National Express posts impressive numbers after second-half turnaround

National Express posted its results for the year ended 31 December on Tuesday, reporting “strong” performances in both international divisions as well as growth in the UK, leading to solid increases in group revenue, profit and cash and reduced gearing.

The FTSE 250 passenger transport operator said group revenue was ahead 10.9%, or 6.1% at constant currency, to £2.32bn, while group normalised operating profit rose 11%, or 6% at constant currency, to £241.5m.

Group normalised profit before tax improved 18.6%, or 11.7% at constant currency, to £200m, with normalised basic earnings per share up 10.6% at 29.1p.

Free cash flow was 5.6% higher year-on-year at £146.4m, and net debt widened by 1.1% to £887.9m

The company said its focus on “operational excellence” was continuing to deliver results, with North America revenue up 10.1% and normalised operating profit ahead 6.6% in constant currency.

That was delivered through a combination of organic growth, cost efficiencies and the benefit of recent acquisitions.

Its Spanish division, ALSA. delivered revenue growth of 3.6% and a normalised operating profit increase of 4.4%, both in constant currency.

The board said “sophisticated pricing” in its UK bus and coach businesses delivered strong second halves to the year, reversing first half declines.

As a newly-combined division, growth in both revenue of 0.6% and normalised operating profit of 5.3% was achieved.

German rail reportedly saw big increases in constant currency revenue of 20.4%, and normalised operating profit growth of €7.7m, which was partly put down to a recognition of revenues the board was unable to include in the 2016 accounts.

National Express said it was also continuing to deploy technology to drive efficiency, growth and raise standards.

“Our increasingly sophisticated real-time revenue management systems have helped drive both revenue and seat occupancy rate increases in UK coach and ALSA,” the board said in its statement.

“We have seen further growth in our more cost-efficient digital sale channels, which also allow more sophisticated and targeted pricing.”

The company continued to roll-out Lytx DriveCam smart safety cameras on its vehicles, improving safety performance, raising service standards and delivering cost savings.

National Express also said it was growing through new business opportunities, including bolt-on acquisitions, having made a further nine acquisitions in the year, with targeted returns of at least 15% and a “strong” pipeline of new opportunities.

The company said it would continue to target new contract opportunities, in particular North American transit and charter markets, as well as Morocco and German rail.

Looking at the current year, National Express said it made a “good start” to 2018, with group revenues and profits up in January, notwithstanding significant weather-related disruption in North America.

It expected organic revenue growth in 2018 in all divisions, adding that it saw an encouraging start to the current North American school bus bid season.

The company was entering 2018 with tailwinds, including £20m lower fuel costs and a lower group effective tax rate after recent US reform.

It proposed a 10% increase in the final dividend to 13.51p, and was expecting annual free cash flow to be broadly the same as 2017.

“I am very pleased with our performance in 2017,” said group chief executive Dean Finch.

“Strong performances in our North American and ALSA divisions, combined with growth in our UK businesses, have delivered significant increases in group profit, revenue and cash generation.

“We carried more passengers than we did last year reflecting the strong focus in all our businesses on good service and value for money.”

Finch said the company’s international diversity was an important asset, adding that it was “particularly pleasing” that all divisions contributed strongly to the group’s performance.

The second half performances of its UK businesses were particularly impressive, he added.

“We continue to invest in the future success of our business, with our focus on operational excellence and the deployment of technology to raise standards and drive efficiency.

“We will continue to pursue new growth opportunities, including through further acquisitions to add to the nine we made in 2017.

“I believe our industry-leading position means we are well-placed for the upcoming concession renewals in Spain.”

Although the business suffered weather disruption in North America at the start of 2018, Finch said he expected the missed days to be recovered later in the year and he was so far pleased with the above-inflation price increases in school bus contract renewals.

“Our strategy is simple - we focus on providing well run, safe, value for money services in and around some of the most affluent cities and regions in the world.

“This sustainable strategy is proving to be highly successful as the proposed 10% increase in the final dividend demonstrates.

“I am looking forward with optimism to the coming year, which I expect once again will deliver growth in revenue, profits, cash flow and dividends.”