6th May 2015 10:29
LONDON (Alliance News) - Public transport company National Express Group PLC on Wednesday said it is on track to meet its expectations for the year on the back of revenue growth across its divisions in the first four months of the year, with a good performance in its North American School Bus arm and the group highlighting a GBP12 billion bid pipeline.
The FTSE 250-listed company said revenue in the first quarter rose 4% at constant currencies, with passenger volumes rising by 2% across its divisions. Group profit is ahead year-on-year so far in 2015, the company said, after adjusting for costs related to poor weather conditions in North America and the strike which hit the company in Spain last year and after absorbing increased premium charges for its c2c franchise this year.
Shares in National Express were down 0.6% to 283.30 pence on Wednesday.
The group said it has seen a strong financial performance in its UK bus business, boosted by good passenger demand and cost controls in the division, while its c2c rail franchise has started well, with passenger growth of 4% and revenue growth of 10% on the back of strong peak and off-peak travel.
Revenue in its Spanish business grew 4% in the first four months on the back of 7% passenger growth in the business, while revenue in Morocco rose 17%, driven by the scaling up of its operations in Tangiers. The group also saw good contract retention in its North America school bus business at 99%, with an average price increase of 5% in the recent bid season offsetting higher wage pressures in the division.
Chief Executive Dean Finch added the company has successfully started its ten-year deal to provide bus services in Bahrain and reiterated the company continues to consider Germany as a key growth market going forward. "We believe that, in time, German Rail will make a significant contribution to Group earnings," Finch said.
National Express noted it has a GBP12 billion pipeline of bid opportunities, including a further bid the company has submitted for the Rhine Ruhr Express in Germany, a 15-year contract with revenue in excess of EUR2 billion. It also is preparing to table a bid for the Lisbon Bus and Metro franchises in Portugal and has submitted a pre-qualification questionnaire for the East Anglia rail franchise bidder shortlist.
"We have made a good start to 2015 and are on track to deliver the board's expectations for the full year. The results reflect our ongoing commitment to deliver excellent operational performance and customer service. We continue to drive our strategy to develop opportunities in existing and new markets with a number of exciting bids submitted since the start of the year and our plans for further bids are progressing well," said Dean Finch, National Express' chief executive.
"Cash generation remains strong and we are well placed to seek new avenues of growth, enabling us to continue to deliver shareholder value. In light of this and our long-term future in rail, we will review our dividend policy as the year progresses," Finch added.
Shore Capital said the trading update from National Express points to an encouraging performance for the company, and says some progress has been made on providing more detail on a strategic vision for the company.
Shore said the trading update from National Express shows the company on track to meet its full-year expectations and, though the broker said the detail in the statement is a "little random", it indicates a strong performance from the company.
Shore pointed particularly to the strong performance in the company's North America school bus business, with 99% contract retention and average price increases of 5% in the current bid season, compared to 98% and 2% at the same time a year ago. This trend also bodes well for rival FirstGroup, Shore added.
The broker also likes the good growth in Spain and Morocco and the good bid opportunities the group has cited, saying all of this looks encouraging. But its key criticism of National Express of late has been that Shore thinks investors need to hear an updated strategic vision for the business.
The statement on Wednesday does have more about the future of the company, Shore said, and while not enough to lay out a vision of the company in 2018, it could be a precursor for what is to come in the remainder of the year.
By Sam Unsted; [email protected]; @SamUAtAlliance
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