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National Express

National Express Group PLC Organic revenue growth in every division and record profits

National Express Group PLC (LON:NEX), today announced full year results for the year ended 31 December 2018

Dean Finch, National Express Group Chief Executive said:
“I am delighted we have again delivered a record-breaking set of results. 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%.

“We 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.

“A consistent record of success over the last five years has delivered compounded statutory PBT growth of over 20%, whilst reducing gearing and improving ROCE. 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 per cent.”

Financial highlights

2018

2017

Change

In constant currency

Continuing operations

Group revenue

£2.45bn

£2.32bn

+5.6%

+6.9%

Group normalised operating profit

£257.7m

£241.5m

+6.7%

+7.7%

Group normalised PBT

£220.0m

£200.0m

+10.0%

+11.3%

Normalised basic EPS

32.9p

29.1p

+13.1%

Statutory

Group operating profit

£215.4m

£197.9m

+8.8%

Group PBT

£177.7m

£156.4m

+13.6%

Group PAT from continuing operations

£138.7m

£128.4m

+8.0%

Basic EPS

26.6p

25.7p

+3.5%

Free cash flow

£198.6m

£146.4m

+£52.2m

Net debt

£951.5m

£887.9m

+£63.6m

Full year proposed dividend

14.86p

13.51p

+10.0%

 

Highlights
· Organic revenue growth in all divisions and strategic acquisitions delivering record Group profit:
o Record Group normalised operating profit of £257.7 million, up 7.7% in constant currency;
o Record Group statutory profit of £177.7 million, up 13.6%;
o Group normalised operating margin increased to 10.5% (2017: 10.4%).

· Consistent delivery, with very strong five year compound annual growth rates (CAGR):
o Statutory PBT five year CAGR of 21.9%;

o Normalised operating profit five year CAGR of 8.2%.

· Free cash flow of £198.6 million.

· ROCE increased by 50 basis points to 12.4%; gearing held flat at 2.3x EBITDA.

· Proposed final dividend increased 10% to 10.17p; £450 million paid since 2011 resumption.

Operational excellence: organic revenue growth in every division and record profits
· Every division delivered revenue growth for the year:

o North America: grew by 8% in constant currency to a record $1.42 billion;

o ALSA: grew by 11.2% in constant currency to a record €842.3 million;

o UK: grew by 2.8% to £577.0 million;

o German Rail: declined by 15.1% in constant currency, as 2017 principally benefited from catch up revenues (up 5.4% on an underlying basis).

· Record normalised operating profits in our main international divisions combined with very strong UK growth:

o North America: grew by 6.4% in constant currency to a record $129.4 million;

o ALSA: grew by 9.9% in constant currency to a record €119.1 million;

o UK: grew by 12.6% to £79.9 million (2017: £70.9m). Underlying profit growth was 5.4%, with a further £5m from property disposals.

· The Group carried 2.7% more commercial passengers than 2017:

o All divisions carried more passengers, by providing value added services and retaining valued customers;

o Our Spanish, Moroccan and UK coach businesses all set new patronage records;

o UK bus grew commercial patronage by 1.1%, against the market trend;

o Both UK coach (to nearly 60%) and ALSA (to over 50%) grew load factors during the year;

o UK coach (11.5%) and bus (4%) both improved revenue per mile considerably.

Technology investment to underpin excellence, efficiency and innovation
· Across the Group we now have nearly 19,000 vehicles installed with DriveCam smart safety cameras, helping to reduce both the number of accidents and the cost of claims

· A continued shift to more convenient, cost effective and innovative digital channels, with over 13% growth in revenue through this segment in 2018:

o Both UK coach (19%) and ALSA (15%) have grown ancillary revenues, such as seat reservations, during the year;

o A significant growth in partner sales made through our digital channels – a key aspect of public transport’s future revenue generation: this segment alone grew 63% in 2018.

· The benefit of our sophisticated Revenue Management Systems in UK coach and ALSA are demonstrated by both businesses growing passengers and yield during 2018:

o By year end ALSA had more than reversed the long haul patronage decline of the first half;

o Early pilots of machine learning have proved successful, with roll-out of Artificial Intelligence to further extend the reach and sophistication of our systems shortly underway.

Targeted growth through acquisition and market diversification
· We made 11 acquisitions in 2018: seven in North America, three in ALSA and one in the UK, consolidating our presence in core markets and entering strategic growth segments

· Our value enhancing acquisitions alongside continued contract wins have expanded our presence in rich and growing cities, as we seek to build multi-modal service hubs:

o Geneva, New York and Chicago are examples where we have expanded through acquisition and contract wins to build hubs serving multiple local market segments;

o We see significant opportunity to deepen our presence in similar cities and build platforms that deliver door-to-door journeys or comprehesive transport services for customers.

· We are well-advanced in our preparations to launch our new Rabat urban bus services (making us Morocco’s largest operator) and our new Rhine Ruhr Express rail operations this year

· We have a very stong pipeline of further opportunities in place, which we will continue to pursue in a disciplined manner (targeting returns of over 15%) funded by our strong free cash flow generation.