National Express Group PLC - Trading Update

National Express Group PLC has reported its Trading Update for the period January 1, 2017 to April 30, 2017 (“the period”).

Overview

The group has maintained its strong momentum from 2016, with an overall revenue increase from continuing operations of 5.4 percent on a constant currency basis, up 15.8 percent on a reported basis, benefiting from organic growth and a number of bolt-on acquisitions made last year, together with significant foreign exchange tailwinds. The Group remains on target to deliver its profit expectation and free cash flow and leverage targets for the year.

Highlights

• The strategy of consistently focusing on operational excellence, the deployment of technology and pursuing growth through new opportunities including bolt-on acquisitions continues to deliver.
• Group profit before tax is up year-on-year on a constant currency basis, driven by both organic growth and the benefit of recent acquisitions.
• North America has had a strong start to the year with revenue up 5.8 percent in constant currency, boosted by the recent acquisitions. National Express has had another strong bid season with our consistently high contract retention rate at 96 percent. 2017 has seen a much smaller proportion of contracts up for renewal compared to last year. Where contracts have been renegotiated or renewed we have secured an average price increase of 3.8 percent, up 2.2 percent across the entire portfolio.
• ALSA has delivered a strong increase in revenue, up 8.4 percent in constant currency, with organic growth also enhanced by acquisitions. The division saw good passenger growth in the period, with Spain’s real-time active revenue management system performing well and helping to drive a strong performance over the Easter break.
• In the period, one of our Spanish long distance coach concessions was retendered. Although relatively small in revenue terms, the Madrid-Guadalajara renewal has confirmed the importance of the quality elements of bids, a key strength of our offer. It has provided us with further confidence in National Express's future prospects through the concession renewal process.
• UK Coach has also benefited from real-time revenue management system and delivered an increase in patronage over the Easter break of 4 percent. Revenue was up 2.7 percent during the period.
• Overall, UK Bus commercial revenue has declined by 0.5 percent in the period. The challenging conditions experienced at the end of 2016 continued in the early part of the year, passenger number decreasing 0.7 percent in the period. Recently, however, the company has seen a more encouraging performance, with commercial revenue now flat year on year and passenger numbers up 1 percent in the last six weeks.  
• UK Bus has seen positive results from the Sandwell and Dudley fare reductions, with passenger growth already sufficient to yield overall revenue growth in the local area. The company will shortly extend the lessons from these early successes further across the West Midlands. A recent restructuring — including management changes to bring UK Coach’s revenue expertise in to UK Bus — is designed to target additional revenue growth initiatives as well as cost efficiencies. National Express looks forward to working constructively with the new West Midlands Mayor to deliver ever-improving services and tackle congestion.
• The group's German Rail services continue to perform well, with operational and customer service statistics remaining strong. National Express recently clarified our revenue position in Germany including latest passenger count data, allowing us to recognize all revenue earned, confirming the profitability of the contract.
• The company continues to have a strong pipeline of further acquisition opportunities and are actively pursuing targets in North America and Europe. The company is also assessing two German rail bids during the year.

Dean Finch, group chief executive, commented: “I am pleased we have maintained our strong momentum into 2017, with a good revenue performance driven by both organic growth and the benefit of our recent acquisitions. Our diversified portfolio is providing broad-based growth that is also providing additional opportunities for further expansion.

“We will continue to focus on operational excellence to drive our growth by both delivering high standard services for our customers and generating cash and returns that we can invest in future expansion. These opportunities will continue to be sought in a disciplined manner and we will only pursue them if they meet our strict financial criteria. We remain on track to meet our full year profit and cash flow expectations.”