National Express profit boost in first half of 2016

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National Express’ coach division saw operating profit grow by 4%. MIKE SHEATHER
National Express’ coach division saw operating profit grow by 4%. MIKE SHEATHER

Group sees revenues up by more than 10% on constant-currency basis, and says its business mix makes it ideally positioned to deal with a UK economic slowdown

National Express has posted positive half-year results and said that the company is well-positioned to withstand the likely negative economic implications of the EU Referendum vote.

Group revenue was up by 10.4% on a constant currency basis at £1.1bn. Operating profit increased by 3% to £96.2m, while group operating profit rose to £73.2m, up 3.8% on a constant currency basis.

Earnings per share stood at 11.3p (2015: 10.2p) while interim dividend was 3.87p, up 5% on the 3.685p from 2015.

Operating profit in the UK Bus division increased by £0.5m to £17.6m, while the UK Coach division saw a £0.4m boost to £10.4m. The group said revenue and margins had also improved.

Dean Finch, National Express Group Chief Executive, said: “We have made a good start to 2016 and despite subdued growth in the UK we remain on track to deliver our expectations for the year.

“The diversity of our cash generative, international portfolio of businesses where two thirds of our earnings are generated outside of the UK, is a key strength that allows us to grow and to declare a 5% increase in the interim dividend.

“Our strong cash generation provides us with options and we will continue to look to deploy capital in those parts of our business where we believe it will generate the best returns for shareholders.

“We have been particularly pleased with the performance of the North American businesses we acquired last year which are generating strong returns both in terms of profit and cash validating our strategic decision to increase our investment in this attractive market.”

However, the operator warned that in light of the EU Referendum result, the uncertainty over the nature and the length of the negotiation of the ‘Brexit’ may have an adverse impact on the UK economy, though it expects developments to have a more muted impact on the business.

A spokesman said: “It is possible that there may be an economic slowdown in the UK as a result of the vote for Brexit in the EU Referendum.

“However, with two-thirds of Group earnings generated in North America and Spain, where we expect to see no significant immediate effects from ‘Brexit’, we feel that the Group is well-positioned to deal with any short-term uncertainty in the UK.

“The value of Sterling has fallen against both the Euro and US Dollar since the EU Referendum. While this affects both our overseas earnings and debt balances, our policy of  matching our debt and earnings in local currency ensures that our key gearing ratio is protected.

“We will continue to hedge our UK fuel in Sterling. We also monitor the interest rate environment, which is of relevance to our pension valuations and our plans to refinance the £350m bond due to expire in January 2017. However, we do not currently expect any significant adverse effect as a result of interest rate movements in the light of the referendum result, particularly given the flexibility provided by our £450m bridge facility, which does not expire until January 2019.”