National Express on track to achieve £50m cost-saving

EAST Coast rail line operator National Express said today it is on track to deliver £50m in cost-savings despite challenging economic conditions.

The firm, which earlier this week confirmed that rival Stagecoach had approached it over a possible merger following the collapse of takeover talks, said its bus, coach and rail operations were achieving “excellence” in service delivery while its self-help progamme was delivering sustainable improvements in cash management.

National Express said its primary goal continued to be strengthening the group’s balance sheet through a planned equity fund-raising.

The group’s debt providers have agreed to extend the maturity on up to 50% of its €540m facility in the event of an equity fund-raising.

This would provide additional certainty of funding to the group and should permit a refinancing in 2010 of remaining bank facilities, including the £800m revolving credit facility due to mature in June 2011.

Discussions over the hand back of the East Coast rail franchise are continuing with £34m of a £40m loan utilised by the end of September.

Ongoing losses have been charged against the contract exit provision established at the half-year.

“We are working towards agreeing a formal handback date for the franchise prior to year end,” it said in a statement.

Total group revenue in sterling terms in the third quarter was 1% lower than the prior year period.

With economic conditions remaining weak revenue growth has slowed across all businesses.

National Express group’s executive chairman John Devaney, said: “We are focused on delivering our refinancing, reducing and managing costs, driving revenue and delivering best in class customer experience.

“Despite the recession, we have delivered a resilient trading performance. We are moving forward, with our primary focus to refinance the group.”

National Express became an acquisition target after struggling with debt of around £1bn including a £20m loss on the East Coast line. National Express paid £1.4bn to run the route, based out of York.

Last week a consortium led by Spain’s Cosmen family announced it had decided not to make a takeover offer for the business.

Stagecoach had made a deal with the consortium regarding the possible acquisition of National Express’ UK bus and rail operations.

Newspaper reports value the potential merger between Stagecoach and National Express at £1.65bn.