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National Express – QuickView

By Edison Stock MarketsMar 14, 2013 05:59AM ET
www.investing.com/analysis/national-express-%EF%BF%BD%EF%BF%BD%EF%BF%BD-quickview-158981
National Express – QuickView
By Edison   |  Mar 14, 2013 05:59AM ET
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NEX
-2.01%
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TPR
-4.17%
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Investment Summary: International Strength
National Express’ results demonstrated the business is building a strong base from which to provide sustained organic growth, despite significant headwinds endured in 2012, including the handover of the NXEA rail franchise. As a result, operating profit fell and there was a decline of one million elderly and disabled UK coach passengers following the removal of the concession scheme. However, with four of the five divisions performing strongly, a keen focus on operational efficiency and numerous contract wins achieved on the international stage, National Express has positioned itself to provide sustained growth. With consistent cash flow generation, the group has the flexibility to further invest and deliver shareholder returns.

Results Show Resilience In The Face Of Significant Headwinds
The 2012 results demonstrated that the group was able to deliver a robust underlying performance, with non-rail revenues up 6% to £1.6bn. Group margins progressed 150bp to a best-in-class 11.6%, with operating profit down only 6% to £211.9m (2011: £225.2m) despite c £50m of profit headwinds from the loss of NXEA rail profits, a reduction in the fuel duty rebate, an increase in the hedged price of fuel, adverse forex movements and the cut in concessionary coach passengers. The non-rail profit of £185.5m was a record, with a third successive year of progress as a result of acquisition, organic growth and a focus on efficiency.

Organic Growth Drivers In Place And Set To Deliver
With over £3.6bn of revenues contracted or under exclusive concession and nearly £2bn of new revenue added in the last 12 months, the group is positioned to deliver future organic growth. 2013 will see the initial benefits of the transformation provided by investment in new buses and route optimisation, supported by access to new opportunities provided through acquisitions (Petermann, Transit) and strategic new contracts wins (German rail and coach, and US transit).

Valuation: Progress Set To Show Through In Rating
We feel the current rating of 9.4x CY13 EPS does not fully recognise the strategic progress made throughout 2012, despite the headwinds and the long-term potential of the group as a result of new strategic opportunities. With the full impact of headwinds set to bottom out in 2013 and with new contracts ramping up, there should be a potential re-rating of the shares as visibility improves.

To Read the Entire Report Please Click on the pdf File Below.
National Express – QuickView
 

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National Express – QuickView

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