Annual Report and Accounts 2011
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Annual Report and Accounts 2011 Continuing the journey Overview National Express at a glance Group Spain North America Group revenue by market Revenue Revenue Spain 25% North America 21% £551.1m £481.0m UK Bus 12% UK Coach 12% Operating profit Operating profit UK Rail 30% £90.1m £47.9m Group operating profit by market Revenue Operating profit Revenue Operating profit Spain 36% (£m) (£m) (£m) (£m) North America 19% 90.1 47.9 481.0 551.1 UK Bus 13% 86.2 459.8 UK Coach 14% 525.6 UK Rail 18% 36.9 10 11 10 11 10 11 11 10 +4.9% +4.5% +4.6% +29.8% National Express ALSA Durham School Services The Group operates in the UK, Spain, Our Spanish business, ALSA, operates Stock Transportation and North America and during 2011 long distance, regional and urban bus Our business in North America is employed 40,000 people and operated and coach services across Spain and focused solely on student transportation over 22,000 vehicles. in Morocco. and operates in 30 US states and four Canadian provinces. Passengers made more than 650 million ALSA was acquired by National Express journeys on our services during the year. in 2005, and our position in Spain was The business operates through medium- strengthened with the acquisition of term contracts awarded by local school Continental Auto in 2007. Apart from its boards to provide safe and reliable bus and coach services, the business transport for students, and is the second also operates service areas and other largest private operator in North America. transport-related businesses, such as fuel distribution. For more details go to page 12 For more details go to page 16 All profit and margin numbers unless otherwise stated intangible asset amortisation, exceptional items and refer to normalised results, which can be found on tax relief thereon, for continuing operations. The Board the face of the Group Income Statement in the first believes that the normalised result gives a better column. The definition of normalised profit is as follows: indication of the underlying performance of the Group. Statutory result excluding profit or loss on the sale Operating margin: the ratio of normalised operating of business, exceptional profit or loss on sale of non- profit to revenue for continuing businesses. current assets and charges for goodwill impairment, UK Bus UK Coach UK Rail Revenue Revenue Revenue £263.5m £259.1m £688.3m Operating profit Operating profit Operating profit £32.7m £34.9m £43.4m Revenue Operating profit Revenue Operating profit Revenue Operating profit (£m) (£m) (£m) (£m) (£m) (£m) 34.9 43.4 32.7 259.1 263.5 688.3 257.8 250.3 32.0 637.5 28.3 33.8 10 11 10 11 10 11 10 11 10 11 10 11 +2.2% +15.5% +3.5% +9.1% +8.0% +28.4% National Express West Midlands National Express c2c National Express Coventry Eurolines National Express operates the industry- National Express Dundee The Kings Ferry leading c2c franchise which serves London Midland Metro National Express is the largest operator and South Essex. It is an important National Express is the market leader of scheduled coach services in the UK. commuter route serving 25 stations on in the UK’s largest urban bus market The business operates high frequency the line out of Fenchurch Street station, outside of London. We also run bus services linking around 1,000 destinations London. We ran National Express East services in Coventry and Dundee. We across the country. Anglia until February 2012. operate more than 1,600 vehicles and We are the UK partner in the Eurolines cover over 70 million miles per year. network which serves over 500 We operate the Midland Metro light destinations across Europe and rail service between Birmingham North Africa. and Wolverhampton. For more details go to page 20 For more details go to page 24 For more details go to page 28 Contents Overview Governance Financial statements An overview of National Express Group, our Our approach to corporate governance The audited financial statements of key highlights and how we have performed and how we have applied this in 2011. National Express Group for the year ended this year. 44 Chairman’s overview 31 December 2011. 01 Group highlights 46 Board of Directors 75 Auditor’s Report 02 Chairman’s letter 48 Corporate governance 76 Group Income Statement Business review 58 Directors’ remuneration report 77 Group Statement of Comprehensive This section gives detail on our strategy and 69 Directors’ report Income vision and how we have performed against 72 Statutory information 78 Group Balance Sheet this at Group and Divisional level. 74 Directors’ responsibilities statement 79 Group Statement of Changes in Equity 80 Group Statement of Cash Flows 03 Group Chief Executive 81 Notes to the Consolidated Accounts 08 Strategy 137 Auditor’s Report 10 Business model 138 Company Balance Sheet 12 Spain 139 Notes to the Company Accounts 16 North America 150 Shareholder information 20 UK Bus 151 Dividends and financial calendar 24 UK Coach 152 Corporate information 28 UK Rail 153 Glossary 32 Financial review 157 Five year summary 37 Risks and risk management 40 Living our values Who we are National Express Group is a leading transport provider delivering services in the UK, North America, Spain and Morocco. Our vision Is to earn the lifetime loyalty of our customers by consistently delivering frequent, high performing public transport services which offer excellent value. 1 highlights Group Overview Group Revenue Operating margin £2,238.0m 10.1% Operating profit Earnings per share £225.2m 27.0p Profit before tax Dividend £180.2m 9.5p Revenue Operating profit Profit before tax Operating margin Earnings per Dividend (£m) (£m) (£m) (%) share (p) (p) 9.5 10.1 27.0 9.6 225.2 180.2 2,238.0 23.6 204.2 160.5 2,125.9 6.0 10 11 10 11 10 11 10 11 10 11 10 11 +5.3% +10.3% +12.3% +50bps +14.4% +58.3% • Record statutory profit before tax and • Passenger journeys rose by 5.4 million amortisation of £180.2 million (2010: £97.3m) journeys to 656.6 million • Revenue growth of 5.3% to £2,238.0 million • Strong balance sheet with long-term funding (2010: £2,125.9m) maturity. Gearing ratio further improved to 1.9x (2010: 2.1x) • Operating profit increased by 10.3% to £225.2 million (2010: £204.2m) • Return on capital (before tax) increased to 14.1% (2010: 13.2%) • Revenue and profit growth in every division. Record profits in our UK Coach business • Basic EPS increased 14.4% to 27.0 pence of £34.9 million (2010: 23.6p); 20.3 pence delivered from non-rail earnings (2010: 17.9p) • Industry leading operating margins in Spain, North America, UK Coach and Rail – North • Final dividend increased 8.3% to 6.5 pence America achieved 10% margin; Group margin has almost doubled since 2009 Overview 2 Chairman’s letter John Devaney Dear shareholder, I am delighted to report that, in 2011, National Express has delivered another successful year of business turnaround and improvement. I am delighted to report that in 2011 of the growth opportunities in our current We remain committed to these core National Express has delivered another markets; and to identify and develop policies, which provide shareholders with successful year of business turnaround exciting new market potential. It will be a suitable balance of long-term growing and improvement. We have now delivered by a management team that returns whilst retaining sufficient resource completed the process of recreating a has proven credentials in every area of in the Group to explore opportunities to high quality business, building on the our operations and we will strengthen the grow shareholder value. Following foundations that we put in place in 2010 team further to ensure that we have the payment of our interim 2011 dividend and delivering both improved profitability skills to deliver each aspect of our strategy. of 3 pence per share in September, I am and strong revenue growth. National Our vision for the Group is to put our pleased to announce a recommended final Express is now the best performing private customers first, to a level that will clearly dividend for 2011 of 6.5 pence per share, provider of mass transportation in many differentiate National Express in the mass an increase of 8.3%, taking the full year of the markets in which it operates. transport market. payment to 9.5 pence per share. This will be paid from the 20.3 pence of non-rail 2011 has been a record year for Group During the first half of 2011, the Board earnings per share (EPS) delivered in 2011 statutory profit before tax and amortisation. took steps to further enhance its skills and the £84.4 million of free cash flow we Back in 2009, when I joined as Chairman, and experience, particularly recognising generated in the year, both of which we the Group was struggling for its business the Group’s future growth plans for North expect to grow in future years. survival. However, we reduced our debt, America and Continental Europe. I was resolved the losses in our East Coast rail very pleased to welcome Chris Muntwyler, During 2011, our employees have franchise, maintained our independence Joaquín Ayuso and Lee Sander to the continued to play a major part in the and, with strong shareholder support, put Board, each with credentials in our target implementation of our strategy, adopting in place an appropriate capital structure.