30th Jul 2014 09:05
LONDON (Alliance News) - Bus, coach and rail operator National Express Group PLC Wednesday reported lower profit and revenue for the first half of 2014 as it was hit by the extreme winter weather in North America early in the year, industrial action at its Spanish unit, and took a hit from the strength of sterling.
The company reported a pretax profit of GBP23.4 million for the six months to June 30, down from GBP34.3 million a year earlier, as revenue declined to GBP939.5 million, from GBP956.7 million. This more than offset a GBP14 million of cost savings.
It said the industrial action at its Alsa subsidiary in Spain knocked EUR2.0 million off profit, while the extreme cold weather conditions in the first quarter in North America reduced profit from that unit by USD6.1 million. In addition, overseas profits were hit by the strength of sterling to the tune of GBP4.6 million, while its Spanish arm was also impacted by aggressive competition in the intercity coach segment.
Still, the company raised its interim dividend to 3.35 pence a share, up from 3.25 pence last year, as it said it remains on course to deliver on its full-year profit expectations at constant exchange rates.
The company has recently been focusing on improving its cash flow and cutting debt, a process it pledged to continue.
"We will continue our focus on cash generation, with capital investment remaining lower until the end of 2014. Our target for free cash flow is GBP150 million," it said in its outlook statement. It generated free cashflow of GBP80.3 million in the first half, and cut net debt to GBP729.0 million, from GBP746.1 million a year earlier.
It said it is making progress in its three key strategy areas: customer satisfaction is strong, operational metrics are continuing to improve, contract-retention levels are positive and cost efficiencies are outstripping inflation.
"We made clear in our previous statement that extreme weather and industrial action in the US and Spain respectively would affect our half year results. We remain determined to deliver the improvements and efficiencies necessary over the course of the year to achieve the board's expectations," Chief Executive Dean Finch said in the statement.
Its biggest unit by revenue is its North American business, which won its largest ever US school bus conversion contract during the period and retained its largest US transit contract. Still revenue was flat in the region in dollar terms, and declined 7% in sterling terms.
In Spain, its second-biggest revenue generator revenue was down 1% in euro terms and 4% in sterling terms.
Revenue increased 2% in its UK bus operations, 7% in UK coach and 6% in its rail operations.
It has been trying to bolster its rail operations, but had mixed success during the half. It retained its highly-rated Essex Thameside franchise in the UK, but missed out on Transport for London's GBP1.4 billion Crossrail franchise.
However, it is currently in the running for the ScotRail franchise in the UK as well as a number of German rail contracts.
Elsewhere, "we have been selected as the preferred bidder for a bus contract in Bahrain, potentially opening a new and exciting market. We are also actively monitoring the situation in Portugal and Spain where the group is well placed to deploy its expertise when liberalisation of these markets occurs."
National Express shares were up 3.2% to 264.90 pence on Wednesday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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