Out-Law / Your Daily Need-To-Know

UK public transport operator looks to expand into Middle East

Out-Law News | 05 Aug 2014 | 10:07 am | 1 min. read

UK-based public transport operator National Express Group said it has been selected as the preferred bidder for urban bus services in Bahrain, “opening up significant new potential growth opportunities” in the region.

National Express said, if successful, the contract to run urban bus operations in Bahrain would be the group’s first operations in the Middle East, “a region where, like Morocco, urbanisation is driving greater traffic congestion and consequent demand for public transport”.

In addition the group, which operates bus, coach and rail services in the UK, continental Europe, North Africa and North America, said it is pursuing other opportunities in new and adjacent markets to existing businesses, such as in Spain and Portugal.

In June, the group launched a fleet of 120 new buses in Tangiers and said “Morocco remains a key market for future growth with the potential to add further new cities”.

The group said: “We also continue to invest and win business in Germany and Morocco where we have been growing. The majority of our target markets are capital light in nature and we will continue to deploy capital in a way that enables us to secure high returns on investment.”

In 2013, the group won two contracts in Germany to run the Rhine Munsterland Express. The construction of the first three trains for the project has been completed ahead of contract start-up in December 2015, the group said.

Further bids in relation to German rail contracts are under evaluation and the group said its overall ‘bid pipeline’ remains substantial and worth €1.5 billion in annual revenue.

In the US, the group said it renewed a public transport contract in Boston with annual revenue of $35m for a five-to seven-year period, “securing up to $250m in revenue at margins that are typical for this capital-light industry”. Annual revenue in transit is now close to $80m, the group said.

In the UK, the group won the franchise for the Essex Thameside rail network in the southeast of England until 2029 and said it would continue to consider bidding for further franchises “on a selective basis, where the quality, risk and returns match the group’s expertise and preferred profile”.

In its half-year results for 2014, the group said it had invested £25m in net maintenance capital expenditure to replenish its fleet of vehicles. “Our unique portfolio of international bus, coach and rail businesses enables us to grow in selected new markets and add significant value to the group. In 2013 we secured £1.8bn of revenue from new market opportunities.”

The group said: “Our key focus in 2014 is to drive superior cash and returns, the second part of our strategy. The group generated £80.3m of free cash flow in the first half of 2014, on target to deliver £150m in the full year.”