National Express reports solid summer across the group

By Josh White

Date: Thursday 18 Oct 2018

National Express reports solid summer across the group

(Sharecast News) - National Express Group updated the market on its trading for the period from 1 July to 30 September on Thursday, reporting a "good summer's trading", describing performance in UK coach as "outstanding", and in the Spanish division as "particularly strong".
The FTSE 250 passenger transport operator said group revenue was up 9.5% in reported terms, and 8.9% in constant currency.

Group profit before tax was 18.3% higher year-on-year in reported terms, and 10.7% at constant currency, with year-to-date group profit before tax rising 14.5% in reported terms and 16% at constant currency.

National Express said its group margin was also up year-on-year.

The board said it expected to continue that positive momentum in the medium term, as Spanish concession renewals were still paused.

"We do not believe there will be any impact from renewals in 2019 and each passing week further reduces any impact in 2020," the National Express board said in its statement.

Its significant Rabat urban bus contract was set to start in mid-2019, making National Express Morocco's largest transport operator.

The joint venture would operate nearly 500 buses, and was expected to secure around €1bn of revenues and a typical ALSA operating margin, with the full earnings benefit felt from 2020.

It said it was "increasingly apparent" that its North American school bus customers with the highest satisfaction score were not only more likely to retain us, but also more willing to pay a premium for quality services, the firm added.

Half of its customers were currently on that highest satisfaction score, and a programme to move more into that group had started.

The board also noted that Moody's had recently upgraded the company's investment rating to Baa2.

On a divisional basis, the firm saw a "strong summer" in the UK, with its coached especially showing "outstanding" organic growth.

It reported "strong" trading performances in both its bus and coach businesses, delivering accelerating divisional revenue growth of 5.3%.

In coach, core revenue increased 10.1% and passenger numbers grew by 6%, while on a like-for-like basis, UK coach revenue was up 9.4%.

Core coach took over £5m in revenue for every week in August for the first time ever, with August bank holiday Monday's revenue up 13% alone.

"We acquired Stewarts in mid-September, a high-quality coach business," National Express noted.

"This acquisition: expands our business-to-business operations amongst blue chip companies in the fast-growing M4 corridor; provides further opportunities in the inbound tourist market, to complement our Clarkes of London services; and provides synergy benefits with existing coach operations."

In UK bus, the firm saw commercial revenue increase by 1.1% and passengers grow by 0.5%, while commercial revenue per mile increased by 4.1%.

M-tickets continued to grow strongly, with further evidence they were driving extra journeys on the company's services.

It said it remained on-track for its projection of 70% of revenue through digital methods by year-end.

At Spain-based bus and coach operator ALSA, the company also reported a "strong summer", with growth across the board and continued expansion in new markets.

Revenue at ALSA increased 15% in constant currency, with organic revenue growth positive at 4.1% in Spain and 2.9% in Morocco.

Passenger numbers for the division grew by 5.7%, with all segments growing revenue and passengers, and long-haul returning to growth with revenue and passengers up 3.7% and 2.2%, respectively.

The firm said its new Geneva hub continued to grow "strongly" with its first local tenders won.

A focus on new summer tourist routes had driven revenues up by 26.7% in AlpyBus, while it secured contracts for two small urban bus services in Geneva, to add to and complement its existing presence.

"Our urban minicab services continue to perform strongly, providing a platform for both multimodal integration and growth," the board added.

In North America, National Express pointed to a "strong start" to the new school year, complemented by a significant transit win, with revenue in the geography increasing 6.9% in constant currency.

The business was "well-controlled" over the traditionally quieter summer period, with the recent improved pricing starting to be felt in the fourth quarter.

A good return-to-school performance saw the company secure organically an additional 167 routes in September.

"We won our largest ever transit contract secured through open competition," the board said.

"The 115-bus operation in San Bernardino, California, is our seventh contract in the state.

"It has already started and is due to run for five years, securing nearly $20m in annual revenue."

The company also secured two further smaller contracts that advanced its complementary market growth.

It said the first was a bus shuttle contract in Chicago, run from an existing operating site, while the second was a contract which expanded its operations in the fast-growing charter school market.

Working with the company's Ecolane scheduling software business, its transit division also won a small on-demand contract to provide ride-sharing services in Stockton, California.

The board said that complemented its existing services in the area, and it hoped it would provide a proof-of-concept for other transit authorities across the country.

"We had a good summer's trading, with our UK coach business in particular delivering outstanding organic growth," said group chief executive Dean Finch.

"Group revenue and profit are up strongly and we are carrying more passengers.

"We expect this momentum to continue in our traditionally quieter fourth quarter."

Finch said that, with Spanish concession renewals further delayed, a major contract starting during 2019 in Rabat and "encouraging" pricing trends in North America, the company's outlook was positive.

"Our continued focus on cash flow and operational performance should allow us to continue to grow profit in the years ahead."


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