Strong pound and US polar winter drive down H1 revenues for National Express

A STRONG pound combined with a freak winter in the United States has helped dent the first half performance of Birmingham-based transport group National Express.

In its interim results statement, the company said group revenue for the first six months was £939.5m (2013: £956.7m), an overall decrease of 2%. It said this reflected a strengthening in Sterling against the US Dollar and Euro, reducing revenue by 4%.

The company said the polar-like conditions gripping much of the United States during the past winter eroded profits by more than $5.5m.

For the period as a whole, underlying revenue increased by 2%. UK Coach was the company’s strongest performer, up 7%. Rail grew by 6% and UK Bus by 2%, with commercial revenue growth of 3.2% delivered through patronage growth.

Underlying revenue in Spain declined by 1%, with growth in Morocco, including the start-up of operations in Tangiers, mostly offsetting the impact of intercity coach competition and industrial action in Spain. Underlying revenue in North America School Bus was 0.5% better, with slightly lower volume from the previous bid season offset by better pricing. North America Transit grew by 16% with the benefit of new contracts.

Profit improved strongly in UK Coach, with an increase of £1.5m, and UK Bus also grew its profit. Profit in Spain was down, with local currency profit €2.2m lower, mostly due to industrial action, while competitive pressure in the domestic long distance market was successfully offset by growth in the regional and urban business.

Excluding the imp-act of the cold weather, the North America divisional profit was broadly flat, as cost pressures offset gains from improvement in contract quality. Start-up losses in the German coach operation were £1.4m over the period, representing a complete half year of trading, compared to just one quarter in 2013.

Rail profit from the group’s c2c franchise increased and the period ended with a major boost for the division as it retained the Essex Thameside franchise until 2029.

Net finance costs in the period decreased to £24.2m (2013: £25.8m), benefitting from the strong cash generation of the group driving lower debt, together with a lower cost of financing from the group’s bank refinancing in July 2013. With associate income of £0.2m (2013: £0.4m), normalised pre-tax profit was £65.5m (2013: £71.8m).

Highlights of the period included strong cash generation – £80m of free cash flow in the first half of the year has set the company up for a full year target of £150m. Net debt has been reduced by £80m over the last 12 months.

It also succeeded in winning new contracts worth £5bn, which excluding Thameside included the largest ever US School Bus conversion contract, a retention of the largest US transit contract, the selection as preferred bidder for largest urban/regional bus contract in Spain and the continued delivery of the US School Bus.

It has identified new growth markets, especially in Bahrain where it has been selected as preferred bidder for urban bus services. The move opens up significant new growth opportunities in the Middle East.

Dean Finch, chief executive, National Express, said: “We have made important progress in the first half of the year. Our success in retaining the Essex Thameside rail franchise confirms our long term future in UK rail. Other major contract successes across the group demonstrate the quality of our services and strength of our reputation in the markets we serve. Our strong cash generation remains a highlight and a particular focus of the business this year.”

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