Major announcements from National Express Group PLC.
National Express Group PLC ("the Group") today issues a pre-close trading update ahead of the year ending 31 December 2008.
Following strong revenue growth this year through to September, the Group has continued to perform well during the final quarter. The travel sector is not immune to the impact of the tougher consumer climate but, despite some softening in underlying revenue growth, the Group remains on target to deliver normalised profit before tax* in line with expectations for the current year.
Underlying† revenue growth in the bus business in the year to date has been robust at 6%, benefitting from our strong operational model and customer partnerships. National Express coach underlying revenue growth year to date has remained steady at 5%, with strong performance in cross country routes offsetting lower revenues on Stansted airport services. We continue to progress the exit of the Dot2Dot shuttle service, which we have scheduled for January 2009.
In line with the sector, we have seen some impact of the weakening UK economy on our rail business. Despite this, year to date underlying passenger revenue growth for National Express East Coast has been 9½% and growth in National Express East Anglia (‘NXEA’) has been good at 5½%. NXEA also benefits from a revenue share arrangement with the Department for Transport.
Our focus on ensuring we capture good quality information on our customers is proving extremely valuable in this economic climate, enabling us to target our marketing and promotions to generate significant value. Whilst the contribution of Gatwick Express and the resolution of outstanding commercial claims in former rail operations has benefitted 2008, these will not recur in 2009.
Following a full review of support and back office functions across all of the UK businesses, opportunities to reduce overall staffing levels have been identified. Whilst we remain committed to investing in and delivering excellent customer service, we must manage our costs effectively. We are currently consulting with affected employees over the cost reduction proposals, which are expected to deliver annualised savings of over £15 million.
Demand for coach travel in Spain has been steady, despite the slowdown in the Spanish economy, with underlying revenue growth in the year to date of 5%. Overall, long distance revenues have been strong, supported by a decline in some ‘no frills’ airline competition, and urban demand has also remained good. Although revenue in some regional services has been lower, the impact has been offset by the overall translation benefit from the strong Euro.
The successful integration of the Continental Auto acquisition continues to support our robust market position. We have also been successful in renewing and extending a number of our franchises and in winning new franchises in competitive tenders.
Year to date underlying revenue growth continues to be strong, up 8% in local currency. This has been supported by a successful contract bid season and our best ever operational start up to a new school year. Growth benefits have been offset by lower margins due to increased costs. Good progress has continued in the phased development of our Business Transformation project. With the potential for greater outsourcing of school bus contracts in light of public funding constraints, the business is well placed for the future.
The Group is approaching the end of a period of significant investment for the future and, underpinned by a decline in capital expenditure, we are focused on delivering strong cash generation in 2009.
We expect the adverse impact of the weakness in Sterling on the foreign exchange movement in net debt to be approximately £90 million in the second half of 2008. The Group has now removed the majority of its exposure to overseas currency debt, reflecting the reduced interest rate differentials available between currencies.
Commenting Richard Bowker, Chief Executive, said:
"National Express has had a successful year, with good revenue growth across our business.
"Looking ahead, the transport sector cannot be wholly immune from the global recession. While cautious about the economic outlook, we are taking the initiative to reduce costs across our UK operations and counteract any slowdown in growth. We are well placed for the challenges of the year ahead and will continue to focus on our customers, delivering the excellent service they expect at competitive prices."
|National Express Group PLC|
|Richard Bowker||Chief Executive||}+44 20 7506 4324|
|Jez Maiden||Group Finance Director||}|
|Nicole Lander||Communications Director||+44 121 460 8401|
|Neil Bennett/Suzanne Bartch/Brian Hudspith||+44 20 7379 5151|
There will be a conference call for research analysts and investors at 08:00am 17 December 2008. For details, contact Rebecca Mitchell at Maitland on +44 20 7379 5151.
* Normalised profit before tax is stated before intangible asset amortisation and exceptional items (as defined in the Report & Accounts).
† Underlying revenue growth compares the relevant year to date period for the current year with the same period for the prior year, based on the latest available management accounts periods in local currency. Acquisitions and disposals are excluded.