National Express operates safe, reliable, convenient and good value public transportation services.
We do this in both regulated and unregulated markets, and provide services to our customers who are private individuals, companies, school boards or public authorities.
National Express generates revenue from two principal sources. The Group engages in multi-year contracts with bodies such as school boards in North America or local authorities in Spain and Morocco and these make up 48% of revenue. Revenue is generated either on a per mile/kilometre basis, or per route travelled. The Group generates a further 38% of revenue through ticket sales to the public, such as in the UK bus and coach businesses, coach and some bus services in Spain and Morocco, and the German rail business. In these, National Express is marketing the product and taking revenue risk. Concession revenue from local authorities in the UK, Spain and Germany delivers 3% of Group revenue with charter/private hire contributing a further 6%. The remaining 4% is from other revenue streams such as on-board entertainment, SMS alerts, booking fees and advertising.
The Group uses technology to support its revenue growth. Our Revenue Management Systems (‘RMS’) enable us to segment our customer offer through a better understanding of customer needs and purchasing behaviour to drive revenue through differential pricing depending on time of journey, ticket type, buying channel etc. Our customer facing apps support our customers in getting the product they need at a price they can afford.
Converting it to profit
National Express margins are industry leading. We focus on delivering operational excellence in all we do. Sophisticated network optimisation is a key factor. We optimise peak vehicle requirements and loading factors through review and redesign of our networks, reducing the cost of delivering a high quality service to our customers. We use scheduling software to allow optimisation of routes and asset usage in our student transportation and transit markets in North America. Our diversity and scale are an important factor in managing indirect costs, enabling us to optimise cost and quality across the Group’s supply base.
Delivering cash flow
National Express has a track record of consistently generating cash flow from its operations. The Group has delivered over £785 million of free cash flow over the last five years and is extremely disciplined in its management of working capital and in the conversion of operating profit into free cash
Funding returns and reinvestment
Our first priority is to re-invest in the core business. After maintaining our base business, we invest cash back into the operations to grow, having invested £506 million both organically and inorganically since 2014. This has strengthened our market-leading positions in coach in the UK and in Spain; built out key hub positions in North American student transport; and enabled us to move into adjacencies like urban bus in Morocco or charter in North America. In addition, we can deliver consistent, competitive returns to shareholders. Over the last five years the Company has returned £301 million through dividends, growing dividend per share by 44%.