Shareholder Summary Moving forward. Focusing on our core strengths

Transcription

1 Moving forward Focusing on our core strengths

2 National Express Group is a leading transport provider delivering services in the UK, North America and. Every year around 800 million journeys are made on our buses, trains, light rail services and coaches. Last year, National Express decided that online communications would be the preferred method of contacting shareholders. The full Annual Report and Accounts and Notice of Meeting are available on our website. However, we have produced this Shareholder Summary to give you an overview of our performance and achievements in Search Annual Report and Accounts 2009 Home Overview Operating review Performance and financial review Corporate responsibility Governance Financial statements Shareholder information Moving forward Focusing on our core strengths National Express Group is a leading transport provider delivering services in the UK, North America and. Every year around 800 million journeys are made on our buses, trains, light rail services and coaches. Download centre Visit our download centre Print this page Bookmark this page Divisional reviews North America UK Key financials 2,711.1m Operating cash generation 281.3m Normalised 159.8m Net debt reduced by 521.9m Created by luminous.co.uk Group website Site map Privacy statement Disclaimer Accessibility National Express 2010 To view the full Annual Report and Accounts visit: 2 National Express Group PLC

3 Dear shareholders There can be no doubt that 2009 was a challenging year for National Express for its people, its customers and, above all, its shareholders. We faced difficult decisions, some setbacks, a deep recession and significant uncertainty over the Group s future direction. Nevertheless, we were able to remove our loss-making business, stabilise profitability, successfully refinance much of our debt and draw a line under a difficult period for the Group. With strong shareholder support, we have created a firm platform from which we can develop. We have an appropriate capital structure with good funding support, we retain robust market positions in our businesses from which to grow sustainably, we have a strong operational capability and cost focus from which to drive margins, and we have restored our cash generative ability. Our new Chief Executive, Dean Finch, who joined us in February 2010, has a track record of delivery in the transport industry. He will lead our management team in implementing and refining our strategy improving margins, driving cash and delivering selective, value-creating growth. I would like to thank our team for facing and weathering the challenges of 2009 a series of events that few would expect to meet in a single year. Each of our 41,000 employees has focused on the task at hand, delivering results in difficult market conditions, safely and with complete focus on pleasing our customers. I would also like to thank my Board colleagues for their leadership and resolute approach, particularly during a time of personnel change at the highest level. But above all, I would like to thank you, our shareholders, for your continuing support. The success of the Rights Issue, and the subsequent oversubscribed bond issue to debtholders, demonstrate our stakeholders commitment to the Group. I have no doubt that National Express is a robust company, with a strong future. Whilst the new year is bound to present new issues and markets will remain difficult, the Group can make good progress, building on the platform created from the challenges we successfully faced in Yours sincerely, John Devaney Chairman National Express Group PLC 3

4 Group at a glance Group National Express operates in the UK,, and North America. The Group employs 41,000 people and operates over 21,000 vehicles. Passengers make more than 800 million journeys on our services every year. ALSA Continental Auto Our Spanish business, ALSA, operates long distance, regional and urban bus and coach services across and in Marrakech, Morocco. ALSA was acquired by National Express in 2005, and our position in was strengthened with the acquisition of Continental Auto in Apart from its market-leading position in bus and coach service, the business also operates service stations and other transport-related businesses, such as fuel distribution. North America Durham School Services Stock Transportation Our business in North America is focused solely on student transportation and operates in 29 US states and two Canadian provinces. The business operates through medium-term contracts awarded by local school boards to provide safe and reliable transport for students, and is the second largest private operator in North America. Centralised shared services delivered from the Illinois head office support local operational delivery. 2,711.1m 159.8m 41, m 76.5m 6, m 25.3m 21,400 4 National Express Group PLC

5 Group revenue by market UK 63.4% 16.4% North America 20.2% Group normalised* operating profit by market UK 39.7% 45.3% North America 15.0% (excludes central functions) * Normalised results are the statutory results excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon. UK UK Coach UK Bus UK Rail National Express Coaches Eurolines The Kings Ferry Airlinks National Express Coaches is the largest operator of scheduled coach services in the UK. The business operates high frequency services linking over 1,000 destinations across the country, including major cities and airports. We are the UK partner in the Eurolines network which serves over 500 destinations across Europe and North Africa. National Express West Midlands National Express Coventry National Express Dundee Midland Metro National Express is the market leader in the UK s largest urban bus market outside of London. We operate more than 1,600 vehicles and cover over 65 million miles per year. We also run bus services in Coventry and Dundee and operate the Midland Metro light rail service between Birmingham and Wolverhampton. c2c National Express East Anglia National Express operates two rail franchises in the UK, both operating in the East of England. C2c serves destinations between London and South Essex. National Express East Anglia serves routes out of London and across Norfolk, Suffolk, Essex and Cambridgeshire, including the Stansted Express airport service. These franchises have delivered marketleading operational performance and will be managed by the Group until their return in m 34.3m 1, m 20.8m 5,800 1,190.5m 12.0m 6,100 National Express Group PLC 5

6 Business overview 2009 was a challenging year for National Express. The Group faced a succession of difficult issues the global recession; the exit from the East Coast rail franchise; the departure of our Chief Executive; the protracted period during which we dealt with a series of potential bidders for the Group; and finally the demanding and complex refinancing we completed at the end of the year. Against all this, we have delivered some positive results. We reduced costs by 50 million on an annualised basis, secured incremental cash generation of over 200 million to drive down debt, resolved the East Coast rail position, and capped the year with a strongly supported equity Rights Issue, overall delivering 520 million of debt reduction. This was followed by a successful bond issue. Together these have delivered an improved capital structure and, as a result, National Express ended 2009 in a far stronger position than it began the year. And in February 2010, we welcomed Dean Finch as our new Chief Executive to take forward implementation of our strategy. Overall revenue in 2009 was down 2% on 2008 at 2.71 billion and normalised* profit before tax (PBT) for continuing operations was million compared to million. But most of the decline in profitability related to the losses incurred on the East Coast rail franchise. If this was excluded from our results, PBT for the rest of the business was down just 30 million on Within this performance, UK Coach was the stand-out success with up 27%. s performance was also resilient given the difficult economic background, with down 8%. The performances of UK Bus and North America were weaker in a tough year, but we have clear initiatives in place to recover this. Our remaining rail franchises increased profitability. The two key events which have enabled us to make progress were the handing back of the East Coast rail franchise in November 2009 and reducing our debt. The East Coast franchise had, with hindsight, been too expensive, reflecting passenger growth that proved unachievable in recession. Faced with mounting losses, we returned the franchise to the government together with the necessary penalties. East Coast accounted for 56.3 million of the year-on-year fall in PBT. Our debt, which had been high at the start of the year, reduced by over 520 million to million and our gearing ratio was successfully cut from 3.5 times at its peak in 2008 to 2.5 times by the end of 2009 a financeable level. This included a Rights Issue in November and self-help cash generation measures, the latter converting million of * into million of operating cash** a profit conversion of more than 175%. A 350 million bond launched in January 2010 also successfully extended our debt maturity. The progress during the year reflects our strategy of driving greater shareholder value from increased focus on the Group s core businesses, through: maximising cash generation; delivering greater cost savings; and protecting and growing revenue. Cost reduction and driving efficiency are our mantra in difficult markets in 2009 we delivered 50 million of annualised savings, and reduced operating mileage between 3-5% by keeping our services flexible. Yet we still secured new revenue including a major new urban bus contract in Morocco. UK Coach for UK Coach was million (2008: 244.7m) and normalised was 34.3 million (2008: 27.0m) Overall revenue in UK Coach was maintained as passenger volumes declined by 2%, with the recession impacting discretionary journeys. Our marketing strategy worked well to protect revenues, with yields improving by 3.3%, and profits up by 27%. Our important Stansted Airport routes grew by 10%, with a new customer centre opened; our dedicated events business grew by 12%; and in response to increased competition on the Southampton and Portsmouth route, we introduced new services and grew revenue by 18%. Our 15 million investment in the flagship coach station in Birmingham was completed and opened on time in December. This will become the new Group head office in The record profit figure benefited from cost reductions we removed duplicate services, reduced operating mileage by 4% and reduced overheads. This shows the flexibility of our operating model, with 80% of the National Express coach services operated by third parties. This allows us to focus on filling the seats. Looking forward, we will continue to develop better IT systems in order to improve our yields. This work is being done in conjunction with our Spanish operation ALSA. * Normalised results are the statutory results excluding profit or loss on the sale of business, exceptional profit or loss on sale of non-current assets and charges for goodwill impairment, intangible asset amortisation, exceptional items and tax relief thereon. ** Operating cash flow is intended to be the cash flow equivalent to normalised. Operating cash flow is defined as the statutory cash flow including the following, as appropriate: cash generated from operations and proceeds from disposals of property, plant and equipment, and less the following, as appropriate: finance lease additions, purchase of property, plant and equipment, purchase of intangible assets, payments to associates, payments in relation to exceptional items, UK Rail franchise entry and exit cash flows and discontinued operations cash flows. 6 National Express Group PLC

7 We are also improving the quality of the onboard experience, such as through the introduction of Wi-Fi, and will be introducing more direct services to key destinations, as well as continuing to grow our events and contracts business. UK Bus for UK Bus was million (2008: 341.0m) and normalised was 20.8 million (2008: 40.0m) It was a tough year for Bus with normalised s down almost 50%. Despite seeing revenue grow by 2% following a fare increase in January 2009, we lost 3% of volume as unemployment in Birmingham reached almost 13% the highest rate in any of the eight major UK cities. In Dundee, a new management team has improved the reliability and operational efficiency of our operation, although revenue was impacted by the economic downturn. The fall in profit was due to a number of factors, including 2.3 million from the disposal of Travel London during the year. We also experienced a number of cost increases, including: fuel which was 4.5 million worse year-on-year; pension costs of 3.5 million; and the final stage of a three-year pay deal which cost 5.4 million. However, we are taking steps to improve margins and have a clear plan of action to address this during We have hedged our fuel at a much better price than in We are in the process of implementing 9 million of further cost savings. We are reviewing our networks to better reflect passenger demand, and are consolidating all our head office functions to a single unit in Birmingham and adding benefits from better procurement. UK Rail for the UK Rail division was 1,190.5 million (2008: 1,332.5m) and normalised was 12.0 million (2008: 81.3m). Our UK Rail business in 2009 was dominated by the handing back of the East Coast mainline franchise in November. The losses on this franchise had a major impact on the financial performance of the Rail division, with revenue 11% lower and normalised operating profit down 85%. But the headlines do not tell the whole story. Our two remaining rail franchises c2c and National Express East Anglia delivered a strong operational and financial performance, demonstrating that the Group remains an accomplished railway operator. During 2009, revenue grew in c2c by 4%, with targeted marketing, and in East Anglia by 1%, where we continue to benefit from the government meeting 80% of any revenue shortfall. c2c had the best punctuality of any UK rail franchise ever, while East Anglia achieved the best performance since we took over the franchise. Both franchises are scheduled to end in 2011, after which the Group will cease to have any active rail franchise. However, we would not discount future involvement in rail with the right risk management structure in place. North America for North America was million (2008: 372.5m) and normalised was 25.3 million (2008: 32.5m). In local currency, revenue was US$695.0 million (2008: US$690.5m) and normalised was US$39.6 million (2008: US$60.3m). North America delivered modest revenue growth (up nearly 2%), and once again achieved good contract retention at over 90%. We won 19 new contracts in 2009, worth US$30 million annually, gaining over 500 additional routes. But we also lost, or resigned due to poor margin levels, 24 contracts, reducing our overall network by over 500 routes was a disappointing year. Profit in local currency was significantly lower than in 2008 due to higher fuel and infrastructure costs, and the double running costs we incurred as part of our programme to transform the business. This programme has proved to be larger and more complex than anticipated, and, having reviewed the various elements of the project, we have decided to progress some, refocus others and terminate ones that proved not to be cost effective. These changes will result in all double running costs being completely removed in Q1 2010, and we continue to target a US$40 million reduction in the overall cost base by 2011, compared to We have brought a more focused approach to our North American operation, which has included making changes to the senior leadership team. This will bring better cost control and operational management to the business, and will restore margins, while improving service to our customers. for was million (2008: 483.1m) and normalised was 76.5 million (2008: 83.3m). In local currency, revenue was million (2008: 608.5m) and normalised was 85.7 million (2008: 105.0m). The global recession has had a considerable impact on our Spanish business, ALSA. Unemployment has reached almost 20% in, and both leisure and discretionary travel have suffered. Underlying revenue was 5% lower and Sterling profitability in 2009 was down by 8%. Yet in a challenging year, this was a resilient performance by a business that is strong across long distance, regional and urban travel. In 2009, 80% of the regional concessions managed by ALSA worth 92 million in revenue per year were extended by the regional authorities. These now run for periods between 2019 and 2034, and we have no concessions due for renewal before This allows for long-term investment in services and fleet. ALSA has continued to invest in service improvements, including new premium and value for money services, and new ways to buy tickets. In 2009, three million passenger journeys were made using reservations sent by text message. In maximising cash generation, the Spanish business generated some 20 million of annual cost savings, including a 5% reduction in kilometres operated to match passenger demand. Selective organic growth continues despite the recession. ALSA s operations in Morocco now account for 5% of the division s profitability. ALSA has provided urban bus services in Marrakech since 1999 and in December 2009 won a similar contract for the city of Agadir, expected to add 16 million of revenue from Looking forward There is no doubt that 2010 will be another challenging year for all companies in a difficult economic environment. However, we know there is scope to continue to improve our business, and, having resolved the most serious issues we faced during last year, we will build on the platform of simple strengths we have created: ensuring cash generation, delivering lower cost and securing growth through selective investment. We will be focusing intensely on the operational management of all parts of the group, and we expect to see continued momentum both in UK Coach and in. We will continue to reduce costs, especially in UK Bus and in North America, in order to drive margin improvement, and will further drive the strong cash generation qualities of the business. We are committed to driving forward our performance in order to continue delivering shareholder value. National Express Group PLC 7

8 National Express Group is a leading transport provider delivering services in the UK, North America and. Every year around 800 million journeys are made on our buses, trains, light rail services and coaches. Visit our download centre Operating cash generation Annual Report and Accounts 2009 Normalised Net debt reduced by Shareholder Summary 2009 Shareholder Information Divisional reviews Moving forward Focusing on our core strengths Key financials 2,711.1m 281.3m 159.8m 521.9m Please visit to view the full Annual Report and Accounts and to access PDF downloads Shareholder electronic communications By registering for electronic communications you can help us to conserve environmental resources by reducing print, paper and postage costs. Log on to if you would like to: register your so that future shareholder information, including the Annual Report and Accounts, is sent to you electronically; check the balance of your shareholding; set up a dividend mandate online; change your registered postal address or your dividend mandate details; or submit your vote online prior to a general meeting. To sign up for the first time you should click on Register and follow the simple instructions you will need your shareholder reference number from your share certificate or dividend voucher or any other correspondence sent to you by Equiniti Limited. Dividends paid directly to your bank account Having dividends paid directly to your bank account has the following advantages: avoids the risk of cheques being lost and incurring a replacement fee; saves you time in presenting the cheque for payment; and the dividend is credited to your account on the payment date. The tax voucher is sent to your registered address at the same time as the dividend is credited to your account. To set up a new dividend mandate please log on to www. shareview.co.uk or contact the Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Shareholder helpline number: *. * Calls to this number are charged at 8p per minute from a BT landline. Other telephone providers costs may vary. Share dealing service A telephone and internet share dealing service, which provides a simple way to buy and sell shares, is available through our Registrar, Equiniti. For further information log on to www. shareview.co.uk/dealing or telephone *. * Calls to this number are charged by BT at the local rate. Company website The Company website at has information about the Group, including press releases, share price data and copies of the half year and Annual Report and Accounts as well as corporate responsibility reporting. The Company no longer publishes the half year results in hard copy. These will now only be available via the website. ShareGift ShareGift is an independent charity share donation scheme administered by the Orr Mackintosh Foundation (registered charity number ). Those shareholders who hold only a small number of shares, the value of which makes it uneconomic to sell them, can donate the shares to ShareGift who will sell them and donate the proceeds to a wide range of charities. Further information about ShareGift can be obtained from its website at and a ShareGift transfer form can be downloaded from Unclaimed assets register The Company participates in the Unclaimed Assets Register (UAR) which provides a search facility for shareholdings and other financial assets that may have been forgotten. For further information contact UAR, PO Box 9501, Nottingham NG80 1WD. Tel: or visit Rights Issue On 11 November 2009, a Rights Issue was announced on the basis of seven new ordinary shares for every three existing shares held on 24 November 2009, at a subscription price of 105p per share. Dealing in the new ordinary shares commenced on the London Stock Exchange on 15 December Shareholders who subscribed for their rights in full should, for UK tax on chargeable gains (CGT) purposes, treat the existing and new shares as the same asset acquired at the time of acquisition of their existing shares, and the subscription monies for the new shares should be added to the base cost of their existing shareholding. Further tax information can be found in the Rights Issue section of the Investor Centre on National Express Group PLC 7 Triton Square London NW1 3HG Tel: +44 (0) Fax: +44 (0) info@nationalexpress.com