Continues strong growth from a diverse international portfolio of businesses

The Group has made good progress in the first half of the year with both revenue and profit up strongly year-on-year on a constant currency basis, in line with the Board’s expectations. Our North American and Spanish & Moroccan (ALSA) divisions both delivered record half year operating profit. This has more than offset softer trading in the UK. Recent acquisitions continue to deliver strong returns and we have a good pipeline of further opportunities. Our diversified portfolio of cash generative businesses continues to provide a stable source of growing revenue and profits; around 80% of our earnings are generated outside the UK and our largest contract only contributes 4% of our Group operating profit. Our strong operational and financial position continues to enable us both to invest in growth and to deliver attractive returns to our shareholders, with a 10% increase in the interim dividend. The Group remains positive about its future and on track to deliver its profit, cash flow and leverage targets for the year.

Financial highlights

Our focus on operational excellence continues to deliver results

• North American and ALSA divisions both delivered record half year normalised profits:
  • 8.2% increase in profit on a constant currency basis in North America;
  • 9.2% increase in profit on a constant currency basis ALSA.
• The North American School Bus bid season saw an average of a 3.7% price increase secured on those contracts up for bid and renewal; with another very strong retention rate of 95%.
• ALSA again carried a record number of passengers, with Spanish long haul routes performing particularly strongly.
• Management action has driven recent commercial growth in UK Bus, and mitigated the challenges faced by UK Coach.

We continue to deploy technology to drive efficiency and growth and raise standards

• Our active real-time revenue management system is driving revenue, passenger and yield growth in Spain.
• DriveCam roll out across the Group continues to improve safety performance and cost efficiency.
• Our UK Coach, UK Bus and Spanish operations have all: increased the proportion of sales made through digital channels; expanded their CRM databases; and, significantly grown customer usage of our apps.

Growing through new business opportunities including bolt-on acquisitions

• Our acquisitions continue to make very strong investment returns of 15-20%, generating significant value.
• We have made three acquisitions so far this year, with benefits due in the second half:
  • Two in ALSA, including further expansion in Geneva, complementing our recent – and very successful – AlpyBus acquisition;
  • A significant acquisition in North America of a Chicago para-transit operator that also strengthens our credentials in a growing market.
• We will remain disciplined and have rejected 18 potential acquisitions in North America alone in the first half. However, our strong and sustainable cash flow provides the opportunity to pursue further acquisitions this year.

Dean Finch, National Express Group Chief Executive, said:

“We have delivered a strong set of results, again benefiting from our internationally diverse portfolio of cash-generative businesses. Record half year performances in our North American and Spanish & Moroccan divisions have more than offset more challenging trading in the UK. I am particularly pleased with the strength of our free cash flow, which provides us with opportunity for further investment and improving returns.

“We continue to see the benefit of our recent acquisitions in driving good growth and creating shareholder value. These acquisitions are also helping us to expand in new growth markets, but we will remain disciplined in the opportunities we pursue. We also of course retain our focus on operational excellence and customer service to drive growth and efficiency in our existing businesses, and the initial success of our low fare zones in UK Bus are particularly encouraging. Our confidence in the strength of our approach to deliver growing shareholder value is demonstrated by a further 10% increase in the interim dividend.”

Enquiries

There will be a presentation and webcast for investors and analysts at 0900 on 27 July 2017. Details are available from Rebecca Mitchell at Maitland. 

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Unless otherwise stated, all operating profit, margin and EPS data refer to normalised results of the continuing Group, which can be found on the face of the Condensed Group Income Statement in the first column. Normalised profit is defined as being the IFRS result excluding intangible asset amortisation and UK rail and restructuring, along with tax relief thereon. Due to the one-off nature of UK rail and restructuring, the Board believes that its removal gives a more comparable year-on-year indication of the underlying performance of the Group. For intangible amortisation, the Board believes that adding back this non-cash item also gives a more comparable year-on-year indication of the underlying performance of the Group and allows better comparison of divisional performance which have different levels of amortisation. The continuing Group is stated, and the prior year restated, before discontinued operations, details of which can be found in note 7 to the condensed interim financial statements. Constant currency basis compares current period’s results with the prior period’s results translated at the current period’s exchange rates. The Board believes that this gives a better comparison of the underlying performance of the Group. Further details of these measures are provided in note 17 to the condensed interim financial statements.