Transport firm off to flying start

May 2 2008 by Iain Laing, The Journal

RAIL, bus and coach operator National Express has matched its rivals by reporting a strong start to the year.

The group, which runs East Coast Main Line services, said all its operations in the UK were performing well, despite the uncertain economic conditions.

Shares in transport firms have risen in recent days after firms including Go-Ahead and Stagecoach posted trading updates ahead of expectations.

National Express said its trains business – also featuring the London commuter services c2c and NE East Anglia as well as operations to Stansted and Gatwick airports – produced revenues growth of 9% in the first three months of the year.

This was despite a softening of demand on Stansted Airport routes because of lower footfall through the airport. Ryanair recently cut back flights from Stansted after attacking the airport’s cost and “appalling” service. The same factor also impacted on the National Express coach business, although the division still reported “encouraging” revenues growth of 5%. The bus operation saw revenues improve 6%, helped by 10% passenger growth in the West Midlands and an improved performance for regulated bus operations in London. The division operates more than 2,000 buses, employing 7,250 people across the UK.

The update adds to the strong showing seen in 2007, when underlying annual profits came in slightly ahead of market expectations at £205.6m, up 11% from 2006.

It added: “Despite the current economic backdrop, all operations have made a good start to the year and we have seen no adverse impact on trading in the first quarter.”

National Express has provided increased certainty over its exposure to rising oil costs by hedging 85% of its fuel requirement for this year and 40% for 2009.

Investec Securities said it continued to forecast pre-tax profits of £203.1m for the current year, rising to £220.9m in 2009.

It noted that fuel price risks had diminished because of hedging and said the widely-feared slowdown in Spain was not evident in the trading update.