National Express recorded record profit in 2011, spurred by strong performances from its UK Coach, UK Bus and North America divisions.
The operator’s profit before tax and amortisation was £180.2m, up from £97.3m in 2010. Revenue rose 5% to £2.24bn.
UK Coach delivered a record profit of £34.9m with a 13.5% margin while UK Bus achieved a margin of 12.4%.
Dean Finch, National Express Group chief executive, said: “In just two years National Express has moved from reporting losses to the record profits we have announced today. We carried more passengers than in 2010 and are now the best performing operator in many of our markets. While our customers are increasingly cost conscious in these challenging economic times, we are focused on delivering excellent services at good value. We are determined to maintain this momentum in 2012. I believe our portfolio of businesses and track record of success mean we are also well placed to do this and target emerging growth opportunities.”
The company claims that while economic austerity is presenting a number of challenges for operators, it has also opened up opportunities, with more people turning to public transport as a more viable means of getting around.
Finch continued: “National Express provides attractive, value for money alternatives. We believe that our portfolio of businesses will provide sustainable earnings growth, continued cash generation and exciting opportunities for growth in selected markets in the medium term.”
In the UK Bus division, the average passenger yield has been improved with the West Midlands fares remaining amongst the lowest for comparable conurbations.
Growth of over 4% in commercial revenue was driven by the 11% passenger yield rise.
Passenger volumes decreased by 7%, partly reflecting an overall mileage reduction of 2%. The company states it has targeted reductions in some off-peak services, but increased services to meet additional demand elsewhere; for example, re-timetabling on the inner circle route 8 in Birmingham driving 15% passenger growth year on year, along with a 50% reduction in waiting times.
UK Coach eliminated heavily discounted promotional fares in favour of every day value pricing.
The firm has seen passenger volume growth in response to service improvements in both the UK Bus and Coach operations. It cites more effective marketing strategies targeting student travel in bus, coach and rail, together with commuter travel in coach as contributing factors.
INVESTMENT
There was large investment in new fleet in 2011, with spending of £132m across the group last year.
In UK Bus over 250 new buses entered service over a 12-month period, along with 160 new vehicles introduced to its third-party operated UK Coach fleet in 2011, and 300 new vehicles in Spain. In North America over 600 new school buses were added in 2011 and cascaded over 900 existing buses across the fleet, driving better capital efficiency. Growth in North America has been boosted by the recently acquired Petermann school bus business.
“We will continue to focus on opportunities to enhance margins and profitability in the four core bus and coach divisions. Leveraging our international portfolio and scale, procurement savings, worth over £12m year-on-year in 2011, will continue to bring benefits. In UK Bus we are targeting to further increase margin, through improved costs, depot improvements and growth. In North American school bus, already the industry leader in margin, further improvements will be delivered through improved maintenance schemes and the use of technology; GPS is already delivering better control of wage and fuel costs. Spain and UK Coach are focused on minimising the impact on 2012 margins of concession renewal and subsidy reduction respectively. Each business will continue to deliver cost savings and productivity gains, while keeping networks optimised,” added Finch.
The firm states organic growth is a key target for each business and claims austerity will continue to drive value services such as bus and coach.
A number of cost reduction programmes were put into action last year, including:
- Procurement savings of £12m across the Group, including parts, telecoms and IT;
- Insurance savings of £3m, reflecting safety improvement led by the Driving Out Harm programme; and
- Targeted cost efficiencies savings of £21m, mainly in overhead costs. These were partially offset by:
- Fuel costs rising by £1m, with higher hedged prices and
- Depreciation increasing by £6m, reflecting increased investment in vehicles in North America and Spain.
Group operating cash flow in 2011 was £159.8m (2010: £221.7m), reflecting reinvestment of higher profits in fleet renewal.
Revenue for Alsa, Spain was £551.1m (2010: £525.6m) and normalised operating profit was £90.1m (2010: £86.2m). Revenue for North America was £481.0m (2010: £459.8m) and normalised operating profit was £47.9m (2010: £36.9m). Revenue for UK Bus was £263.5m (2010: £257.8m) and normalised operating profit was £32.7m (2010: £28.3m). Revenue for UK Coach was £259.1m (2010: £250.3m) and normalised operating profit was £34.9m (2010: £32.0m). UK Bus and North America have both nearly doubled profit since 2009.
OUTLOOK
Looking forward, Finch said: “After a strong end to 2011, we expect passenger revenue to continue to grow in each of our bus and coach divisions. In 2012, as austerity measures, fuel and fare increases make passenger travel by other modes relatively more expensive, National Express provides attractive, value for money alternatives. We believe that our portfolio of businesses will provide sustainable earnings growth, continued cash generation and exciting opportunities for growth in selected markets in the medium term.”
