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National Express rebuffs snowy weather with revenue growth at start of 2018

The public transport company reported group revenue growth in constant currency had grown 6.2% in the period, with double-digit growth in its pre-tax profits year-on-year
National Express coach
The group was largely unscathed by periods of snowy weather at the start of the year

National Express Group PLC (LON:NEX) has shrugged off severe weather during the first three months of 2018 to report revenue growth across the group.

The FTSE 250-public transport company reported group revenue growth in constant currency had grown 6.2% in the period, with double-digit growth in its pre-tax profits year-on-year.

READ: Liberum downgrades National Express to ‘hold’ amid less favourable US dollar exchange rate

Across the group’s divisions, its North America operation grew 9% in constant currency, with ALSA, which includes its Spanish, Moroccan and Swiss operations, up 6.3% while the UK grew by 1.4%.

National Express also said its German rail services arm performed well in the period, lapping the catch-up revenue from the period last year so revenues declined 0.7% as expected.

The firm said the rail business remained on-track with the mobilisation of its next contract, which is due to start in June 2019.

The company also amended and extended its revolving credit facilities, securing around £500mln of liquidity to 2023.

Dean Finch, chief executive of National Express, said: "I am pleased all of our divisions have started 2018 in a positive manner. Our strong revenue performance has again been driven by both organic growth and the benefit of recent acquisitions. Our diversified international portfolio continues to deliver broad-based growth and open additional opportunities for further expansion.

He added: “These opportunities will continue to be sought in a disciplined manner and we will only pursue them if they meet our strict financial criteria. We remain on track to meet our full year profit and cash flow expectations."

READ: National Express shrugs off US cold spell as passenger numbers climb

In a note to clients, analysts at Liberum commented: “An encouraging update for the first four months of the year demonstrating that the momentum from last year has continued. Revenue growth has remained strong (+6.2% constant currency, +1.7% reported), although this includes the uplift from acquisitions.

They added: “We make minor changes to our forecasts, raising 2018E EPS by 1% and 2019E by 4%. We update our exchange rate assumptions (again) to reflect the reversal of recent US dollar weakness, which is positive for the translation of the group's North American operations. We still conservatively assume some margin pressure as long distance coach concessions are renewed (with a subsequent recovery), but better visibility on the timing of the tenders suggests the main impact would be in 2020E rather than in 2019E.”

Meanwhile, analysts at Investec placed the stock under review, saying: "The strength of current trading and recent acquisitions suggest that PBT will be slightly ahead of our forecasts, particularly given recent US$ strength."

They added: "Revenue growth is in line or ahead of our forecasts in every division apart from German Rail and although the negative impact of currency is slightly greater than we anticipated, current trends in PBT growth are ahead of our forecasts."

In lunchtime trading Wednesday, National Express shares were up 2.7% at 417.2p.

-- Adds broker comment and updates share price --

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