National Express fights headwinds

PUBLICTRANSPORT operator National Express yesterday said it had made “real strides” in the first half of 2013 despite pretax profits slipping back by £5.5 million.

Total group revenues climbed to £956.7m in the six months to June 30, an improvement on the £934.1m achieved in the same period last year, but pre-tax profits fell from £39.8m to £34.4m.

The company, which operates Dundee’s main bus network from a base on Dock Street, said the performance of its bus division had helped offset the “significant headwinds” facing the business, and the end of a major rail contract.

National Express said it had been forced to absorb £15m in additional fuel costs this year, a reduction in regular government subsidies for bus service operators, and a £1m charge relating to pension accounting changes brought in during the period.

However, it said it was operating within expected financial parameters and was confident for the second half of the year.

“With passenger demand generally stable or improving, we will continue to strengthen our pipeline of new business opportunities and launch new services and contracts across our business portfolio,” the firm said in an update yesterday.

“We are on course to deliver £150m of free cash flow from the group in 2013, at the upper end of our previous target.

It added: “2014 will bring a better fuel cost environment, with hedging already in place at unchanged prices on 2013, progressive revenue growth from our initiatives and investments in our existing divisions, and a growing revenue stream from new business opportunities.”

The statement to the markets shows National Express achieved revenue growth in its UK bus and coach divisions as well as in its overseas operations in Spain and North America.

However, the firm’s UK rail division — which operates the c2c service into London — saw turnover drop from £125.2m last year to £69.9m, as a result of its EastAnglia franchise contract coming to an end and margins being significantly squeezed.

Group chief executive Dean Finch said progress was being made in the company.

“In tough trading conditions, National Express has continued to make real strides at home and abroad.

“We have had to address some significant headwinds in our existing markets while continuing to build a strong pipeline of new business opportunities.

“Our commitment to operational excellence has helped us to secure £1.7 billion in new contract wins in the past six months alone. And our recent successes in Germany demonstrate that we are well placed to benefit from further liberalisation in Europe,” he said.

“We are determined to make further progress on our debt reduction target and are pleased by our excellent cash generation.”

The update buoyed investors, and shares were 9p higher at 254.5p.

Hybrid-electic double decker buses at National Express Dundee. The transport operator said the performance of its bus division had helped offset “significant headwinds” facing the business, and the end of a rail contract.