26th Feb 2015 09:16
LONDON (Alliance News) - National Express Group PLC Thursday reported higher pretax profit for 2014, even though the strong pound offset higher revenue and passenger numbers across its divisions, and it signalled a switch in strategy towards using more cash flow for investments, particularly in North America, rather than debt reduction.
The company, which has bus, coach and rail operations in the UK, continental Europe, North Africa, North America and the Middle East reported a pretax profit of GBP66.5 million for 2014, up from GBP64.4 million in 2013, largely due to lower finance costs.
Its operating profit fell to GBP114.2 million, from GBP117.9 million in 2013, as revenue declined to GBP1.87 billion, from GBP1.89 billion, due to the impact of the pound's strength on its translated overseas earnings. On a constant currency basis, revenue was up 2%, while pretax profit was up 10%. Most of the impact from sterling's strength was felt in the first half of the year.
It has been focusing on boosting cash generation in recent years, using excess cash to reduce debts, but signalled a switch in strategy towards greater investment, particularly in North America.
Its net debt fell to GBP664.3 million at the end of 2014, from GBP746.1 million at the end of 2013. Free cash flow rose to GBP190 million, up from GBP182.8 million in 2013 and GBP40 million ahead of target. It said it will continue to focus on improving margins and return on capital employed in 2015, but also has a lower cash generation target of GBP100 million.
"We increased investment in new business opportunities during 2014 and believe we are now in a strong position to exploit other new growth opportunities with a focus in North America, where we have more than doubled profitability in the past five years," the company said.
"While we will remain within our published target, we believe we have the opportunity to use our continued strong cash generation to invest in new growth opportunities that meet our strict financial and strategic criteria. There are excellent opportunities in the North American market given its highly fragmented nature and the continuing trend in conversions," it added.
It will pay a dividend of 10.3 pence for 2014, up from 10.0p in 2013.
"Every division is carrying more passengers and has grown revenue. We have successfully retained key existing contracts, recently won another two rail contracts in Germany and this month started operating our Bahrain bus contract. I am particularly pleased with our very strong cash performance, which has again exceeded our target," Chief Executive Dean Finch said in a statement.
"This strong performance means we are in an excellent position to continue to exploit new opportunities. Our North American business has more than doubled profitability in the last five years and provides us with a strong platform for further growth in the coming years. Coupled with the opportunity for further growth in German Rail and the Middle East, I am optimistic about the future prospects of the business," he added.
National Express said it has a new business pipeline of opportunities worth over GBP8 billion in annualised revenue.
Still, its shares were down 1.7% at 268.30 pence Thursday morning, amongst the worst-performing stocks on the FTSE 250 on the day.
By Steve McGrath; [email protected]; @stevemcgrath1
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