A long road for National Express

National Express' Spanish long-distance coach operations, the business sold by the Cosmen family, is now the mainstay of the company's operating profits, contributing £76m to the £159m total for 2009. Spain's savage recession forced passengers to cut back on discretionary long-distance travel and underlying sales were 5 per cent lower at £547m, while operating profits took an 8 per cent hit. Weakness in Spain accounted for 60 per cent of National Express' total £100m exceptional operating charges.

While sales were modestly higher in the US coach business, up 2 per cent at £445m, the division endured a torrid year with operating profits tumbling 22 per cent to £25.3m. This was due to a net loss of municipal contracts, combined with tough competition and a failure to win outsourced school bus contracts. Also hedging contracts agreed at a time of high prices pushed fuel costs bills up by $9m (£5.8m). The picture was slightly brighter in the UK, where National Express is the dominant long distance coach carrier, and sales here were £243m, while operating profits were £34.3m (2008:£27m). Passenger volumes fell 2 per cent, partly because of increased competition from the improved rail link to the North West. The UK bus division saw operating profits halve to £20m; the sale of National Express' London bus operations cut £2.3m from profits, but higher fuel bills and pension charges also added £8m to expenses.

The performance of the rail division is now largely irrelevant after chairman John Devaney signalled that National Express will exit the rail business permanently after its two remaining East Anglian franchises expire in 2011.

KBC Peel Hunt forecasts pre-tax profits for 2010 of £139m, with EPS of 21p.

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