National Express scraps dividend

LONDON Thu Jul 30, 2009 12:04pm BST

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LONDON (Reuters) - National Express (NEX.L), the troubled bus and train operator facing a bid approach from its biggest shareholder, said on Thursday it had scrapped its interim dividend as part of measures to reduce debt.

National Express said it expects to resume dividend payments when it has completed refinancing arrangements and lowered its debt to a "more appropriate level."

The company said it had reduced net debt by over 200 million pounds in the first-half to 977.5 million while its cost saving programme was on target to deliver planned savings of 40 million pounds each year.

National Express last week received an all-cash offer proposal from 18.6 percent Spanish shareholder, the Cosmen family, in conjunction with private equity group CVC.

On a conference call with reporters, Finance Director Jez Maiden said the company was focussed on further debt reduction and had not ruled out a rights issue or disposing of assets.

"We will look at opportunities to accelerate the rate at which we reduce debt. We would certainly look at all options including equity fundraising and disposals but at this point we've made no decisions," he said.

National Express sold its London bus business to Dutch group NedRailways for 32 million pounds in May and Maiden indicated further sales are likely.

"We continue to look across the portfolio to see whether there are non-core businesses which other people would see greater value in or, indeed, if there are other types of assets such as properties which are not fully utilised in the group."

National Express became a takeover target after its shares lost two-thirds of their value over the last year on the back of heavy losses in the company's UK rail division, a 1 billion pound debt pile and the departure of its chief executive.

National Express said on Monday it was seeking details on the takeover proposal from the CVC/Cosmen consortium.

"We are evaluating what we've received and going through a number of questions that arose from what is quite a complex and conditional interest," Maiden said on Thursday. "At this point, it's too early to say what that evaluation will be."

National Express had previously said the CVC/Cosmen consortium's proposal is subject to the operator retaining the East Anglia franchise, which runs between London and Norwich, and the smaller c2c London commuter franchise.

This would put the firm at loggerheads with the government, which said earlier this month that it would take back the loss-making London to Edinburgh East Coast franchise.

National Express has had no contact from rival Stagecoach (SGC.L), Maiden confirmed.

Stagecoach is in discussions with CVC and the Cosmen family about taking parts of National Express if the consortium completes a takeover, and has not ruled out an approach of its own for the entire business.

Fellow transport operator FirstGroup (FGP.L) has already mooted and withdrawn an all-share deal, while newspaper reports have named Go-Ahead (GOG.L) as a potential candidate.

National Express reported a 42 percent decline in first-half underlying pretax profit to 55.7 million pounds.

Shares in the company slumped 4 percent in early trade but recovered to trade 1.6 percent down at 334.25 pence at 9:56 a.m.

"We continue to believe that we are in a "phony war" situation at National Express, with it clear that either some kind of M&A will happen or it will have to launch a rights issue to reduce debt," said UBS analyst Dominic Edridge.

(Editing by John Bowker and Mike Nesbit)

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