TIDMNEX
RNS Number : 2205M
National Express Group PLC
27 July 2017
Press release
27 July 2017
National Express Group PLC
Half Year results for the six month period ended 30 June
2017
Continued strong growth from a diverse international portfolio
of businesses
The Group has made good progress in the first half of the year
with both revenue and profit up strongly year-on-year on a constant
currency basis, in line with the Board's expectations. Our North
American and Spanish & Moroccan (ALSA) divisions both delivered
record half year operating profit. This has more than offset softer
trading in the UK. Recent acquisitions continue to deliver strong
returns and we have a good pipeline of further opportunities. Our
diversified portfolio of cash generative businesses continues to
provide a stable source of growing revenue and profits; around 80%
of our earnings are generated outside the UK and our largest
contract only contributes 4% of our Group operating profit. Our
strong operational and financial position continues to enable us
both to invest in growth and to deliver attractive returns to our
shareholders, with a 10% increase in the interim dividend. The
Group remains positive about its future and on track to deliver its
profit, cash flow and leverage targets for the year.
Financial highlights
Change
at constant
HY 2017 HY 2016 Change currency
--------------------------- --------- --------- ------------ ----------------
Continuing operations
--------------------------- --------- --------- ------------ ----------------
Group revenue GBP1.17bn GBP1.01bn +16.2% +6.5%
--------------------------- --------- --------- ------------ ----------------
Group normalised operating
profit GBP111.6m GBP93.7m +19.1% +8.3%
--------------------------- --------- --------- ------------ ----------------
Group normalised PBT GBP88.9m GBP70.7m +25.7% +11.0%
--------------------------- --------- --------- ------------ ----------------
Normalised EPS 13.0p 10.9p +19.3%
--------------------------- --------- --------- ------------
Statutory
--------------------------- --------- --------- ------------
Group statutory operating
profit GBP87.3m GBP77.4m +12.8%
--------------------------- --------- --------- ------------
Group statutory PBT GBP64.6m GBP54.4m +18.8%
--------------------------- --------- --------- ------------
Group PAT from continuing
operations GBP50.8m GBP46.0m +10.4%
--------------------------- --------- --------- ------------
Statutory EPS 10.9p 9.2p +18.5%
--------------------------- --------- --------- ------------
Free cash flow GBP81.8m GBP66.1m +GBP15.7m
--------------------------- --------- --------- ------------
Net debt GBP873.3m GBP802.7m GBP70.6m
--------------------------- --------- --------- ------------
Interim dividend 4.26p 3.87p +10.1%
--------------------------- --------- --------- ------------
Our focus on operational excellence continues to deliver
results
-- North American and ALSA divisions both delivered record half year normalised profits:
o 8.2% increase in profit on a constant currency basis in North
America;
o 9.2% increase in profit on a constant currency basis in
ALSA.
-- The North American School Bus bid season saw an average of a
3.7% price increase secured on those contracts up for bid and
renewal; with another very strong retention rate of 95%.
-- ALSA again carried a record number of passengers, with
Spanish long haul routes performing particularly strongly.
-- Management action has driven recent commercial growth in UK
Bus, and mitigated the challenges faced by UK Coach.
We continue to deploy technology to drive efficiency and growth
and raise standards
-- Our active real-time revenue management system is driving
revenue, passenger and yield growth in Spain.
-- DriveCam roll out across the Group continues to improve
safety performance and cost efficiency.
-- Our UK Coach, UK Bus and Spanish operations have all:
increased the proportion of sales made through digital channels;
expanded their CRM databases; and, significantly grown customer
usage of our apps.
Growing through new business opportunities including bolt-on
acquisitions
-- Our acquisitions continue to make very strong investment
returns of 15-20%, generating significant value.
-- We have made three acquisitions so far this year, with benefits due in the second half:
o Two in ALSA, including further expansion in Geneva,
complementing our recent - and very successful - AlpyBus
acquisition;
o A significant acquisition in North America of a Chicago
para-transit operator that also strengthens our credentials in a
growing market.
-- We will remain disciplined and have rejected 18 potential
acquisitions in North America alone in the first half. However, our
strong and sustainable cash flow provides the opportunity to pursue
further acquisitions this year.
Dean Finch, National Express Group Chief Executive, said:
"We have delivered a strong set of results, again benefiting
from our internationally diverse portfolio of cash-generative
businesses. Record half year performances in our North American and
Spanish & Moroccan divisions have more than offset more
challenging trading in the UK. I am particularly pleased with the
strength of our free cash flow, which provides us with opportunity
for further investment and improving returns.
"We continue to see the benefit of our recent acquisitions in
driving good growth and creating shareholder value. These
acquisitions are also helping us to expand in new growth markets,
but we will remain disciplined in the opportunities we pursue. We
also of course retain our focus on operational excellence and
customer service to drive growth and efficiency in our existing
businesses, and the initial success of our low fare zones in UK Bus
are particularly encouraging. Our confidence in the strength of our
approach to deliver growing shareholder value is demonstrated by a
further 10% increase in the interim dividend."
Enquiries
National Express Group PLC
Chris Davies, Group Finance Director 0121 460 8655
Anthony Vigor, Director of Policy
and External Affairs 07767 425822
Louise Richardson, Head of Investor
Relations 07827 807766
Maitland
Rebecca Mitchell 07951 057351
There will be a presentation and webcast for investors and
analysts at 0900 on 27 July 2017. Details are available from
Rebecca Mitchell at Maitland.
Unless otherwise stated, all operating profit, margin and EPS
data refer to normalised results of the continuing Group, which can
be found on the face of the Condensed Group Income Statement in the
first column. Normalised profit is defined as being the IFRS result
excluding intangible asset amortisation and UK rail and
restructuring, along with tax relief thereon.
Due to the one-off nature of UK rail and restructuring, the
Board believes that its removal gives a more comparable
year-on-year indication of the underlying performance of the Group.
For intangible amortisation, the Board believes that adding back
this non-cash item also gives a more comparable year-on-year
indication of the underlying performance of the Group and allows
better comparison of divisional performance which have different
levels of amortisation.
The continuing Group is stated, and the prior year restated,
before discontinued operations, details of which can be found in
note 7 to the condensed interim financial statements.
Constant currency basis compares current period's results with
the prior period's results translated at the current period's
exchange rates. The Board believes that this gives a better
comparison of the underlying performance of the Group.
Further details of these measures are provided in note 17 to the
condensed interim financial statements.
BUSINESS REVIEW
Overview and outlook
In the first half of the year we have delivered strong growth,
driven by record performances in our North America and ALSA
divisions. The benefit and strength of our diverse portfolio of
international businesses has again been demonstrated with the
strength of our North American and ALSA performances more than
offsetting the challenging UK market conditions. With around 80% of
our earnings now generated outside of the UK, we are confident that
we will deliver our growth targets this year, underpinned by a
sustainable and strong free cash flow.
We are also seeing the benefit of management action to drive
growth and address the challenges we face. Despite challenges in
some businesses, we are carrying the same number of passengers
year-on-year across the Group and importantly with an improved mix:
we have seen a reduction in Moroccan passengers paying on average
four Dirham per ticket more than offset by the increase in Spanish
passengers paying an average fare of four Euros. Further, in UK Bus
while we have seen a near four percent reduction in non-fare paying
concessionary passengers, our first two low fare zones introduced
this year have already delivered commercial revenue growth, with a
third recently introduced and demonstrating positive early
results.
Our active real-time revenue management systems are helping to
drive strong growth in passengers, revenue and yield in Spain, as
well as mitigate the market challenges in UK Coach. Our
acquisitions are delivering both strong returns and some strategic
entries into growing markets; and our ability to pursue additional
opportunities has increased with the sale earlier this year of our
c2c UK rail franchise to Trenitalia which not only released us from
significant capital and premium requirements, it also complemented
our strong cash flow to provide additional opportunities for
further investment. Our disciplined approach to capital allocation
is evidenced by another increase in ROCE in the first half to 12.0%
(2016: 11.9%).
We retain a strong focus on operational excellence, with
Group-wide programmes to embed ever-improving performance across
our operations. We have complemented our attention to on-going
safety improvement with our 'Delivering Excellence' and 'World
Class Maintenance' programmes. While they require an upfront
investment these will not only deliver the operational excellence
so crucial to retaining existing and winning new customers, they
will drive future efficiency so we can add further to nearly GBP80
million of cost-based savings already made in the last three and a
half years.
With our strong free cash flow growing to GBP81.8 million (2016:
GBP66.1m), coupled with the strong growth of 19.3% in EPS, we are
able to increase our interim dividend by 10% to 4.26p. Our net debt
gearing has also decreased to 2.3 times EBITDA.
Performance highlights
National Express has made strong progress in the first half of
2017, with Group revenue up 6.5% on a constant currency basis
(16.2% on a reported basis). This has been driven in particular by
the growth in North America and ALSA. Our German Rail division, has
also delivered a 22.7% increase in revenue, in part because of the
recognition of prior years' revenues that was not able to be
included in the 2016 full year accounts.
Revenue by division was as follows:
Full
First half Year
Revenue in local currency 2017 2016* 2016*
-------------------------- ------- ------- -------
ALSA (EURm) 369.9 344.4 731.2
North America (US$m) 683.9 630.6 1,189.0
German Rail (EURm) 44.3 36.1 75.0
Revenue in GBPm
-------------------------- ------- ------- -------
ALSA 318.1 268.2 597.3
North America 543.0 439.9 877.2
UK Bus 135.9 137.9 276.8
UK Coach 136.1 133.8 282.8
German Rail 38.1 28.2 61.3
Intercompany (0.7) (0.8) (1.7)
-------------------------- ------- ------- -------
Group 1,170.5 1,007.2 2,093.7
-------------------------- ------- ------- -------
* Restated
Group operating profit has increased by 8.3% on a constant
currency basis to GBP111.6 million (up 19.1% on a reported basis).
The weakening of Sterling against both the US Dollar and the Euro
contributed GBP9.3 million of operating profit growth. Profit
before tax rose by 25.7% to GBP88.9m, up 11.0% on a constant
currency basis. After intangible amortisation and restructuring
costs of GBP24.3 million, statutory profit before tax was GBP64.6
million (2016: GBP54.4m).
First Half Full Year
Operating profit in constant 2017 2016* 2016*
currency
----------------------------- ------ ---------- ---------
ALSA (EURm) 45.2 41.4 103.7
North America (US$m) 70.1 64.8 113.9
German Rail (EURm) 2.0 (2.9) (1.8)
Operating profit GBPm
----------------------------- ------ ---------- ---------
ALSA 38.8 32.3 84.7
North America 55.7 45.2 84.0
UK Bus 16.6 16.8 34.0
UK Coach 9.4 10.4 33.3
German Rail 1.7 (2.3) (1.5)
Corporate (10.6) (8.7) (17.0)
----------------------------- ------ ---------- ---------
Operating profit 111.6 93.7 217.5
Interest and associates (22.7) (23.0) (48.9)
----------------------------- ------ ---------- ---------
Profit before tax 88.9 70.7 168.6
----------------------------- ------ ---------- ---------
* Restated
Free cash flow remains strong, with the business on-target to
deliver GBP120 million at the year end.
Dividend
The Board has declared an increase in the interim dividend of
10% to 4.26 pence per share (2016: 3.87p), reflecting its
confidence in the performance and future prospects of the business.
The interim dividend has grown by over 40% since its
re-introduction six years ago. Our dividend policy is to pay a
dividend covered two times by Group earnings.
First half year basic earnings per share were 13.0 pence (2016:
10.9p). The dividend will be paid on 22 September 2017 to
shareholders on the register at close of business on 1 September
2017.
Delivering our strategy
I have repeatedly set out the importance of our strategy,
grounded in operational excellence, utilising technology to drive
service improvement and efficiency and to invest in growth through
new business opportunities including bolt-on acquisitions. This
consistency is borne of the fact that I believe it is the best
route to generating increasing shareholder returns. I believe our
results demonstrate its continued importance and I will turn now to
set out our progress in more detail.
Our focus on operational excellence continues to deliver
results
Our Group Vision is to deliver safe, punctual and frequent
public transport services at excellent prices. This requires a
focus on operational excellence, with services that customers want
and assess as good value consistently delivered.
We are currently engaged in an ambitious phase of development
where I am determined we move from leaders individually in the
markets we serve, to becoming a globally-acknowledged leader in
passenger transport operational excellence. This is why we have
invested in new Group-wide programmes, Delivering Excellence and
World Class Maintenance, to complement our on-going safety
initiatives and to learn from and embed best practice across all
our divisions. We have also extended the roll out of our Master
Driver initiative which recognises and rewards consistently
excellent driving over three years.
The Delivering Excellence team has already completed one round
of work, focused on driver training and management, establishing
new Group-wide operating procedures. A second round of work on
driver utilisation has begun. The World Class Maintenance programme
has quickly become established across the Group, with the team
identifying the global standards and accreditations we will target.
They are also developing a plan to roll out Master Technician
accreditation across the Group, to recognise and further develop
our engineers' skills and firmly establish the excellence of
National Express' maintenance.
This Master Technician programme will draw on the success of our
Master Driver initiative which rewards drivers who achieved three
years of excellent service with no preventable accidents, no
speeding convictions and no proven customer complaints coupled with
achieving advanced driving and customer service qualifications.
Amongst other benefits, UK Master Drivers become members of the
Institute of Advanced Motorists.
Together, this work is crucial in our determination to be an
ever-better and ever-more efficient operator, by learning from and
leveraging the excellence evident across the Group to improve
overall standards. In an increasingly competitive market, this is
crucial to us retaining existing and attracting new customers.
The strength of our annual contract retention rates in North
America (this year, 95% of all contracts) and another record year
for passengers in ALSA are clear demonstrations of the strength and
importance of this approach. But equally, I believe it is also
apparent in how we have responded to challenging trading
conditions. We have complemented local market knowledge within
divisions with Group-wide expertise to improve performance. UK Bus
is a good example, where drawing on Group-wide commercial knowledge
and experience we have responded promptly to declining passenger
numbers with a new granular approach to pricing that better
reflects local markets, with positive results already clear.
We continue to deploy technology to drive efficiency and growth
and raise standards
This approach to leveraging Group expertise is also apparent in
our deployment of technologies to drive efficiency, growth and
raise standards.
Our investment in industry-leading real-time revenue management
systems is a useful example. We installed systems in our UK Coach
and Spanish businesses around two years ago and are seeing the
benefits in our current results. Spain is enjoying record passenger
numbers, and driving revenue, yield and utilisation on the routes
with revenue management in place. Similarly, UK Coach saw the
benefits of its revenue management system: across the half year it
has delivered underlying two percent revenue growth despite the
challenging trading conditions. Crucially, however, these systems
have not been developed in isolation: they have learnt - and
continue to learn - from each other as we make them increasingly
sophisticated and effective.
We have also invested to make our services more accessible to
customers. This includes improving our apps, providing customers
with relevant, real time information. Our three divisional apps now
average a score of four out of five in the App Store and we are
constantly targeting further improvement. This is making a
difference: in a recent survey 33% of our UK Bus customers who use
its app said it was making them travel more often. UK Coach's
on-board entertainment system - VUER - continues to prove popular
with customers, with satisfaction scores nearly nine percent higher
amongst users. And German Rail have recently introduced a WhatsApp
Group to provide prompt customer information and it has already
secured thousands of members.
Our focus here has also included making it easier for customers
to pay. In UK Bus for example, we now have over 10,000 m-ticket
journeys per day. We will be rolling contactless ticketing out this
year, making us the largest contactless public transport network
outside of London.
Our Spanish services are also seeing real progress, with revenue
obtained through digital sales now standing at 39.2% compared to
36.0% in the first half of 2016. Indeed, on our long haul services,
46% of all revenue is now obtained through digital channels.
We continue to invest in the industry-leading Lytx DriveCam
technology to help improve safety performance and drive down cost.
The smart camera technology was fully installed on our UK Coach
fleet last year, and we will shortly complete the roll-out to
Clarkes. We continue to roll-out the technology in North America to
meet our commitment to fully install our fleet by the end of 2019
and all UK buses will have DriveCam installed this year. Our
Spanish installation programme starts on 1 November this year.
Growing through new business opportunities including bolt-on
acquisitions
In the last few years we have developed a real expertise in
identifying, acquiring and integrating new businesses. Our cash
generative businesses, augmented by the recent sale of c2c, have
provided the opportunity to acquire quality new businesses that
meet our strict returns and strategic criteria.
The acquisitions made in 2015 and 2016 continue to deliver very
strong investment returns, of between 15-20%. They are principally
two types of acquisition. First, 'bolt-on' acquisitions near
existing operations, therefore providing opportunities for synergy
and service efficiency benefits. Second, new strategic entry into
growing markets. We have made three acquisitions so far in 2017 in
keeping with this approach: in the growing para-transit market
through the purchase of an operation in Chicago; a bolt-on
acquisition of a bus company in Madrid; and, the acquisition of a
school bus provider in Geneva, building on our recent AlpyBus
purchase. The benefit of these acquisitions will be realised in the
second half of the year.
We will remain disciplined and have already turned down 18
potential acquisition opportunities in North America in 2017.
Nonetheless, we believe there are further opportunities and have a
strong pipeline to explore, drawing on our strong cash flow. We
have, in addition, made two appointments to grow our expertise in
international transport opportunities as we look at other potential
markets for expansion. Alongside the investment in our Group-wide
excellence programmes, this has entailed upfront investment
reflected in our central costs, but I am confident both will
provide strong returns in the coming years.
Divisional performance review
North America
Our North American business has delivered a strong performance
in the period, with revenue growth of 8.4% and a record profit of
$70.1m up 8.2%, both on a constant currency basis.
This performance has been driven in particular by the success of
our recent acquisitions, but is supported by organic growth in the
business as well. We enjoyed a successful bid season, retaining 95%
of all contracts, with an average increase of 3.7% on those
contracts up for bid, which translates to around 2.5% increase
across the whole portfolio. These increases help us manage the
on-going wage pressures within the strong North American labour
market. We have also grown our lower margin transit revenue, so
that now - five years since we started operating in the market - it
delivers $275 million of annualised revenue. With on-going wage
pressure and the increase in transit revenue, we are therefore
pleased to have maintained our operating margin flat at 10.3%.
We continue to pursue an 'up or out' strategy - exiting
contracts which do not meet acceptable returns - although there are
fewer such contracts this year than in recent bid seasons. With the
majority of the bid season completed, we currently have a net
decline of 390 buses overall. We expect this figure to improve in
the coming months as both some additional business wins and extra
routes added to existing contracts are secured. The fact we have
maintained our 100% retention rate since the inception of our
Transit business in 2012, this demonstrates our growing credentials
in this market.
Change in school bus numbers - 2016/17 Number
bid season of buses
---------------------------------------- ---------
Regretted losses (860)
Exited per 'up or out' strategy (150)
Acquisition 0
New business wins 600
Organic growth 20
Change in buses operated for 2016/17
school year (390)
---------------------------------------- ---------
The table above shows that we didn't make any acquisitions in
the period. We have, however, made a significant acquisition in
early July adding a further 275 vehicles. This acquisition,
Cook-DuPage Transportation, secures entry into the Chicago
para-transit market, the largest single para-transit market in the
US. Para-transit is a fast growing market and this acquisition
importantly therefore also strengthens our credentials.
The acquisitions we have made in recent years continue to
deliver strong investment returns of 15-20%. We will remain very
disciplined and only acquire new businesses that pass our strict
criteria. Nonetheless, we continue to pursue other opportunities
and have a strong pipeline ahead of us. This pipeline has both new
strategic market entry opportunities in it, as well as further
'bolt-on' acquisitions in what remains a highly fragmented school
bus market.
ALSA
Our ALSA business has, like North America, also enjoyed a record
performance for half year profit: EUR45.2 million in constant
currency, up 9.2%. Revenue was also up significantly, 7.4%, in
constant currency terms and our operating margin increased by 20
basis points to 12.2%.
This performance has been driven by a combination of organic
growth and the benefit of recent acquisitions. Our Spanish long
haul services have performed particularly strongly, benefiting from
our active, real-time revenue management system. In the first six
months of the year, our long haul services have seen revenue
increase by 5.8%, with a 3.1% growth in passengers and 2.7%
increase in average fare. These results demonstrate the benefit of
our investment in a real-time revenue management system that will
also become increasingly sophisticated through time as it gains
more and more data to further improve its demand forecasting.
ALSA's recent acquisitions - bus services in Ibiza and Madrid
(Herranz) last year, for example - continue to perform very
strongly, delivering investment returns of between 15-20%. Further,
our recent AlpyBus acquisition grew revenue by 18% year-on-year
during its peak season. We have made two further acquisitions so
far this year: a small bus operation in Madrid; and, a charter and
school bus operator based in Geneva. Both of these acquisitions
offer synergy benefits with existing operations, with the
Geneva-based company also providing strategic expansion into a new
market. We believe there are further opportunities for additional
acquisitions in Spain that meet our strict financial and strategic
criteria.
In anticipation of a record tourist season in Spain - which is
expected to be the most popular destination globally - we have
expanded our marketing campaign targeting specific segments (music
events, group travel and young people) that are most likely to use
our services.
The long-distance concession renewal process has been further
delayed and we now expect virtually no impact until 2019. We have
been encouraged by the ministry's suggested bidding criteria
revision to increase the relative importance of quality against
price. This has two important effects. First, it should encourage
more sensible pricing. Second, we believe that as the premium
operator in the market, we will be well placed to retain existing,
and win new, concessions. Our recent success in retaining the
Madrid to Guadalajara concession is instructive: although we came
third on price, we were successful because we scored over 97% on
the quality score. With an industry-leading team in place,
alongside sophisticated systems such as revenue management, we
believe we are well-placed for the upcoming renewal programme.
Morocco has had a more challenging year, primarily because of
the increased competition from local taxis, decreased subsidy and
higher fuel costs. We have responded to the competitive challenge
with lower fares and are already seeing an improvement. We have
also begun negotiations regarding the subsidy reductions with the
authorities and have made progress.
The strength of ALSA's performance is further supported by the
significant awards in crucial business areas that it has won in the
first six months of the year: the BCX 'Best Customer Experience for
transport industry' award; the International Road Safety Award from
the Mapfre Foundation; and a prestigious HR award from the Spanish
magazine 'Capital Humano'.
UK Bus
Our UK Bus business has experienced a half of two quarters with
commercial revenue and overall profit broadly flat for the first
six months of the year. While concessionary revenue is down 3.7%,
we have held overall operating margin flat at 12.2% because of cost
efficiency measures.
Responding to challenging market conditions, we began to
introduce targeted 'low fare zones' within the West Midlands to
reverse revenue and patronage decline. The results so far have been
very encouraging and are helping to drive commercial growth in
revenue and patronage in the second quarter of the year. The first
low fare zone to be introduced - in Dudley - has already boosted
passenger growth by over 3.5% and revenue by over one percent, with
a positive momentum being maintained. Our second low fare zone, in
Walsall, is seeing similar results. We have recently introduced
another low fare zone in East Birmingham, alongside some other
targeted price promotions, and the early results are also positive.
We will be bringing others in shortly and look to further
capitalise on this improving trend.
Alongside these promotions we have been making it easier for
customers to access our services and pay for their tickets. We have
improved our customer app, including offering unique price
promotions for users. We have seen a rapid take-up of m-ticketing,
with over 10,000 tickets sold daily already. And Swift - the single
largest smartcard outside of London - continues to prove
increasingly popular. Later this year we will also roll out
contactless payment across the network, making it the single
largest public transport contactless payment system outside of
London.
We have enjoyed a positive working relationship with the new
West Midlands mayor over the last year. We are working
constructively on further improvements to bus services including
additional prioritisation measures. Following Transport for West
Midlands' (TfWM's) decision to take Midland Metro operations
in-house given the complexity of specifying the next concession
with such significant infrastructure works going on, we have begun
positive discussions with the authority to ensure a smooth
transfer.
We continue to seek operational efficiencies, including through
network reviews. A recent review in East Birmingham & Solihull,
improved the average timetabled journey time by 3.3%; initial
passenger trends are showing a 1.2% improvement (or an extra 8,000
passengers per week). We have also introduced new express services,
in response to customer feedback, which are delivering passenger
growth 3% above the network average. We will work closely with
TfWM, local councils and customers on future reviews to deliver
better and more efficient services.
With the sale of c2c and our exit from the UK rail market, we
have already taken the opportunity to restructure some of the
common functions within our UK Bus and UK Coach operations. Some of
the benefit of this approach is already evident in the more
granular pricing techniques more common in UK Coach being deployed
in UK Bus.
UK Coach
UK Coach enjoyed a strong start to the year, but has more
recently been impacted by a reduction in transport demand after
recent terrorist events. Drawing on its sophisticated revenue
management system, the core coach business has responded by
focusing on retaining market share. This approach has necessitated
a significant reduction in average yield, driving profit down by
nearly 10%. Revenue was up in the first half of the year by 1.7%,
driven by the benefit of our Clarkes acquisition made in December
2016. Our core coach revenues declined slightly due to the impact
of the terrorist events. Following increased investment in new
technology - such as VUER - and our strategy of protecting market
share, UK Coach's operating margin dropped to 6.9% (2016:
7.8%).
We expect the subdued demand to continue in the second half of
the year, but have a number of management actions in place to
improve the trend. As mentioned, our revenue management system is a
crucial tool in generating demand and revenue - it is generating an
underlying revenue benefit of around two percent. We are
complementing this with marketing activity, especially targeted and
personalised digital communications where we have developed an
industry-leading capability. Our operational punctuality is up
year-on-year as is the percentage of customers who recommend us (at
88%). We remain confident about the underlying performance of the
business which further strengthens the importance of maintaining
market share in anticipation of improved trading conditions.
We have continued to pursue new growth opportunities and have
secured new partnerships such as with Groupon, Wowcher and Qatar
Airways. We will be launching a new booking portal on our website
to make the process even easier and more efficient. We grew the
revenue from our Glastonbury services this year, where we carried a
record number of 71,000 passengers. We will also shortly launch a
seat booking option as well as further partnership deals and
additional services in growth markets. Our Clarkes acquisition has
also performed well and is expecting robust in-bound tourism
trading during the summer.
As already mentioned in UK Bus, UK Coach is also benefiting from
efficiency measures made as we restructure our UK presence. The
business is always looking to optimise its network and has removed
a net 1.8 million miles from services this year as it looks to
reduce uncommercial operations while also boosting those on popular
routes.
German Rail
Our German Rail services have delivered a strong result in the
period, with revenue growth of 22.7% in constant currency and EUR2
million of profit (2016: loss EUR2.9m). These results include the
benefit of 'catch up' revenue and profits made last year but that
we were not able to recognise in the 2016 full year results. We are
pleased to have now clarified our revenue position, including over
the latest passenger count data, which has allowed us to recognise
all revenue earned.
We continue to outperform the previous operator on the majority
of customer service metrics and are investing in further
improvements. Our new 'NX Scout' WhatsApp Group which provides
up-to-date customer service information has proved very popular
with customers and the local transport authority. With a new
management team in place, we are also looking to secure further
cost and operational efficiencies to further improve our
performance.
The mobilisation for our Rhine Ruhr Express (RRX) contracts (the
first of which starts in June 2019) is well underway, with the new
trains currently being tested. We are targeting up to four bids by
the end of next year as we look to build on our presence in Germany
and continue to grow our operations.
Bahrain
Bahrain Bus continues to grow robustly its passenger volumes (up
7% year on year) and introduced a sophisticated journey planning
app to complement the state of the art smart card technology. The
journey planning tool is available as a mobile phone application
and uses real time vehicle location tracking to assist our
customers in making their travel decisions. A recent customer
survey also recorded a very pleasing 98% satisfaction score.
Finally, we are also delighted to have been awarded additional
routes to serve Bahrain University which is one of the largest in
the region, with more than 20,000 students.
Outlook
We remain on course to deliver the Board's expectations for
2017. Our internationally diversified portfolio of cash generative
businesses will continue to provide balanced earnings. We are not
over-dependent on any single contract: our largest contributes only
four percent of our earnings. Further, around 80% of our earnings
come from outside the UK.
We continue to benefit from the sale of the c2c rail franchise
to Trenitalia earlier this year. The sale removed liabilities and
potential risks such as the significantly increasing premium
payments, committed capital investment and vehicle leasing costs.
The sale also secured additional cash to combine with that
generated by our existing businesses, providing greater opportunity
to invest in our fastest growing markets as well as enter
strategically interesting new markets. Our recent acquisitions
continue to perform strongly, delivering investment returns of
between 15-20% and we have turned down 18 potential opportunities
already this year, demonstrating our discipline. Nonetheless,
through acquisitions made this year we have strengthened our
position in the growing US para-transit market and complemented our
recent entry into ski-transfer services by purchasing another
operator in Geneva that also serves the local school bus market. We
have a strong pipeline of opportunities in North America and as our
results show, have developed real expertise in the identification,
purchase and integration of new businesses.
We will see increasing excellence and efficiency benefits from
our Group-wide programmes and believe our management action to
mitigate, and in some cases already reverse, the market challenges
we face will provide further positive momentum in the second half
of the year. The initial success of our targeted low fare zones as
part of a renewed approach to more granular pricing in the West
Midlands will be further extended. We hope this will therefore
continue to grow revenue and passenger numbers against market
trends. We were quick to identify driver wage pressure in North
America and have been managing its impact through improved contract
pricing and recruitment practices which we believe will continue to
deliver on-going benefits.
In Spain, our revenue management system is driving real
improvement in the business' performance, with revenue, passenger
numbers and utilisation all strongly up. It also provides a
competitive advantage in the concession renewal process, which has
nonetheless been further delayed. We now expect virtually no profit
impact until 2019 and have been pleased by the authority's
intention to increase the importance of quality relative to price
in the assessments, as this should both encourage more sensible
bidding and plays to our strengths as Spain's pre-eminent operator.
Our recent success in the Madrid-Guadalajara concession, where we
were third on price, but won due to a quality score of over 97%,
demonstrates the strength of our credentials.
The strength of our diversified portfolio of businesses allows
us to absorb relative underperformance in a division, while still
delivering headline growth. We will therefore continue to seek to
maintain market share in UK Coach in the face of subdued demand.
Using our revenue management and marketing capability we will seek
to drive demand and capture any improvements in market conditions
later this year.
It is this combination of excellence in our existing businesses
- to retain existing and attract new customers and generate cash -
with investment in new opportunities that will continue to drive
our growth. Aided by tailwinds, such as the on-going benefits of
our recent acquisitions and lower interest costs, coupled with our
previously guided reduction in fuel costs of GBP20 million in 2018,
we are confident there is more growth to come and look forward to
delivering on our future opportunities.
Dean Finch
Group Chief Executive
27 July 2017
FINANCIAL REVIEW
Presentation of results
To supplement IFRS reporting, we also present normalised results
showing the performance of the business before intangible
amortisation as the Board believes this gives a more comparable
year on year indication of the underlying performance of the Group.
Due to the one-off nature of the disposal of our UK rail
operations, the profit on disposal and the consequent costs of
restructuring the UK business, these amounts are also presented
separately and excluded from normalised results.
Revenue
Revenue bridge GBPm
----------------------------------------- -----
2016 first half year revenue 1,007
Currency translation 92
----------------------------------------- -----
2016 first half year revenue at constant
currency 1,099
Organic growth 17
Acquisitions 55
2017 first half year revenue 1,171
----------------------------------------- -----
Group revenue for the period was GBP1,170.5 million (2016:
GBP1,007.2m), an overall increase of 6.5% on a constant currency
basis (up 16.2% on a reported basis with GBP91.5m of foreign
currency gains on translation). Revenue growth of GBP17 million
from our existing businesses was boosted by a further GBP55 million
from acquisitions.
Performance has been particularly strong in our overseas
businesses, with North America delivering 8.4% growth in constant
currency, benefitting from a number of bolt-on acquisitions made in
the last 12 months, together with a successful bidding season in
which we achieved an average price increase of around 2.5% across
the entire portfolio and 3.7% on those contracts up for bid and
renewal. ALSA also delivered a strong performance, with revenue
growth of 7.4% on a constant currency basis. This was driven by
strong performance in Spain, notably on our Spanish long distance
routes where our revenue management system contributed 5.8% to
revenue growth on our long haul services.
Decisive management action has driven resilient performance in
our UK businesses in the context of softer market conditions. UK
Bus revenue declined by 1.4% reflecting the ongoing decline in
concessionary income while we have driven an improving trend in
commercial revenue in the second quarter with the introduction of a
number of low fare zones, driving an increase in passenger volumes
and yielding increased revenue. Commercial revenue was broadly flat
for the first half as a whole. After a strong start to the year, UK
Coach operations delivered revenue growth of 1.7%, a robust
performance given recent events in Manchester and London.
German Rail delivered strong growth in the first half, with
revenue growth of 22.7% in constant currency. Overall performance
was enhanced by the clarification of our revenue position including
latest passenger count data, allowing us to recognise all revenue
earned. The first half result has therefore included an element of
catch up from 2016 that we were not able to recognise in the 2016
full year results.
Normalised profit
Profit bridge for the continuing operations GBPm
---------------------------------------------- ----
2016 first half year operating profit
(as reported) 94
Currency 9
---------------------------------------------- ----
Operating profit at constant currency 103
Growth 5
Acquisitions 11
Cost inflation (17)
Cost efficiency 12
Other (2)
2017 first half operating profit 112
---------------------------------------------- ----
Group normalised operating profit increased by 8.3% to GBP111.6
million on a constant currency basis, up 19.1% on a reported basis
(2016: GBP93.7m). We delivered solid organic growth of GBP5 million
from our existing businesses as the drivers of revenue growth noted
above flow though. This was supplemented by a strong contribution
of GBP11 million from acquisitions made in the last year,
predominantly in the US.
These results include GBP17m of cost inflation, most notably in
the form of driver wage inflation in North America. We have
retained our disciplined focus on cost control and a programme of
efficiency measures across the Group delivered GBP12m of savings in
the first six months of 2017 and brought net cost inflation down to
GBP5 million.
Central costs have increased by GBP2 million and reflect
strategic investment in a number of group-wide initiatives
including our Delivering Excellence and World Class Maintenance
programmes, together with a new International Development team to
help the Group pursue further international opportunities.
We have benefitted from GBP9m of currency translation in the
first half driven by the weakening of Sterling following the result
of the 'Brexit' referendum. Given the timing of that decision, we
expect the foreign currency tailwind to moderate in the second half
of this year.
Net finance costs decreased by GBP4.9 million to GBP18.8 million
(2016: GBP23.7m), reflecting the lower interest costs following the
successful refinancing, with our new GBP400 million bond that
extends liquidity out to 2023.
We recorded a loss of GBP3.9 million (2016: profit GBP0.7m) from
associates, reflecting the write down of our investment in a
minority stake in Deutsche Touring Group, a German partner in
Eurolines, which entered into administration this year.
After accounting for net finance costs and losses from
associates, profit before tax of GBP88.9 million grew 11.0% on a
constant currency basis and by 25.7% on a reported basis (2016:
GBP70.7m).
The Group's effective tax rate for 2017 normalised profit is
forecast to be around 24% (2016 full year: 19%), in line with our
previous guidance earlier this year.
Normalised basic earnings per share were 13.0 pence (2016:
10.9p), an increase of 19.3%.
Statutory profit
Full
Statutory profit First half year
------------------------------------ -------------------------- ------
2017 2016* 2016*
GBPm GBPm GBPm
------------------------------------ ------------ ------------ ------
Normalised profit before tax 88.9 70.7 168.6
UK restructuring (5.6) - -
Intangible amortisation (18.7) (16.3) (33.8)
------------------------------------ ------------ ------------ ------
Profit before tax 64.6 54.4 134.8
Tax charge (13.8) (8.4) (19.9)
------------------------------------ ------------ ------------ ------
Profit after tax from continuing
operations 50.8 46.0 114.9
------------------------------------ ------------ ------------ ------
Profit from discontinued operations 6.4 2.0 5.1
------------------------------------ ------------ ------------ ------
Profit for the period 57.2 48.0 120.0
------------------------------------ ------------ ------------ ------
*Restated
Intangible amortisation increased to GBP18.7 million (2016:
GBP16.3m) predominantly due to foreign exchange movements.
In February 2017, the Group disposed of its final UK rail
franchise, c2c, as part of a broader UK strategic review in which
the Group discontinued all activity in UK rail. Consequent on this
exit, the Group has also reorganised its UK management structure
given the simplified UK footprint to reduce costs and facilitate
better, clearer decision-making. The aggregate impact of the UK
rail exit including c2c disposal and consequent UK restructuring
has been a small profit after tax of GBP1.9 million, which has been
excluded from normalised results. To comply with accounting
regulations, the gross profit on the sale of the c2c franchise and
the discontinuation of other direct UK rail costs (GBP6.4m) is
separated on the income statement from the associated costs of
restructuring the UK business (GBP5.6m). Further detail can be
found in note 7 to the condensed interim financial statements.
Profit after tax was GBP50.8 million (2016: GBP46.0m). Basic EPS
was 10.9 pence (2016: 9.2p), an increase of 18.5%.
Cash management
Free cash flow Full
First half year
---------------------------------------- -------------------------------- -------
2017 2016* 2016*
GBPm GBPm GBPm
---------------------------------------- --------------- --------------- -------
Continuing normalised operating
profit 111.6 93.7 217.5
Trading (loss)/profit from discontinued
operations (0.9) 2.5 6.4
---------------------------------------- --------------- --------------- -------
110.7 96.2 223.9
Depreciation and other non-cash
items 69.2 57.7 120.7
---------------------------------------- --------------- --------------- -------
EBITDA 179.9 153.9 344.6
Net maintenance capital expenditure (77.4) (57.4) (134.7)
Working capital movement 18.0 9.6 (3.1)
Pension contributions above normal
charge (1.4) (2.8) (5.5)
---------------------------------------- --------------- --------------- -------
Operating cash flow 119.1 103.3 201.3
Payments to associates and minorities (0.6) (0.1) (1.5)
Net interest paid (32.9) (33.9) (47.6)
Tax paid (3.8) (3.2) (13.6)
---------------------------------------- --------------- --------------- -------
Free cash flow 81.8 66.1 138.6
Exceptional cash flow - (2.8) (4.9)
Cash flow available for growth
& dividends 81.8 63.3 133.7
---------------------------------------- --------------- --------------- -------
*Restated
Our strong and sustainable cash flows support a capital
investment programme that maintains fleet age at acceptable levels.
Our current target is to invest around 1.1 to 1.2 times
depreciation.
Operating cash flow improved by GBP15.8 million to GBP119.1
million (2016: GBP103.3m) driven by the growth in EBITDA partially
offset by net maintenance capital expenditure GBP20 million higher
than in the first half of 2016. This is primarily phasing and our
expectation for net maintenance capital expenditure for the full
year remains at around GBP160 million to GBP170 million. The
majority of the maintenance capital investment has been in fleet
replacement predominantly in Spain and North America. We delivered
operating cash flow conversion of 108% partially benefitting from
working capital phasing.
Cash generated from operations for the period was GBP181.2
million (2016: GBP156.8m) as shown in the Condensed Group Statement
of Cash Flows. Operating cash flow of GBP119.1 million (2016:
GBP103.3m) presented in the table above is different, predominantly
due to the inclusion of net maintenance capital expenditure of
GBP77.4 million (2016: GBP57.4m) and the separate disclosure of
discontinued operations.
GBP81.8 million of free cash flow was generated in the period
(2016: GBP66.1m) reflecting the flow-through of the increase in
operating cash flow. This constitutes a strong 74% free cash flow
conversion creating a solid platform for investing in growth and
paying dividends. In line with our previous guidance, we remain on
target to deliver GBP120 million of free cash flow for the full
year.
Net funds flow Full
First half year
---------------------------------- ------------------------------ -------
2017 2016 2016
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -------
Cash flow available for growth
& dividends 81.8 63.3 133.7
Net growth capital expenditure (3.0) (15.5) (27.0)
Net inflow from discontinued
operations 29.9 - -
Acquisitions (52.9) (37.6) (88.8)
Dividends (42.9) (39.1) (58.9)
Other, including foreign exchange (8.2) (28.3) (91.5)
---------------------------------- -------------- -------------- -------
Net funds flow 4.7 (57.2) (132.5)
---------------------------------- -------------- -------------- -------
Net debt (873.3) (802.7) (878.0)
---------------------------------- -------------- -------------- -------
Growth capital expenditure during the period of GBP3.0 million
included investment in new ticket machines enabling contactless pay
in our UK Bus operations, infrastructure to support the
mobilisation of the RRX contract in our German rail operations and
further investment in new technology and digital platforms in our
UK Coach operations.
Cash inflow from discontinued operations of GBP29.9m is the
result of the exit of the UK rail business and is broken out
below.
Net inflow from discontinued
operations
---------------------------------- ------
GBPm
---------------------------------- ------
Proceeds from disposal 71.8
Cash in the business (14.9)
Outflow relating to costs of
disposal (13.0)
------------------------------------ ------
Net cash inflow from c2c disposal 43.9
Outflow relating to discontinued
operations (14.0)
Net cash inflow 29.9
------------------------------------ ------
We have continued our strategy of making selective bolt-on
acquisitions where the returns and strategic fit justify the
investment, and in the period we completed two such investments in
our Spanish division, for total cash consideration of GBP5.7
million. Deferred consideration for acquisitions made in 2016 was
GBP45.8 million. We continue to deliver strong performances from
our acquisitions, delivering returns on invested capital within our
15-20% target range.
Post the period end we completed the acquisition of Cook-DuPage
Transportation, a paratransit operator in the Midwest in the US,
for a net cash consideration of GBP45.3 million. There is no impact
in these interim results from this acquisition.
Our disciplined approach to investment and the underlying
strength of the business is demonstrated in ROCE growing to 12.0%
(2016: 11.9%).
Net funds flow for the period was an inflow of GBP4.7 million
(2016: outflow GBP57.2m), resulting in period--end net debt of
GBP873.3 million.
The Group maintains gearing discipline by matching the currency
denomination of its debt to the currency in which EBITDA is earned.
Gearing at the end of the period was 2.3 times EBITDA, within the
Group's target range of 2-2.5 times.
Dividend
Our dividend policy is to pay a dividend covered at least two
times by Group normalised earnings. In line with our dividend
policy we have declared a 10% increase in the interim dividend to
4.26 pence reflecting these strong results.
Treasury management
The Group maintains a prudent approach to its financing and is
committed to an investment grade credit rating. The Board's policy
targets a level of debt that allows for disciplined investment and
ample headroom on its covenants, with net debt to EBITDA at a ratio
of 2.0x to 2.5x in the medium-term. Both Moody's (Baa3/stable) and
Fitch (BBB-/stable) credit rating agencies have reaffirmed their
investment grade credit rating in the second quarter of this
year.
The Group's key accounting debt ratios at 30 June 2017 were as
follows:
-- Gearing ratio: 2.3 times EBITDA (31 Dec 2016: 2.5x; bank covenant not to exceed 3.5x);
-- Interest cover ratio: EBITDA 8.4 times interest (31 Dec 2016:
6.6x; bank covenant not to be less than 3.5x).
The Group has a strong funding platform that underpins delivery
of its strategy. Core funding is provided from non-bank sources, to
provide improved certainty and maturity of funding.
At 30 June 2017, the Group had GBP1.3 billion of debt capital
and committed facilities, comprised of a GBP225 million bond
maturing in 2020; a GBP400 million bond maturing in 2023; a private
placement of EUR78 million maturing in 2021; GBP512 million
revolving credit facilities ('RCF') maturing in 2021; and GBP154
million of finance leases. At 30 June 2017, the Group had GBP97
million drawn under its RCF, and GBP494 million in cash and undrawn
committed facilities available.
At 30 June 2017, the Group had foreign currency debt and swaps
held as net investment hedges. These help mitigate volatility in
foreign currency profit translation with corresponding movements in
the Sterling value of debt. These corresponded to 1.8x EBITDA
earned in the US, held in US Dollars, and 2.1x EBITDA earned in
Spain and Germany, held in Euros. The Group hedges its exposure to
interest rate movements to maintain an appropriate balance between
fixed and floating interest rates on borrowings. It has therefore
entered into a series of swaps that have the effect of converting
fixed rate debt to floating rate debt. The net effect of these
transactions was that, at 30 June 2017, the proportion of Group
debt at floating rates was 25%.
Pensions
The Group's principal defined benefit pension schemes are all in
the UK. The combined deficit under IAS19 at 30 June 2017 was
GBP89.3 million (Dec 2016: GBP88.2m). The two principal plans are
the UK Group scheme, which closed to new accrual in 2011, and the
West Midlands Bus plan, which remains open to accrual for existing
active members only. We have completed the triennial valuation of
both schemes and expect that the overall level of contribution will
be around GBP10 million per annum until 2020.
The IAS19 valuations for the principal schemes at 30 June 2017
were as follows:
-- UK Bus: GBP124.9 million deficit (Dec 2016: GBP128.5m deficit);
-- UK Group scheme: GBP39.8 million surplus (Dec 2016: GBP44.5m surplus)
The net pension surplus for c2c's participation in the Railways
Pension Scheme has been transferred following the disposal of the
rail franchise to Trenitalia.
Fuel costs
Fuel cost represents approximately 8% of revenue. The Group is
fully hedged for 2017 at an average price of 44.4p per litre, 98%
hedged for 2018 at an average price of 34.0p, 77% hedged for 2019
at an average price of 34.6p and 30% hedged for 2020 at an average
price of 33.6p. As previously guided, we anticipate fuel savings of
around GBP6m for the full year, and GBP20m for 2018.
Summary
The Group has delivered a strong financial performance in the
first half of the year and we remain confident about the prospects
for the full year.
Chris Davies
Group Finance Director
27 July 2017
Group wide risks
Principal risks and uncertainties
The Group's principal risks and uncertainties summarised here
are in line with those that are detailed in the 2016 Annual Report
and Accounts:
-- Economic conditions: parts of the business may be adversely
affected by economic conditions as revenues in many of the
businesses are historically correlated to GDP and employment. The
terms on which Brexit is negotiated may affect the Group's ability
to bid competitively within the EU.
-- Political and regulatory changes: changes in political and
regulatory environments can impact a regulated transport business
through the operation of concessions; safety procedures; equipment
specifications; employment requirements; environmental procedures
and other operating issues.
-- Increased competition from other modes of transport and/or in
terms of increased price competition.
-- Terrorism: the longer term impact of terrorism attacks
potentially softening demand for travel.
-- Safety: a major safety-related incident could impact the
Group both financially and reputationally.
-- HR risks: poor labour relations leading to operational
disruption, reputational damage and increased costs.
-- Changing customer expectations: failure to adapt to changing
customer expectations especially in the digital environment could
affect customer satisfaction and the business's ability to
capitalise on valuable customer data and commercial
initiatives.
-- Cyber security: loss of confidential data causing damage to
brand reputation; major IT failure causing severe or sustained
disruption to the business.
-- Credit risk: the impact of customer payment default in the
North America and Spanish divisions.
-- Treasury risk: the impact of foreign exchange or interest
rate movements on profits and cash and counterparty risk.
-- Hazard risk: asset loss due to natural disaster which may
also impact Group revenue and profits.
-- Pension costs: scheme funding could rise should market conditions materially worsen.
-- Fuel cost: changes in economic and political climate could
drive changes in cost for the Group.
Cautionary statement
This Review is intended to focus on matters which are relevant
to the interests of shareholders in the Company. The purpose of the
Review is to assist shareholders in assessing the strategies
adopted and performance delivered by the Company and the potential
for those strategies to succeed. It should not be relied upon by
any other party or for any other purpose.
Forward looking statements are made in good faith, based on a
number of assumptions concerning future events and information
available to Directors at the time of their approval of this
report. These forward looking statements should be treated with
caution due to the inherent uncertainties underlying any such
forward looking information. The user of these accounts should not
rely unduly on these forward looking statements, which are not a
guarantee of performance and which are subject to a number of
uncertainties and other events, many of which are outside of the
Company's control and could cause actual events to differ
materially from those in these statements. No guarantee can be
given of future results, levels of activity, performance or
achievements.
Responsibility statement
We confirm that, to the best of our knowledge, this half-yearly
financial report:
-- Has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union;
-- Includes a fair review of the information required by the
Disclosure and Transparency Rules ('DTR') 4.2.7R (indication of
important events during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year);
-- Includes a fair review of the information required by DTR
4.2.8R (disclosure of related party transactions and changes
therein).
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Chris Davies
Group Finance Director
27 July 2017
NATIONAL EXPRESS GROUP PLC
CONDENSED GROUP INCOME STATEMENT
For six months ended 30 June 2017
Unaudited six months to 30
June
------------------------------------------------------------------------------ ------------
Audited
Year
Total to 31
before December
Total
before
intangible Intangible
amortisation amortisation
and and
intangible UK rail UK rail Total Total
Intangible
amortisation amortisation
and UK and UK
rail rail
& restructuring & restructuring Total (restated) (restated) (restated) (restated)
2017 2017 2017 2016 2016 2016 2016
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
Revenue 4 1,170.5 - 1,170.5 1,007.2 - 1,007.2 2,093.7
---------------- --------------- --------- ------------ ------------ ------------ ------------
Operating costs
before
intangible
amortisation 4 (1,058.9) (5.6) (1,064.5) (913.5) - (913.5) (1,876.2)
Intangible
amortisation 4 - (18.7) (18.7) - (16.3) (16.3) (33.8)
--------- ------------
Total operating
costs (1,058.9) (24.3) (1,083.2) (913.5) (16.3) (929.8) (1,910.0)
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
Group operating
profit 4 111.6 (24.3) 87.3 93.7 (16.3) 77.4 183.7
Share of results
of associates
and joint
ventures (3.9) - (3.9) 0.7 - 0.7 1.1
Finance income 5 4.4 - 4.4 3.3 - 3.3 7.5
Finance costs 5 (23.2) - (23.2) (27.0) - (27.0) (57.5)
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
Profit before
tax 88.9 (24.3) 64.6 70.7 (16.3) 54.4 134.8
Tax charge 6 (21.4) 7.6 (13.8) (14.1) 5.7 (8.4) (19.9)
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
Profit after
tax for the
period from
continuing
operations 67.5 (16.7) 50.8 56.6 (10.6) 46.0 114.9
Profit for the
period from
discontinued
operations 7 - 6.4 6.4 - 2.0 2.0 5.1
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
Profit for the
period 67.5 (10.3) 57.2 56.6 (8.6) 48.0 120.0
---------------- --------------- --------- ------------ ------------ ------------ ------------
Profit
attributable
to equity
shareholders 66.1 (10.3) 55.8 55.6 (8.6) 47.0 117.2
Profit
attributable
to
non-controlling
interests 1.4 - 1.4 1.0 - 1.0 2.8
---------------- --------------- --------- ------------ ------------ ------------ ------------
67.5 (10.3) 57.2 56.6 (8.6) 48.0 120.0
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
Earnings per
share: 9
- basic earnings
per share 10.9p 9.2p 23.0p
- diluted
earnings
per share 10.9p 9.2p 22.8p
Normalised
earnings
per share:
- basic earnings
per share 13.0p 10.9p 26.3p
- diluted
earnings
per share 13.0p 10.9p 26.2p
Earnings per
share from
continuing
operations:
- basic earnings
per share 9.7p 8.8p 22.0p
- diluted
earnings
per share 9.7p 8.8p 21.8p
---------------- ---- ---------------- --------------- --------- ------------ ------------ ------------ ------------
NATIONAL EXPRESS GROUP PLC
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
Unaudited Unaudited Audited
six six year
months months to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
----------------------------------------- --------- --------- ------------
Profit for the period 57.2 48.0 120.0
Items that will not be reclassified
subsequently to profit or loss:
Actuarial (losses)/gains on defined
benefit pension plans (11.0) 2.4 (45.6)
Deferred tax on actuarial (losses)/gains 2.0 0.1 8.0
----------------------------------------- --------- --------- ------------
(9.0) 2.5 (37.6)
----------------------------------------- --------- --------- ------------
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on retranslation
of net assets of foreign operations
(net of hedging) (12.7) 137.5 189.6
Exchange differences on retranslation
of non-controlling interests 0.5 2.0 2.5
(Losses)/gains on cash flow hedges (31.6) 18.6 38.8
Less: reclassification adjustments
for gains or losses included in
profit 13.3 25.0 43.7
Tax on exchange differences (0.3) 13.5 14.3
Deferred tax on cash flow hedges 3.0 (6.5) (12.2)
----------------------------------------- --------- --------- ------------
(27.8) 190.1 276.7
----------------------------------------- --------- --------- ------------
Total comprehensive income for
the period 20.4 240.6 359.1
----------------------------------------- --------- --------- ------------
Total comprehensive income attributable
to:
--------- --------- ------------
Equity shareholders 18.6 237.6 353.8
Non-controlling interests 1.8 3.0 5.3
--------- --------- ------------
20.4 240.6 359.1
----------------------------------------- --------- --------- ------------
NATIONAL EXPRESS GROUP PLC
CONDENSED GROUP BALANCE SHEET
At 30 June 2017
Unaudited Unaudited Audited
30 30 31
June June December
2017 2016 2016
Note GBPm GBPm GBPm
--------------------------------- ---- --------- --------- ---------
Non-current assets
Intangible assets 1,532.5 1,405.4 1,548.6
Property, plant and equipment 974.8 894.7 983.6
Available for sale investments 8.0 7.5 7.8
Derivative financial instruments 10 15.5 20.1 31.1
Deferred tax assets 52.3 36.2 48.3
Investments accounted for
using the equity method 10.8 11.6 13.7
Trade and other receivables 16.7 3.0 18.2
Defined benefit pension
assets 11 39.8 74.9 44.5
--------------------------------- ---- --------- --------- ---------
2,650.4 2,453.4 2,695.8
--------------------------------- ---- --------- --------- ---------
Current assets
Inventories 25.9 24.2 25.0
Trade and other receivables 319.1 265.5 302.7
Derivative financial instruments 10 10.7 9.7 13.0
Current tax assets - 0.6 2.3
Cash and cash equivalents 78.0 129.4 318.1
Assets classified as held
for sale - - 78.0
--------------------------------- ---- --------- --------- ---------
433.7 429.4 739.1
--------------------------------- ---- --------- --------- ---------
Total assets 3,084.1 2,882.8 3,434.9
--------------------------------- ---- --------- --------- ---------
Non-current liabilities
Borrowings (817.1) (426.3) (816.7)
Derivative financial instruments 10 (13.0) (17.9) (4.2)
Deferred tax liability (79.0) (53.7) (82.9)
Other non-current liabilities (11.4) (16.0) (21.2)
Defined benefit pension
liabilities 11 (129.1) (83.3) (132.7)
Provisions (57.0) (35.7) (57.2)
--------------------------------- ---- --------- --------- ---------
(1,106.6) (632.9) (1,114.9)
--------------------------------- ---- --------- --------- ---------
Current liabilities
Trade and other payables (623.0) (554.0) (600.7)
Borrowings (158.7) (536.9) (443.8)
Derivative financial instruments 10 (25.8) (67.1) (26.0)
Current tax liabilities (13.0) (21.8) (6.7)
Provisions (58.1) (38.2) (57.2)
Liabilities directly associated
with assets classified as
held for sale - - (60.1)
--------------------------------- ---- --------- --------- ---------
(878.6) (1,218.0) (1,194.5)
--------------------------------- ---- --------- --------- ---------
Total liabilities (1,985.2) (1,850.9) (2,309.4)
--------------------------------- ---- --------- --------- ---------
Net assets 1,098.9 1,031.9 1,125.5
--------------------------------- ---- --------- --------- ---------
Shareholders' equity
Called up share capital 25.6 25.6 25.6
Share premium account 532.7 532.7 532.7
Capital redemption reserve 0.2 0.2 0.2
Own shares (3.0) (2.0) (7.8)
Other reserves 165.9 108.0 194.1
Retained earnings 358.2 350.1 362.0
--------------------------------- ---- --------- --------- ---------
Total shareholders' equity 1,079.6 1,014.6 1,106.8
Non-controlling interest
in equity 19.3 17.3 18.7
--------------------------------- ---- --------- --------- ---------
Total equity 1,098.9 1,031.9 1,125.5
--------------------------------- ---- --------- --------- ---------
NATIONAL EXPRESS GROUP PLC
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
Capital
Share Share Redemption Own Other Retained Non-controlling
capital premium reserve shares reserves earnings Total interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- -------- ----------- ------- --------- --------- ------- --------------- -------
At 1 January
2017 25.6 532.7 0.2 (7.8) 194.1 362.0 1,106.8 18.7 1,125.5
Own shares
released to
satisfy employee
share schemes - - - 9.2 - (9.2) - - -
Shares purchased - - - (4.4) - - (4.4) - (4.4)
Total comprehensive
income - - - - (28.2) 46.8 18.6 1.8 20.4
Share-based
payments - - - - - 2.2 2.2 - 2.2
Tax on share-based
payments - - - - - (0.4) (0.4) - (0.4)
Dividends - - - - - (42.9) (42.9) - (42.9)
Dividends payable
to
non-controlling
interests - - - - - - - (1.1) (1.1)
Other movements
with
non-controlling
interests - - - - - (0.3) (0.3) (0.1) (0.4)
------------------- -------- -------- ----------- ------- --------- --------- ------- --------------- -------
At 30 June
2017 (unaudited) 25.6 532.7 0.2 (3.0) 165.9 358.2 1,079.6 19.3 1,098.9
------------------- -------- -------- ----------- ------- --------- --------- ------- --------------- -------
Capital
Share Share Redemption Own Other Retained Non-controlling
capital premium reserve shares reserves earnings Total interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- -------- ----------- ------- --------- --------- ------- --------------- -------
At 1 January
2016 25.6 532.7 0.2 (7.8) (80.1) 345.6 816.2 14.9 831.1
Own shares
released to
satisfy employee
share schemes - - - 7.3 - (7.3) - - -
Shares purchased - - - (1.5) - - (1.5) - (1.5)
Total comprehensive
income - - - - 188.1 49.5 237.6 3.0 240.6
Share-based
payments - - - - - 1.7 1.7 - 1.7
Tax on share-based
payments - - - - - (0.3) (0.3) - (0.3)
Dividends - - - - - (39.1) (39.1) - (39.1)
Dividends payable
to
non-controlling
interests - - - - - - - (0.6) (0.6)
-------- -------- ----------- ------- --------- --------- ------- --------------- -------
At 30 June
2016 25.6 532.7 0.2 (2.0) 108.0 350.1 1,014.6 17.3 1,031.9
(unaudited)
------------------- -------- -------- ----------- ------- --------- --------- ------- --------------- -------
NATIONAL EXPRESS GROUP PLC
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2017
Unaudited Unaudited Audited
six six year
months months to
to to 31
30 June 30 June December
2017 2016 2016
Note GBPm GBPm GBPm
--------------------------------------- ---- --------- --------- ---------
Cash generated from operations 14 181.2 156.8 330.2
Tax paid (3.8) (3.2) (13.6)
Interest paid (43.2) (42.5) (62.9)
Interest received 10.8 9.8 7.1
--------------------------------------- ---- --------- --------- ---------
Net cash flow from operating
activities 145.0 120.9 260.8
--------------------------------------- ---- --------- --------- ---------
Cash flows from investing activities
Payments to acquire businesses,
net of cash acquired 12 (5.7) (21.5) (58.9)
Deferred consideration for
businesses acquired 12 (45.8) (16.3) (24.4)
Proceeds from disposal of business,
net of cash disposed 43.9 0.9 0.9
Purchase of property, plant
and equipment (63.8) (51.5) (130.3)
Proceeds from disposal of property,
plant and equipment 4.5 4.0 14.4
Payments to acquire intangible
assets (1.3) (4.1) (6.3)
Payments to acquire associates
and investments (0.9) - (0.2)
Net cash flow from investing
activities (69.1) (88.5) (204.8)
--------------------------------------- ---- --------- --------- ---------
Cash flows from financing activities
Finance lease principal payments (19.0) (15.5) (37.9)
Increase in borrowings 95.3 85.2 404.4
Repayment of borrowings (351.8) (6.7) (50.3)
Receipts/(payments) for the
maturity of foreign currency
swaps 1.1 8.8 (46.3)
Purchase of own shares (4.2) (1.5) (7.7)
Dividends paid to non-controlling
interests (0.2) (0.1) (0.9)
Payments for equity in non-controlling
interests (0.4) - (0.6)
Dividends paid to shareholders
of the Company (42.9) (39.1) (58.9)
--------------------------------------- ---- --------- --------- ---------
Net cash flow from financing
activities (322.1) 31.1 201.8
--------------------------------------- ---- --------- --------- ---------
(Decrease)/increase in cash
and cash equivalents (246.2) 63.5 257.8
--------------------------------------- ---- --------- --------- ---------
Opening cash and cash equivalents 324.4 60.4 60.4
(Decrease)/increase in cash
and cash equivalents (246.2) 63.5 257.8
Foreign exchange (0.2) 5.5 6.2
--------------------------------------- ---- --------- --------- ---------
Closing cash and cash equivalents 78.0 129.4 324.4
--------------------------------------- ---- --------- --------- ---------
NATIONAL EXPRESS GROUP PLC
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
For the six months ended 30 June 2017
1. General information
These condensed interim financial statements for the six months
ended 30 June 2017 do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2016 were approved by the
board of directors on 23 February 2017 and delivered to the
Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of
the Companies Act 2006.
The Group's Annual Report and Accounts for the year ended 2016
was prepared in accordance with IFRS as adopted by the European
Union. The condensed interim financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the European Union.
Figures for the year ended 31 December 2016 have been extracted
from the Group's Annual Report and Accounts for the year ended
2016. The interim results are unaudited but have been reviewed by
the Group's auditor.
Prior period figures in the Condensed Group Income Statement and
related notes have been restated to present separately the amounts
relating to operations classified as discontinued in the current
year. For details see note 7.
Going concern
The Group has a stable financing platform and its key debt
ratios are within the Board's target range and well within the
Group's banking covenant. The directors are satisfied that the
Group has sufficient resources to continue in operation for the
foreseeable future, a period of not less than 12 months from the
date of this report. Accordingly, they continue to adopt the going
concern basis in preparing the condensed financial statements.
Accounting policies
The accounting policies adopted in these condensed interim
financial statements are consistent with those of the previous
financial year.
Taxes on income in the interim periods are accrued using the tax
rate that is expected to apply to total annual earnings.
Three amendments to IFRSs became effective for the financial
year beginning on 1 January 2017, although as at 30 June 2017 these
had not been endorsed by the European Union. The changes comprise
amendments to IAS 7 'Cash flow statements' and IAS 12 'Income
taxes', and the annual improvements project 2014-2016 relating to
IFRS 12 'Disclosure of interests in other entities'.
The amendment to IAS 7 'Cash flow statements' requires a
disclosure of changes in liabilities arising from financing
activities. This amendment is not required for interim financial
statements and has not yet been endorsed by the European Union. The
Directors expect to provide these additional disclosures in the
Annual Report and Accounts for the year ended 31 December 2017.
The changes to IAS 12 'Income taxes' and IFRS 12 'Disclosure of
interests in other entities' do not have an impact on the Group's
financial statements.
In addition, the following principal standards are in issue but
not yet effective, and have not been applied to these condensed
interim financial statements:
IFRS 9 'Financial Instruments' - effective for periods beginning
on or after 1 January 2018. The standard deals with the
classification, recognition and measurement of financial assets and
liabilities.
IFRS 15 'Revenue from Contracts with Customers' - effective for
periods beginning on or after 1 January 2018. The standard
establishes the principles for reporting the nature, amount, timing
and uncertainty of revenue and cash flows arising from contracts
with customers.
IFRS 16 'Leases' - effective for periods beginning on or after 1
January 2019. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of
leases.
A review of the above three standards is in progress and is due
to be finalised by the end of the financial year. Further details
will be provided in the Annual Report and Accounts for the year
ended 2017. Based on the work performed to date, the Directors do
not expect IFRS 9 and IFRS 15 to have a significant impact on
future financial statements. IFRS 16 is expected to result in a
material increase to both the assets and liabilities of the Group
and expected to reduce operating costs and increase finance
costs.
Seasonality
The Group operates a diversified portfolio of bus, coach and
rail businesses operating in international markets. The North
American bus business typically earns higher operating profits for
the first half of the year (i.e. the 6 months to 30 June) than for
the second half. This is because of the timing of school terms and
the summer holiday period. The UK and Spanish coach businesses
typically earn lower operating profits for the first half of the
year than the second half. This is because of the higher demand
created by leisure travellers during the summer months. On a Group
basis, the results are not materially seasonal in nature.
2. Exchange rates
The most significant exchange rates to UK Sterling for the Group
are as follows:
Six months Six months Year to 31
to 30 June to 30 June December 2016
2017 2016
Closing Average Closing Average Closing Average
rate rate rate rate rate rate
---------------- ------- ------- ------- ------- ------- -------
US dollar 1.30 1.26 1.33 1.43 1.23 1.36
Canadian dollar 1.69 1.68 1.72 1.91 1.66 1.80
Euro 1.14 1.16 1.20 1.28 1.17 1.22
---------------- ------- ------- ------- ------- ------- -------
If the results for the 6 months to 30 June 2016 had been
retranslated at the average exchange rates for the period to 30
June 2017, North America would have achieved normalised operating
profit of GBP51.4m on revenue of GBP500.4m, compared to normalised
operating profit of GBP45.2m on revenue of GBP439.9m as reported,
and Spain and Morocco would have achieved a normalised operating
profit of GBP35.6m on revenue of GBP296.2m, compared to normalised
operating profit of GBP32.3m on revenue of GBP268.2m as
reported.
3. Risks and uncertainties
The principal risks and uncertainties are described in the
Financial Review. Additional information on risks and uncertainties
is contained on pages 34-37 in the Group's Annual Report and
Accounts for the year ended 2016.
4. Segmental analysis
The operating businesses are organised and managed separately
according to the nature of the public transport services they
provide and the geographical market they operate in. Commentary on
the segments is included in the Business and Financial Reviews.
Six months to Year to 31 December
30 June
--------------------------------
Operating Operating
Operating Revenue result Revenue result
Revenue result (restated) (restated) (restated) (restated)
2017 2017 2016 2016 2016 2016
Analysis by class
and geography
of business GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- --------- ------------ ------------ ------------ ------------
UK Bus 135.9 16.6 137.9 16.8 276.8 34.0
UK Coach 136.1 9.4 133.8 10.4 282.8 33.3
German Rail 38.1 1.7 28.2 (2.3) 61.3 (1.5)
Spain and Morocco 318.1 38.8 268.2 32.3 597.3 84.7
North America 543.0 55.7 439.9 45.2 877.2 84.0
Central functions - (10.6) - (8.7) - (17.0)
Intercompany elimination (0.7) - (0.8) - (1.7) -
-------------------------- ------- --------- ------------ ------------ ------------ ------------
Normalised result
from continuing
operations 1,170.5 111.6 1,007.2 93.7 2,093.7 217.5
Intangible asset
amortisation (18.7) (16.3) (33.8)
UK restructuring
costs (5.6) - -
Group operating
profit 87.3 77.4 183.7
Share of results
of associates (3.9) 0.7 1.1
Net finance costs (18.8) (23.7) (50.0)
-------------------------- ------- --------- ------------ ------------ ------------ ------------
Profit before
tax 64.6 54.4 134.8
Tax charge (13.8) (8.4) (19.9)
-------------------------- ------- --------- ------------ ------------ ------------ ------------
Profit after tax
for the period
from continuing
operations 50.8 46.0 114.9
Profit for the
period from discontinued
operations 6.4 2.0 5.1
-------------------------- ------- --------- ------------ ------------ ------------ ------------
57.2 48.0 120.0
-------------------------- ------- --------- ------------ ------------ ------------ ------------
Intercompany sales are made by UK Bus to UK Coach for the
provision of coach services on a small number of routes and by UK
Coach to UK Rail for rail replacement services. Inter-segment
trading is undertaken on standard arm's length commercial
terms.
As disclosed in note 7, in February 2017 the Group disposed of
its final UK rail franchise, c2c, as part of a broader UK strategic
review in which the Group discontinued all activity in UK Rail.
Consequent on this exit and given the simplified UK footprint, the
Group has also reorganised its UK management structure to reduce
costs and facilitate better, clearer decision-making. The cost in
the period relating to this restructuring was GBP5.6m.
Intangible asset amortisation for continuing operations is
analysed by reportable segment as follows:
Six months Six months Year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------ ---------- ---------- ------------
UK Coach 0.4 0.2 0.4
German Rail 0.5 0.4 0.8
Spain and Morocco 4.3 4.8 9.5
North America 13.5 10.9 23.0
Central functions - - 0.1
------------------ ---------- ---------- ------------
18.7 16.3 33.8
------------------ ---------- ---------- ------------
5. Net finance costs
Six months Six months Year
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
--------------------------------- ---------- ---------- -------
Bank and bond interest payable (19.3) (23.6) (50.3)
Finance lease interest payable (2.0) (1.7) (3.5)
Other interest payable (0.4) (0.9) (1.5)
Unwind of provision discounting (0.5) (0.6) (1.2)
Interest cost on defined benefit
pension obligations (1.0) (0.2) (1.0)
--------------------------------- ---------- ---------- -------
Finance costs (23.2) (27.0) (57.5)
Other financial income 4.4 3.3 7.5
--------------------------------- ---------- ---------- -------
Net finance costs (18.8) (23.7) (50.0)
--------------------------------- ---------- ---------- -------
6. Taxation
Tax on profit on ordinary activities for the six months to 30
June 2017 has been calculated on the basis of the estimated annual
effective rate for the year ending 31 December 2017. The normalised
tax charge of GBP21.4m (2016 interim: GBP14.1m) represents an
effective tax rate on normalised profit before tax, for continuing
operations, of 24% (2016 interim: 20%). The total tax charge of
GBP13.8m (2016 interim: GBP8.4m) includes a deferred taxation
charge of GBP0.7m (2016 interim: GBP1.2m).
7. Discontinued operations
As previously announced in the 2016 Annual Report and Accounts,
on 10 February 2017 the Group disposed of its only UK rail
franchise, National Express Essex Thameside 'c2c', to Trenitalia
and as a result has recognised all UK rail operating activity as
discontinued.
On 22 March 2017, Transport for West Midlands announced its
intention to take over the running of the Midland Metro tram
operations at the end of the current franchise. We have therefore
also shown this as discontinued.
Prior period figures have been restated to present separately
the above operations as discontinued.
Details of the discontinued operations are as follows:
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ------------
Revenue 25.3 91.7 185.5
Operating costs (26.2) (89.2) (179.1)
----------------------------------------- ---------- ---------- ------------
Trading (loss)/profit before
tax (0.9) 2.5 6.4
One-off costs relating to
discontinued operations (7.0) - -
Gross profit on disposal
of discontinued operations 12.9 - -
----------------------------------------- ---------- ---------- ------------
Net profit from discontinued
operations before tax 5.0 2.5 6.4
Attributable income tax credit/(expense) 1.4 (0.5) (1.3)
----------------------------------------- ---------- ---------- ------------
Net profit from discontinued
operations attributable to
equity shareholders 6.4 2.0 5.1
----------------------------------------- ---------- ---------- ------------
The net cash flows incurred by the discontinued operations
during the period are as follows. These cash flows are included
within the Group Statement of Cash Flows:
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
---------------------------- ---------- ---------- ------------
Cash outflow from operating
activities (13.5) (17.7) (1.2)
Cash (outflow)/inflow from
investing activities (0.5) 0.1 (6.7)
Cash inflow from financing
activities - - 0.8
---------------------------- ---------- ---------- ------------
Net cash outflow (14.0) (17.6) (7.1)
---------------------------- ---------- ---------- ------------
8. Dividends paid and proposed
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------- ---------- ---------- ------------
Declared and paid during
the period:
Ordinary final dividend for
2015 of 7.645p per share - 39.1 39.1
Ordinary interim dividend
for 2016 of 3.87p per share - - 19.8
Ordinary final dividend for
2016 of 8.41p per share 43.0 - -
----------------------------- ---------- ---------- ------------
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------- ---------- ---------- ------------
Proposed for approval and
not recognised at period
end:
Ordinary interim dividend
for 2016 of 3.87p per share - 19.8 -
Ordinary final dividend for
2016 of 8.41p per share - - 43.0
Ordinary interim dividend
for 2017 of 4.26p per share 21.8 - --
----------------------------- ---------- ---------- ------------
9. Earnings per share
Six months
to Year to
Six months 30 June 31 December
to 2016 2016
30 June
2017 (restated) (restated)
---------------------------- ---------- ------------ -------------
Basic earnings per share 10.9p 9.2p 23.0p
---------------------------- ---------- ------------ -------------
Normalised basic earnings
per share 13.0p 10.9p 26.3p
---------------------------- ---------- ------------ -------------
Basic earnings per share
from continuing operations 9.7p 8.8p 22.0p
---------------------------- ---------- ------------ -------------
Diluted earnings per share 10.9p 9.2p 22.8p
---------------------------- ---------- ------------ -------------
Normalised diluted earnings
per share 13.0p 10.9p 26.2p
---------------------------- ---------- ------------ -------------
Diluted earnings per share
from continuing operations 9.7p 8.8p 21.8p
---------------------------- ---------- ------------ -------------
Basic earnings per share is calculated by dividing the profit
attributable to equity shareholders of GBP55.8m (2016 interim:
GBP47.0m; 2016 full year: GBP117.2m) by the weighted average number
of ordinary shares in issue during the period, excluding those held
by employees' share ownership trusts and held as own shares which
are both treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to include the weighted
average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into
ordinary shares.
The reconciliation of the weighted average number of ordinary
shares is as follows:
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016
------------------------------ ----------- ----------- ------------
Basic weighted average shares 509,862,298 510,026,180 510,255,410
Adjustment for dilutive
potential ordinary shares 504,834 180,345 2,859,856
------------------------------ ----------- ----------- ------------
Diluted weighted average
shares 510,367,132 510,206,525 513,115,266
------------------------------ ----------- ----------- ------------
The normalised basic and normalised diluted earnings per share
have been calculated in addition to the basic and diluted earnings
per share since, in the opinion of the Directors, they reflect the
underlying performance of the business' operations more
appropriately.
The reconciliation of statutory profit to normalised profit for
the financial period is as follows:
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
------------------------------- ---------- ---------- ------------
Profit attributable to equity
shareholders 55.8 47.0 117.2
------------------------------- ---------- ---------- ------------
Intangible asset amortisation 18.7 16.3 33.8
UK restructuring costs 5.6 - -
Tax relief on amortisation
and UK restructuring costs (7.6) (5.7) (11.5)
Profit for the period from
discontinued operations (6.4) (2.0) (5.1)
------------------------------- ---------- ---------- ------------
Normalised profit attributable
to equity shareholders 66.1 55.6 134.4
------------------------------- ---------- ---------- ------------
10. Derivative financial assets and liabilities
The Group's multi-national transport operations and debt
financing expose it to a variety of financial risks, including the
effects of changes in fuel prices, foreign currency exchange rates
and interest rates. The Group has in place a risk management
programme that seeks to limit the adverse effects of these
financial risks on the financial performance of the Group by means
of derivative financial instruments.
As at 30 June 2017 the Group's portfolio of hedging instruments
included fuel price derivatives, foreign exchange derivatives and
interest rate derivatives. The fuel price derivatives are in place
to hedge the changes in price of the different types of fuel used
in each division. The foreign exchange derivatives are in place to
hedge the foreign exchange risk on translation of net assets and
earnings denominated in foreign currency. In addition, the Group
holds two GBP50.0 million denominated interest rate derivatives to
swap fixed interest on GBP100m of the Group's Sterling bonds to a
floating rate and two EUR39.25m denominated interest rate
derivatives equal in value to a Euro Private Placement.
These derivative financial instruments are held in the balance
sheet at fair value and are measured using level 2 inputs. These
are valued using discounted cash flow methods that incorporate
interest rates, fuel prices and yield curves observable at commonly
quoted intervals and observable credit spreads. The Group has no
financial instruments with fair values that are determined by
reference to significant unobservable inputs i.e. those that would
be classified as level 3 in the fair value hierarchy, nor have
there been any transfers of assets or liabilities between levels of
the fair value hierarchy. There are no non-recurring fair value
measurements.
The Group applies relevant hedge accounting to all derivatives
outstanding as at 30 June 2017. All hedge relationships were
effective under the rules of IAS 39.
Derivative financial assets and liabilities on the balance sheet
are as follows:
At At At
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
--------------------------------- -------- -------- ------------
Non-current
Fuel derivatives 0.4 2.9 8.6
Interest rate derivatives 10.7 17.2 14.3
Cross currency swaps 4.4 - 8.2
--------------------------------- -------- -------- ------------
Derivative financial assets 15.5 20.1 31.1
--------------------------------- -------- -------- ------------
Current
Fuel derivatives 2.2 0.2 3.6
Interest rate derivatives 1.9 2.7 8.4
Foreign exchange derivatives 6.6 6.8 1.0
Derivative financial assets 10.7 9.7 13.0
--------------------------------- -------- -------- ------------
Non-current
Fuel derivatives 13.0 17.9 4.2
Derivative financial liabilities 13.0 17.9 4.2
--------------------------------- -------- -------- ------------
Current
Fuel derivatives 21.1 31.2 21.1
Foreign exchange derivatives 4.7 35.9 4.9
Derivative financial liabilities 25.8 67.1 26.0
--------------------------------- -------- -------- ------------
11. Pensions and other post-employment benefits
The UK Bus division and National Express Group PLC (the
'Company') operate defined benefit pension schemes. The Company
defined benefit scheme also includes certain employees of the UK
Coach division. In addition, a defined contribution scheme operates
for staff in the UK Bus and UK Coach divisions and the Company.
The Group also maintains a small defined benefit pension scheme
for a number of ex-employees previously employed by the UK Rail
division. The principal UK Rail defined benefit scheme was
transferred to Trenitalia as part of the disposal of NXET Trains
Limited on 10 February 2017.
With effect from 30 June 2017, the assets and liabilities of the
Tayside Transport Fund (a defined benefit pension scheme for
certain past and present employees of Tayside Public Transport
Company Limited, a subsidiary of the UK Bus division) were
transferred into the Tayside Pension Fund (a fund administered by
Dundee City Council). The Group will continue to make contributions
into the Tayside Pension Fund in respect of current service costs
on the basis of a fixed percentage of pensionable pay and will
account for this on a defined contribution basis. Prior to
transfer, the Tayside Transport Fund was in a net surplus position
and had been derecognised in full.
The assets of the defined benefits schemes are held separately
from those of the Group and contributions to the schemes are
determined by independent professionally qualified actuaries.
Subsidiaries in North America contribute to a number of defined
contribution plans. The Group also provides certain additional
unfunded post-employment benefits to employees in North America and
Spain. These are categorised as 'Other' below.
The total pension operating cost for the six months to 30 June
2017 was GBP3.9m (2016 interim: GBP3.7m; 2016 full year: GBP7.4m),
of which GBP1.9m (2016 interim: GBP1.9m; 2016 full year: GBP3.7m)
relates to the defined contribution schemes.
The defined benefit pension asset/(liability) included in the
balance sheet is as follows:
At At At
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
UK Bus (124.9) (80.9) (128.5)
UK Rail* (1.5) 26.3 (1.5)
Company 39.8 48.6 44.5
Other (2.7) (2.4) (2.7)
--------- -------- -------- ------------
Total (89.3) (8.4) (88.2)
--------- -------- -------- ------------
* 30 June 2016 includes a defined benefit asset of NXET Trains
Limited, subsequently recognised within assets held for sale at 31
December 2016 and transferred on disposal in February 2017.
The net defined benefit pension asset/(liability) was calculated
based on the following assumptions:
Six months ended Year ended 31 December
30 June 2017 2016
----------------- --------------------- --------------------------
UK Bus Rail Company UK Bus Rail Company
----------------- ------ ---- ------- -------- ----- ---------
Rate of increase
in salaries 2.5% 2.8% 2.5% 2.5% 2.9% 2.5%
Rate of increase
in pensions 2.3% 2.3% 3.3% 2.4% 2.4% 3.3%
Discount rate 2.6% 2.6% 2.6% 2.7% 2.7% 2.7%
Inflation rate
(RPI) 3.3% 3.3% 3.3% 3.4% 3.4% 3.4%
Inflation rate
(CPI) 2.3% 2.3% 2.3% 2.4% 2.4% 2.4%
----------------- ------ ---- ------- -------- ----- ---------
12. Business Combinations
(a) Acquisitions
During the period the Group acquired two businesses, Odier
Excursions SA, a business providing tourist charter and other
transportation services based in Switzerland, and Transportes Santo
Domingo S.L., a business providing bus transportation services in
Madrid, Spain. The total provisional fair value of net assets
acquired in the two businesses was GBP4.1m. Total consideration was
GBP5.7m, resulting in provisional goodwill of GBP1.6m.
In addition to the above, deferred consideration of GBP45.8m was
paid in the period relating to North America and UK Coach
acquisitions from earlier years.
In the period to 30 June 2016 there were a number of small
acquisitions in the North America and Spain and Morocco divisions.
Further details are disclosed in the interim condensed consolidated
financial statements for that period and in the Group's 2016 Annual
Report and Accounts. No material changes were made to the fair
values during 2017.
On 1 July 2017, the Group acquired Cook-DuPage Transportation
Co. Inc, a paratransit business located in Chicago, USA. Total
consideration, net of cash in the business of GBP4.0m, was
GBP45.3m. This includes deferred contingent consideration of
GBP25.8m. Due to the proximity of the acquisition to the date of
issuance of the interim results, the accounting for the business
combination is incomplete and no further disclosures required by
IFRS 3 can be provided at this time. Further details will be
provided in the Annual Report and Accounts for the year ended
2017.
(b) Disposals
On 10 February 2017, the Group disposed of the National Express
Essex Thameside 'c2c' franchise to Trenitalia. The consideration
received was GBP71.8m and a further GBP35.0m was received to settle
intercompany loans.
Further details of the disposal are disclosed in note 7.
13. Net debt
At 1 Cash Acquisitions Foreign Other At 30
January flow & disposals Exchange movements June
2017 GBPm GBPm GBPm GBPm 2017
GBPm GBPm
---------------------- --------- ------- ------------ --------- ---------- -------
Cash and cash
equivalents 324.4 (231.3) (14.9) (0.2) - 78.0
---------------------- --------- ------- ------------ --------- ---------- -------
Other debt receivable 0.5 - - - - 0.5
---------------------- --------- ------- ------------ --------- ---------- -------
Borrowings:
Bank loans (13.1) (93.5) (0.3) (2.0) (0.2) (109.1)
Bonds (983.2) 350.0 - - 2.7 (630.5)
Cross currency
swap 11.1 - - (6.1) - 5.0
Fair value of
hedging derivatives 14.4 - - - (3.7) 10.7
Finance lease
obligations (159.7) 19.0 (1.1) 7.3 (19.8) (154.3)
Other debt payable (72.4) - - (1.9) 0.7 (73.6)
---------------------- --------- ------- ------------ --------- ---------- -------
Total borrowings (1,202.9) 275.5 (1.4) (2.7) (20.3) (951.8)
---------------------- --------- ------- ------------ --------- ---------- -------
Net debt (878.0) 44.2 (16.3) (2.9) (20.3) (873.3)
---------------------- --------- ------- ------------ --------- ---------- -------
At 1 Cash Acquisitions Foreign Other At 30
January flow & disposals Exchange movements June
2016 GBPm GBPm GBPm GBPm 2016
GBPm GBPm
---------------------- -------- ------ ------------ --------- ---------- -------
Cash and cash
equivalents 60.4 59.8 3.7 5.5 - 129.4
---------------------- -------- ------ ------------ --------- ---------- -------
Other debt receivable 0.8 (0.2) - - - 0.6
---------------------- -------- ------ ------------ --------- ---------- -------
Borrowings:
Bank loans (45.3) (80.1) - (18.2) (0.4) (144.0)
Bonds (583.5) - - - (3.1) (586.6)
Fair value of
hedging derivatives 14.3 - - - 4.1 18.4
Finance lease
obligations (127.6) 15.5 (0.7) (14.0) (21.2) (148.0)
Other debt payable (64.6) 1.8 - (7.9) (1.8) (72.5)
---------------------- -------- ------ ------------ --------- ---------- -------
Total borrowings (806.7) (62.8) (0.7) (40.1) (22.4) (932.7)
---------------------- -------- ------ ------------ --------- ---------- -------
Net debt (745.5) (3.2) 3.0 (34.6) (22.4) (802.7)
---------------------- -------- ------ ------------ --------- ---------- -------
Borrowings include non-current interest bearing loans and
borrowings of GBP817.1m (2016 interim: GBP426.3m; 2016 full year:
GBP816.7m).
Other non-cash movements represent finance lease additions of
GBP19.8m (2016 interim: GBP21.2m) and a GBP0.5m reduction from the
amortisation of loan and bond arrangement fees (2016 interim:
GBP1.2m). A GBP3.7m decrease to the fair value of the hedging
derivatives is offset by opposite movements in the fair value of
the related hedged borrowings. This comprises a GBP3.0m fair value
increase in bonds and a GBP0.7m fair value increase in other debt
payable
14. Cash flow statement
The reconciliation of Group profit before tax to cash generated
from operations is as follows:
Six months Six months Year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ------------
Net cash inflow from operating
activities
Profit before tax from continuing
operations 64.6 54.4 134.8
Profit before tax from discontinued
operations (note 7) 5.0 2.5 6.4
------------------------------------ ---------- ---------- ------------
Total profit before tax 69.6 56.9 141.2
Net finance costs 18.8 23.7 50.0
Share of post-tax results under
the equity method 3.9 (0.7) (1.1)
Depreciation of property, plant
and equipment 71.2 58.8 123.0
Intangible asset amortisation 18.7 16.3 33.8
Amortisation of fixed asset
grants (0.3) (0.2) (0.5)
Profit on disposal property,
plant and equipment (1.0) (2.5) (5.9)
Profit on the sale of discontinued
operations (note 7) (5.9) - -
Share-based payments 2.0 1.7 4.1
(Increase)/decrease in inventories (1.2) 0.7 1.1
Increase in receivables (28.8) (2.9) (42.5)
Increase in payables 46.3 12.2 23.6
(Decrease)/increase in provisions (12.1) (7.2) 3.4
------------------------------------ ---------- ---------- ------------
Cash generated from operations 181.2 156.8 330.2
------------------------------------ ---------- ---------- ------------
15. Commitments and contingencies
Capital commitments
Capital commitments contracted but not provided at 30 June 2017
were GBP61.6m (2016 full year: GBP55.0m).
Contingent liabilities
Guarantees
The Group has guaranteed credit facilities totalling GBP29.6m
(2016 full year: GBP36.1m) relating to certain joint ventures.
Bonds and letters of credit
In the ordinary course of business, the Group is required to
issue counter-indemnities in support of its operations. As at 30
June 2017, there were performance bonds in respect of businesses in
the US of GBP147.3m (2016 full year: GBP159.5m) and in Spain of
GBP39.3m (2016 full year: GBP41.4m), and GBP12.5m of performance
bonds in the other regions (2016 full year, including UK Rail:
GBP70.6m). Letters of credit have been issued to support insurance
retentions of GBP85.8m (2016 full year: GBP91.5m).
16. Related party transactions
There have been no material changes to the related party
balances disclosed in the Group's Annual Report and Accounts 2016
and there have been no transactions which have materially affected
the financial position or performance of the Group in the six
months to 30 June 2017.
17. Definitions
Unless otherwise stated, all operating profit, margin and EPS
data refer to normalised results of the continuing Group, which can
be found on the face of the Condensed Group Income Statement in the
first column. Normalised profit is defined as being the IFRS result
excluding intangible asset amortisation and UK rail and
restructuring, along with tax relief thereon.
Due to the one-off nature of UK rail and restructuring, the
Board believes that its removal gives a more comparable
year-on-year indication of the underlying performance of the Group.
For intangible amortisation, the Board believes that adding back
this non-cash item also gives a more comparable year-on-year
indication of the underlying performance of the Group and allows
better comparison of divisional performance which have different
levels of amortisation.
The continuing Group is stated, and the prior year restated,
before discontinued operations, details of which can be found in
note 7.
Underlying revenue compares current period with the prior period
on a consistent basis, after adjusting for the impact of
currency.
Constant currency basis compares the current period's results
with the prior period's results translated at the current period's
exchange rates. The Board believes that this gives a better
comparison of the underlying performance of the Group.
Operating margin or 'margin' is the ratio of normalised
operating profit to revenue.
'Return on capital employed' ('ROCE') is normalised operating
profit divided by net assets excluding net debt and derivative
financial instruments. For the purposes of this calculation, net
assets are translated using average exchange rates.
Return on invested capital (ROIC) or 'investment returns' is
normalised operating profit divided by invested capital. For
acquisitions, invested capital is total consideration for the
acquired business.
Operating cash flow is the cash flow equivalent of normalised
operating profit. A reconciliation is set out in the table within
the Finance Director's review. Operating cash flow conversion is
operating cash flow as a percentage of the Group's normalised
operating profit plus trading (loss)/profit from discontinued
operations.
Free cash flow is the cash flow equivalent of normalised profit
after tax. Free cash flow conversion is free cash flow as a
percentage of the Group's normalised operating profit plus trading
(loss)/profit from discontinued operations.
EBITDA is "Earnings Before Interest, Tax, Depreciation and
Amortisation." It is calculated by taking normalised operating
profit and adding depreciation, fixed asset grant amortisation,
normalised profit on disposal of non-current assets and share-based
payments.
Net debt is defined as cash and cash equivalents (cash overnight
deposits and other short-term deposits), and other debt
receivables, offset by borrowings (loan notes, bank loans and
finance lease obligations) and other debt payable (excluding
accrued interest).
Gearing ratio is the ratio of net debt to EBITDA over the last
12 months, including any pre-acquisition EBITDA generated in that
12 month period by businesses acquired by the Group during the
period. For the purposes of this calculation, net assets are
translated using average exchange rates.
Earnings per share (EPS) is the profit for the period
attributable to shareholders, divided by the weighted average
number of shares in issue, excluding those held in the Employee
Benefit Trust which are treated as cancelled.
In UK Bus, commercial revenue is that from fare-paying customers
and excludes concessions and contracted services. In UK Coach, core
revenue is that from the scheduled National Express network.
Safety Incidents measure those for which the Group is
responsible and is based on the Fatalities and Weighted Injuries
Index used in the UK rail industry.
Independent Review Report to National Express Group PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the Condensed Group
Income Statement, the Condensed Group Statement of Comprehensive
Income, the Condensed Group Balance Sheet, the Condensed Group
Statement of changes in Equity, Condensed Group Statement of Cash
Flows and the related notes 1 to 17. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
27 July 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKADNCBKDNOB
(END) Dow Jones Newswires
July 27, 2017 02:01 ET (06:01 GMT)
Mobico (LSE:MCG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Mobico (LSE:MCG)
Historical Stock Chart
From Apr 2023 to Apr 2024
