be paying a dividend in respect of 2020. The Board understands how important dividends are to many of our shareholders and we are committed to reinstating dividend payments when performance recovers.
The year ahead
2021 will be a year of transition and we expect performance to rebuild as we progress through the year. The rolling out of vaccination programmes across the world gives us confidence that we will see normality return, although the exact timing of that remains impossible to forecast. When that time comes, I believe that we are well placed to recover relatively quickly given both the high proportion of nondiscretionary journeys taken on our services and the level of pent-up demand for travel.
The environmental commitments we made last year look even more important as governments around the world are looking to hold on to the clean air gains that have been made through the crisis. We have made good progress in the UK this year, rolling out the first of our new zero emission buses. We will build on this in 2021 with Coventry becoming the first of two electric bus cities in the UK and with new hydrogen-powered buses being launched in Birmingham.
Finally, I would like to thank my fellow Directors and all our employees at National Express. It has been a truly tough year and we have had to make many difficult decisions, but I am very proud of how our teams have worked together to get through this unprecedented year.
I remain confident about the future. We came into this crisis in great shape, we have acted decisively through this crisis and we are well positioned to emerge strongly from it.
Sir John Armitt CBE
18 March 2021