(Alliance News) - National Express Group PLC on Thursday said it still expects a small but positive cashflow for the coming months, though Covid-19 has significantly reduced passenger numbers.
Shares in National Express were up 9.2% at 98.71 pence in London in morning trading.
The transport company said it has already taken steps to cut down its cost base and protect cashflow. It also has "a diverse portfolio of contracts", of which many have protections and minimum income guarantees that will help shore up National Express's cost base.
Further, National Express noted that responses such as that from the Spanish government have significantly helped support the firm's employee costs, and it is working with contracting authorities and local governments so as to "maintain some payments during the disruption".
National Express said it has "significant liquidity headroom" in its bank facilities and that the recent announcement from the UK government of "access to additional lines of credit" for businesses such as National Express should strengthen its position.
In the first two months of 2020, National Express's revenue was up 17% year-on-year, driven by a 24% improvement in Spanish subsidiary ALSA, with North America up 15% and UK up 5%.
In the US, National Express's School Bus businesses has reached resolution with 52% of its customer base, with 86% of those agreeing to pay either partially or in full for service despite school closures.
"We note that now a number of states are issuing instructions to their districts to pay their contractors. The effect of which we anticipate will mean more customers agreeing to pay us," National Express added.
Following a royal decree in Spain, revenue from that country is down 70% at present and revenue in Morocco has fallen 40%. In response, National Express has reduced its service levels, including a 50% reduction in inter-city and regional services in Spain. Around half of its employees have been moved to a government income protection scheme, with 70% of salary met by the Spanish state. ALSA contributed 30% to revenue in 2019.
In the UK, which accounted for 22% of 2019 revenue, commercial bus revenue has fallen by about 20%, while concession income is down 40%. Network reductions are also planned in the UK, with the network reverting to something similar to its Christmas Day service, removing as much as 80% of capacity.
National Rail said is is reflecting on its dividend, having intended to pay a 11.19 pence per share final dividend.
Chief Executive Dean Finch said: "These are unprecedented times and have had an immediate and direct impact on our business. Nevertheless we are taking action everywhere to reduce our cost base, whilst both our contractual customers and governments are being very supportive.
"At this stage we cannot give precise guidance to what this means for our profitability this year, but our cash flow over the next three months is still anticipated to be positive even in light of the material downturn in passenger volumes. Our balance sheet is strong and we have borrowing headroom of around GBP500 million, while we are holding discussions to increase this further."
By Anna Farley; annafarley@alliancenews.com
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