Losing the profitable East Anglia rail franchise and subsidy for OAP coach concessions made half-year results from National Express look ugly. Recession in Spain, where the transport company makes a third of its money, made us wince, too. Yet, with business there more resilient than we expected, it's time for a rethink.
In fact, after one-off costs, pre-tax profit fell just 14 per cent and demand actually increased in Spain. Running buses in more prosperous northern cities, where operations are mostly contracted, and owning exclusive rights to drive coaches between them, generated sales growth of 2 per cent in local currency. Conversion to sterling and a sharp drop in ancillary revenue cut profits there by 8 per cent to £35.4m, and revenue by 4 per cent, though declining car travel, expensive air tickets and fewer railway discounts should offer some protection. Nearby, Morocco is growing fast and a move into Germany is likely, too. Elsewhere, new contracts and the acquisition of US school bus operator Petermann grew revenue in North America by 11 per cent, while clever marketing in the West Midlands was partly responsible for 13 per cent profit growth in UK bus.
Broker Peel Hunt expects full-year adjusted pre-tax profit of £161.6m, giving adjusted EPS of 24.1p (£180.2m and 26.9p in 2011).
NATIONAL EXPRESS (NEX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 211p | MARKET VALUE: | £1.08bn | |
| TOUCH: | 211-212p | 12-MONTH HIGH: | 269p | Low: 176p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 173p* | NET DEBT: | 93% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.12 | 70.1 | 10.6 | 3.00 |
| 2012 | 0.93 | 39.8 | 6.20 | 3.15 |
| % change | -17 | -43 | -42 | +5 |
Ex-div: 5 Sep Payment: 21 Sep *Includes intangible assets of £1.28bn, or 251p a share | ||||
