Corporate news

Trading Update

National Express Group PLC ("National Express" or "the Group") today reports its Trading Update for the period 1 January 2020 to 31 March 2020 ("the period").

Our colleagues

Tragically, we have lost two colleagues to Covid-19. We are providing support to both families and they have our utmost sympathy at this incredibly difficult time. Both were highly-regarded colleagues and will be very fondly remembered by all who knew them.

Across the Group, we have many colleagues self-isolating and some are receiving treatment for Covid-19. They have our best wishes and any support they require. Our priority remains protecting the safety of our colleagues and customers and we continue to be guided by the government advice in all countries we operate in.

Overview

• In the first two months of the year, the Group delivered significant year-on-year revenue growth of 17%.
• Since the impact of Covid-19, the Group has seen a significant decline in revenue as services have been withdrawn. Nonetheless, overall revenue for the period was still up 8.9% year-on-year in constant currency (9.4% on a reported basis).
• We have acted swiftly and decisively to protect the business and made good progress with national governments and customers, as well as cost management across the Group.
• Even in this unprecedented lockdown, we continue to generate positive EBITDA and cashflow. Our half year cash flow projection has improved further since our 19 March 2020 statement.
• We have improved liquidity with over £200 million cash on deposit and more than £1 billion in undrawn committed facilities.
• Moody's (Baa2) and Fitch (BBB) have reaffirmed our ratings, whilst also revising the rating outlook to negative from stable.
• In light of Covid-19, the board is withdrawing its recommendation for a final dividend.

Financial highlights

* Includes revenue from NEAT

** Includes revenue from new RRX contracts

• Before Covid-19 lockdowns were imposed, every division in the Group was trading strongly.

Community contribution

The pandemic has reinforced the fundamental and essential role our services play in the communities we serve. The extraordinary action of governments and authorities only reinforces the critical importance of our services.

Across our businesses we have also sought to step-up and provide crucial new services that are helping keyworkers or the most vulnerable during the crisis:

• In the UK (through National Express Accessible Transport (NEAT)) and in North America (through our school bus drivers) we are delivering food packages to vulnerable groups;
• In North America we are helping to distribute learning materials to students at home;
• In Dundee and the West Midlands in the UK and Cantabria in Spain, our bus services are free for health workers travelling to and from work;
• In the UK, NEAT is also running shuttle buses to and from hospitals from train stations across the West Midlands;
• ALSA has made spare fleet available to the Spanish Emergency Military Unit (EMU). So far it's been taken up by the EMU in Madrid, Leon and Sevilla;
• And finally, Helio Garcia, a driver trainer from Aviles, Spain is manufacturing face masks from home for local hospital workers and police.

Business updates

North America

Services continue to operate at much lower volumes, broadly in-line with our 19 March 2020 statement:

• All North American schools are currently closed, with no services operating;
• Transit volumes are down around 75%;
• Shuttle volumes down around 85%.

Good progress with federal government support and customer payment:

• The US stimulus package signed by President Trump on 27 March 2020, provides significant funding to support transit and school bus operators:
  • The schools element of the stimulus package amounted to $13.5 billion and requires "education establishments to pay contractors to the maximum extent possible":
    • We are currently receiving over 60% of pre-Covid-19 revenue and expect that figure to grow as we continue discussions with customers in light of the stimulus package's provisions;
  • The transit support element of the stimulus package was worth $25 billion, to enable authorities to maintain key worker networks and cover employee costs of those laid-off:
    • We are currently receiving over 60% of pre-Covid-19 revenue.
• Our shuttle business continues to see a significant majority of customers pay full service rates; we are receiving around 70% of our pre-Covid-19 revenue.

Cost-reduction actions:

• All variable costs have been reduced in-line with service reductions;
• Where a customer is not paying to retain staff, employees have been laid-off (and in receipt of the enhanced unemployment benefit included in the stimulus package);
• All capital expenditure is on hold.

ALSA

Services continue to operate at much lower volumes, broadly in-line with our 19 March 2020 statement:

• Across the whole of ALSA around 25% of services are running;
• Those that are - in both Spain and Morocco - are after agreement with the local authorities.

Our contract structures provide strong mitigations, as set out in our 19 March 2020 statement:

• Around €200 million of Spanish contracts (around 20% of ALSA's total revenue) are gross cost;
• We continue our negotiations with the Madrid authorities to move the payment for our services there to a per kilometre basis, and expect a resolution soon;
• Our largest Moroccan contract, Casablanca, is a gross cost contract, with ALSA only at risk on 10% of the revenue. Casablanca accounts for around half of Morocco's revenue;
• Taken together this means that 40% of ALSA's revenue is protected from demand volatility;
• In addition to these existing protections and mitigations, the Spanish Government has said that companies will be able to rebalance the economic equilibrium of contracts through an extension in their duration. This could extend the life of a number of our contracts and enable us to recoup lost revenue over the coming years.

Cost-reduction actions:

• All variable costs have been reduced in-line with service reductions;
• In Spain around half of our employees have moved on to the government income protection scheme, where 70% of their salary during a lay-off is met by the Spanish state, allied to a suspension of employer tax payments. Further, Spanish law mandates that there will also be a mechanism to claim later for the costs of those employees not included in the furlough scheme;
• The Moroccan Government has launched a scheme covering the salary of any employee not working, at no cost to the company. Around half of our employees have been moved onto the scheme;
• All capital expenditure is on hold.

UK

Services continue to operate at much lower volumes:

• We are running 46% of our West Midlands bus operations, after agreement with Transport for West Midlands, to sustain an emergency key worker network;
• We temporarily suspended coach services until further notice from 23.59 on 5 April 2020:
  • A small number of private hire contracts (principally for local authorities, the Ministry of Defence and NHS) continue.

Welcome commitments from national and local authorities:

• The Department for Transport announced on 3 April 2020 that it would provide further funding to support key worker bus networks across England. This follows earlier commitments to maintain Bus Service Operators Grant at pre-pandemic levels, as well as a strong encouragement to local authorities to continue concession payments on a similar basis. Combined, this funding allows us to continue to work closely with Transport for West Midlands through the Bus Alliance to deliver a bus network that provides services for key workers during the pandemic. We are confident that the range of government measures mean we are able to offer a bus network in the West Midlands on a break-even basis during the pandemic;
• Around a half of our UK workforce has been moved onto the government's Coronavirus Job Retention Scheme.

Cost-reduction actions:

• All variable costs have been reduced in-line with service reductions;
• The suspension of our coach network allows us to significantly reduce our costs of operations whilst demand is so low, thereby strengthening the Group's overall operating cash position;
• All capital expenditure is on hold.

German Rail

• Service levels have been reduced by around 30%;
• Our larger contract is on a gross cost basis and beyond this the passenger transport authorities are fully covering the costs of the services we are running.

In every business we are staying in close contact with furloughed or laid-off colleagues, to check on their welfare and make operational start-up a quick and smooth as possible. We have similarly sought to maintain strong relationships with our supply chain partners.

Group cash flow and liquidity

Our cash flow position has strengthened since our 19 March 2020 statement, where we said we expected our cash flow to be positive over the next three months.

We have secured a further £800 million of additional facilities, including £600 million from Her Majesty's Treasury's and the Bank of England's Covid Corporate Financing Facility (CCFF). We now have over £200 million of cash on deposit and in addition, undrawn committed facilities of over £1 billion. These extra facilities provide us with further security through all foreseeable scenarios during this temporary shutdown.

The Board recognises the importance of a dividend to our shareholders but equally balances this with the exceptional circumstances that the Covid-19 pandemic represents. Given these exceptional circumstances, the Board is withdrawing its recommendation to our shareholders to declare a final dividend for the year ending 31 December 2019. As such, the resolution proposing the declaration of the final dividend in the Company's Notice of 2020 AGM will not be put to the vote at the AGM. The Board will keep future dividends under review and will restart payments when it is appropriate to do so.

All members of National Express PLC Board have volunteered pay sacrifices in light of the pandemic. 

Dean Finch, National Express Group Chief Executive, said:

"I would like to pay tribute to our two colleagues who have tragically lost their lives to Coronavirus. They were much respected colleagues and will be sorely missed. We are providing their families with support during this very difficult time. Equally, we pass on our best wishes to other colleagues suffering from the virus and hope for their safe recovery. Our priority remains protecting the safety of our colleagues and customers. I am particularly proud of the excellent work my National Express colleagues are doing during this exceptionally difficult period.

"We continue to make important progress in dealing with the impact of the pandemic across our businesses. We are combining self-help with productive discussions with customers, national governments and relationship banks. We are also determined to play our part by continuing to provide essential services where they are still needed. This pandemic has reinforced the absolutely fundamental and essential role our services play in the communities we serve. With their exceptional actions, governments and authorities have clearly recognised this as well.

"National Express went in to this crisis with revenue up strongly across the Group. I remain confident that we will emerge out of this unprecedented period with our portfolio of strong assets ready to return to delivering industry-leading service to our customers."