National Express Group PLC (LON: NEX) has announced that a Casablanca win follows renewal and near-doubling of second largest US transit contract.
· Already the largest bus operator in Morocco, this up to 15-year contract nearly doubles National Express’ presence.
· Starting next month, this contract in Morocco’s largest city means National Express is now the sole operator in 5 of the country’s 6 biggest urban areas.
· National Express will operate more buses in Morocco than the UK from next year.
· Follows a successful summer, including the renewal and significant expansion of our second largest US transit contract, with anticipated revenue nearly doubling to $420 million over 7.5 years.
National Express Group PLC announced that its Spanish and Moroccan division, ALSA, has been awarded a major bus contract in Casablanca, for up to 15 years. Casablanca is Morocco’s largest city and economic capital. The contract is expected to secure more than €1 billion in revenue over its term.
The contract will start in November 2019 with an initial 400 buses in operation. This will increase to 700 buses next year, carrying 100 million passengers annually. As well as operating the bus services, the contract includes responsibilities to introduce new payment and scheduling systems, alongside a network re-design.
This contract has been awarded to ALSA because of their reputation for excellence within Morocco, recently reinforced with the successful start-up of the over 400 bus Rabat contract in August. As in other Moroccan cities, there is opportunity for further growth in other local Casablanca transport markets, such as school buses and tourist services.
This caps a successful summer for National Express, including the renewal and significant expansion of our second largest US transit contract, in Boston. This renewal, for up to 7.5 years, starting in January 2020, has seen revenue nearly double to $420 million across the contract. Small contract wins in New York (two) and Connecticut continue to develop our hub strategy, with efficient growth from existing locations in major urban areas. Additionally, the excellent start-up of our new 400 vehicle accessible transport business in the West Midlands over the summer has helped us build a strong credential to target expansion in this interesting and growing market.
Dean Finch said:
“I am delighted we have secured this significant contract in Morocco. This nearly doubles our presence in Morocco, which had already doubled in August with Rabat’s successful start-up. We will now operate more buses in Morocco than the UK. We look forward to serving the people of Casablanca soon.
“It is particularly pleasing that our track record for service excellence in Morocco was an important reason for our success. A similar reputation was also crucial to last week’s successful renewal and significant expansion of our second largest US transit contract, in Boston. It is through this consistent focus on excellence for our customers that we will continue to deliver growing shareholder returns.”
The Casablanca contract is for an initial 10-year term, with an optional 5 years depending on well-established performance criteria. Applying the same performance criteria, ALSA secured a 5-year extension on its Marrakesh contract in 2014.
Due to its start late in the year, as well as start-up costs, we expect the Casablanca contract to make only a small contribution to this year’s and next year’s earnings. After that, we expect the contract to build to around typical ALSA margins.
National Express in Morocco: long-term success
ALSA has been present in Morocco for 20 years, building from an initial contract in Marrakesh to operate services in Agadir (2010), Tangier (2013), Khouribga (2015) and Rabat (2019).
Morocco has political and legal stability, combined with a currency pegged to a basket of the Euro and Dollar, encouraging long-term investment. With other large cities looking to tender their urban bus services in the coming years, as well as potential opportunities in the inter-city market, National Express believes there are good prospects for further growth in Morocco in the coming years.
As this table demonstrates, this win delivers our expectation of further growth in the country as noted in our half year results.
ALSA/National Express’ Rapid Growth in Morocco
|PASSENGERS||3.8 million||263 million||405 million|
|TURNOVER||€1 million||€97 million||€157 million|
* Annualised figures