National Express sees record performance in several divisions
National Express Group reported organic revenue growth across all of its divisions in its final results on Thursday, with a number of strategic acquisitions delivering record group profit.
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The FTSE 250 passenger transport operator said group revenue was up 6.9% at constant exchange rates to £2.45bn, or ahead 5.6% on an actual basis.
It claimed a record level of group normalised operating profit at £257.7m - up 7.7% in constant currency - while group statutory profit also hit a record, rising 13.6% to £177.7m.
The group normalised operating margin rose slightly to 10.5% from 10.4% in 2017.
National Express also reported “very strong” five-year compound annual growth rates, with the statutory profit before tax five-year growth rate standing at 21.9%, and the rate for normalised operating profit over five years at 8.2%.
Free cash flow stood at £198.6m, up from £146.4m, while the firm’s return on capital employed increased by 50 basis points to 12.4%, and its gearing was flat at 2.3x EBITDA.
The board proposed a final dividend of 10.17p, up 10%, with the directors pointing out that £450m had been paid since the resumption of distributions in 2011.
On the operational front, National Express reported that every division delivered revenue growth for the year, with North America growing 8% in constant currency to a record $1.42bn.
Its ALSA operations in Spain grew 11.2% in constant currency to a record €842.3m, while in the UK, business grew 2.8% to £577m.
The company’s Germany rail operations declined by 15.1% in constant currency, however, with the board claiming that the 2017 result primarily benefited from catch up revenues.
Germany rail was up 5.4% on an underlying basis.
National Express also said it saw record normalised operating profits in its main international divisions, as well as “very strong” UK growth, with North America growing by 6.4% in constant currency to a record $129.4m.
ALSA was ahead 9.9% in constant currency to a record €119.1m, and in the UK, profits grew by 12.6% to £79.9m, with underlying profit growth standing at 5.4%, and a further £5m coming from property disposals.
The group said it carried 2.7% more commercial passengers than in 2017, with its Spanish, Moroccan and UK coach businesses all setting new patronage records.
UK bus grew commercial patronage by 1.1%, which the board claimed was against the market trend, while both UK coach and ALSA grew load factors to almost 60% and more than 50% during the year, respectively.
UK coach and bus both improved revenue per mile “considerably”, the directors said, by 11.5% and 4% respectively.
National Express made 11 acquisitions in 2018 - seven in North America, three in ALSA and one in the UK, consolidating its presence in core markets and entering strategic growth segments.
The board said its “value enhancing” acquisitions, alongside continued contract wins, had expanded its presence in “rich and growing cities”, as it seeked to build multi-modal service hubs.
It pointed to Geneva, New York and Chicago as examples where it had expanded through acquisition and contract wins to build hubs serving multiple local market segments.
The company also said it had “significant” opportunity to deepen its presence in similar cities, and build platforms that delivered door-to-door journeys or “comprehensive” transport services for customers.
National Express said it was “well-advanced” in its preparations to launch its new Rabat urban bus services, making it Morocco's largest operator, as well as the new Rhine Ruhr Express rail operations this year.
It said it had a “very strong” pipeline of further opportunities in place, which the board said it would continue to pursue in a disciplined manner, targeting returns of at least 15%, funded by its strong free cash flow generation.
“I am delighted we have again delivered a record-breaking set of results,” said group chief executive officer Dean Finch.
“Revenue, profit and free cash all increased significantly, with organic top line growth in every division augmented by strategic acquisitions and cost control.
“Group normalised operating margin increased to 10.5%.”
Finch said that the company ended the year strongly, with “particularly outstanding” performances in ALSA and UK coach.
“These record results again demonstrate the benefit of our increasingly diversified international portfolio of industry-leading businesses.
“Every division accelerated revenue growth in the second half of 2018 and made strategic acquisitions or complementary market expansions.
“Our strong cash generation allows us to capitalise on these opportunities, invest in innovative technologies to drive organic growth and further efficiencies, while consistently increasing returns to shareholders.”
Finch also said a consistent record of success over the last five years had delivered compounded statutory profit before tax growth of more than 20%, while reducing gearing and improving its return on capital employed.
“I remain confident we will grow revenue, profit and dividends further in 2019.
“As a measure of our confidence we again propose to increase the final dividend by 10%.”