Investor presentation Autumn 2016 Includes financial results for six months ended 30 June 2016
Cautionary statement This Review is intended to focus on matters which are relevant to the interests of shareholders in the Company. The purpose of the Review is to assist shareholders in assessing the strategies adopted and performance delivered by the Company and the potential for those strategies to succeed. It should not be relied upon by any other party or for any other purpose. Forward looking statements are made in good faith, based on a number of assumptions concerning future events and information available to Directors at the time of their approval of this report. These forward looking statements should be treated with caution due to the inherent uncertainties underlying any such forward looking information. The user of these accounts should not rely unduly on these forward looking statements, which are not a guarantee of performance and which are subject to a number of uncertainties and other facts, many of which are outside of the Company’s control and could cause actual events to differ materially from those in these statements. No guarantee can be given of future results, levels of activity, performance or achievements. Unless otherwise stated, all operating profit, operating margin, operating cashflow, asset return and EPS data refer to normalised results, which can be found on the face of the Group Income Statement in the first column. The definition of normalised profit is as follows: IFRS result found in the third column, excluding intangible asset amortisation and tax relief thereon. The Board believes that the normalised result gives a better indication of the underlying performance of the Group. 2
Contents o Investment case and business model o Our markets o Strategic focus and areas for growth o Divisional highlights – Half year 2016 o Financial results – Half year 2016 o Appendix 3
Investment case Business model 4
Investment case Our diversity is our strength… … helping to deliver sustainable, long -term shareholder value Best in class public transport operator with differentiated proposition: o Well balanced & diversified portfolio with over 2/3’s of earnings from overseas o Strong recurring revenue streams from perpetuity businesses & established o contract markets Strong free cash flow helping to drive organic growth and position us for growth in o new markets: Fast developing pipeline of substantial capital-light growth opportunities; o successful conversion of pipeline in German rail and the Middle East Bolt-on acquisition opportunities in North America o Stable, long-term financing and commitment to investment grade rating o Dividend policy: around 2x Group earnings o 5
Business model Using operational excellence… …to serve our customers … and create profit and cash, generating long-term shareholder value 6
Business model Differentiating through diversification Balanced portfolio with attractive geographic & modal exposure National Express o Diversified portfolio with leading positions in Group Revenue £1.9bn many of our markets o Lower geographical and regulatory exposure Diversified revenue stream (1) to any one market o Deep understanding of & expertise in managing regulated concessions o Ability to apply our experience & expertise to build revenue & profit streams in new markets o Morocco experience entry into Diversified modal breadth (1) Middle East o Successful UK rail franchise entry into German rail o Rail – revenue & profit stream secured through to 2029 in UK & to 2033 in Germany (1) Data: Full Year 2015 7
Delivering on our strategy Strong track record on improving returns Focus on operational excellence is delivering sustainable & growing returns Free Cash Flow* ROCE* £m % Dividend per share Earnings per share* p p *Historical results restated to adjust for the impact of the Rail and Middle east bid costs previously treated as exceptional items 8
Our markets 9
Our markets Attractive markets with opportunity for growth Rail Spain & North UK Bus UK Morocco America Coach Regional Bus UK & £4.8bn Bus & Coach School Bus Germany Scheduled & Transit market Coach € 3.8bn (excluding £8.5bn UK market $24bn £300m London) market € 9bn market 30% market 80% local share 14% market 60% share Germany market share share Capital intensive…………............... Capital Light 10
Our markets Spain & Morocco Market size • € 3.8bn Features • Regulated & highly segmented market with 3 levels of Government regulation; national, regional & urban • Each concession is exclusive to the operator Competition • Intercity competition from state-backed rail & low cost airlines • Concessions awarded through competitive public tender, typically 10 years Growth drivers • Concession renewals, urban contract wins in Spain & Morocco ALSA has leading position in a highly fragmented market National Express adding value through quality of service with ALSA the top rated transport company in Spain Introduction of RMS providing competitive advantage 11
Our markets North America Market size • $24bn – 32% outsourced, 68% in-house Features • Fragmented market with top 4 players accounting for nearly 50% • Low barriers to entry but hard to get scale • Local relationships are key Competition • Bigger players - access to capital, geographical reach & scale advantages • Top 6 players – First Student, National Express, STA, Illinois Central, Krapf, Cook Illinois Growth drivers • Price increases on renewal & market share shift - organic & acquisitions National Express is second largest player with 14% market share & best in class margins National Express adding value through quality, safety and reliability resulting in industry leading retention rates 12
Our markets UK Bus Market size • £4.8bn Features • Primarily de-regulated with low barriers to entry Competition • National & local bus operators, car & rail • Top 5 players – Stagecoach, FirstGroup, Go-Ahead, Arriva, National Express Growth drivers • Increasing passenger volumes through modal shift Largest 5 operators represent around 70% of UK de-regulated bus market National Express adding value through our pioneering partnership approach with local transport authority, working together in passengers’ interests 13
Our markets UK Coach Market size • £300m Features • Highly de-regulated • Operators able to compete flexibly on selected routes Competition • Selective competition from rail, large bus operators & localised services • Main competitor is Megabus (Stagecoach) but on limited number of routes Growth drivers • Increasing passenger volumes through competitive pricing, better distribution channels, enhanced digital marketing & revenue management systems National Express only true national player with 60% market share 80% operated by third-party operators National Express adding value through innovative marketing using our enhanced CRM systems and customer database of 14m 14
Our markets Rail Market size • UK £8.5bn, Germany € 9bn Features • Regulated in the UK • Franchise lengths of between 7-15 years – pricing & quality key focus • Liberalising German market with DB needing to exit 40% of market share Competition • Increased international competition in UK franchise bidding • Domestic & international competition in Germany as market liberalises Growth drivers • Bidding for UK & German franchises National Express rail revenues secured through to 2029 in the UK & through to 2033 in Germany National Express adding value through innovative marketing techniques & the introduction of pioneering initiatives e.g. automatic compensation scheme 15
Strategic focus and growth opportunities
Strategic focus Clear strategy with 4 components 1. Focus on operational excellence 2. Deployment of technology throughout our business Insert 3. Growing our business through targeted bolt-on acquisitions photo 4. Further diversification by bidding in other global markets, building on our successful entry into Germany & Bahrain 17 17
Strategic focus Operational excellence Generates revenue, margin and cash o Continuing focus on raising service & safety standards delivers growth in passenger journeys e.g. o UK Coach customer satisfaction up 1.7% & reconfirmed as No. 1 trusted ground transport provider in UKCSI Survey o Reducing journey times – seeing double digit passenger growth on all our Platinum routes o 6% growth & highest passenger numbers in the last 5 years, carrying 480m passengers in H1 2016 o DriveCam, a driver behaviour training tool – is already reducing collisions & associated claims o 100% rolled out in UK Coach; successful trial in UK Bus o Master Driver programme underway in the UK, ALSA & NA o On-going programme to drive cost efficiencies across the Group, targeting cost reductions of £18m in 2016 – delivered £9m in H1, & nearly £60m in last 2½ years 18
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