Travel companies can look forward to a brighter future as there are obvious signs that the pandemic is receding. At the same time, it still has a hold on them, allowing for limited recovery so far. This is evident in the half-year results for FTSE 250 coach operator National Express (LSE: NEX).
Weak-but-improving numbers
For the first half of 2021, its revenue was down by 3.8% from the same time last year. It also continued to make a statutory loss. Statutory numbers are used for government-related purposes and also help in comparison across companies by standardising accounting procedures.
However, signs of recovery were evident too. It may still be loss-making, but the amount has reduced to around a quarter of its levels last year. It also reported a small underlying post-tax profit. Underlying numbers reflect the company’s assessment of its business and may more accurately reflect its situation. To that extent, a return to profitability, after reporting a £61m loss during the first half of 2020, is a significant improvement.
National Express also saw free cash flow of £41m, a huge change from a negative number seen last year. And its net debt declined too.
What’s next for the National Express share price?
I think these figures are more positive than not for the company. This is especially so since its outlook was optimistic too. It said: “We continue to project a robust improvement in the second half of the year as vaccination programmes enable a fuller return to mobility.”
Its share price is already up a huge 72% in a year. And I think it can rise more. This is partly because the latest results were encouraging. But it is also because the stock has already demonstrated its ability to rise even higher. It had touched a high of 328p in April, almost tripling from its lows in September last year, before its downward slide began. It is down by almost 22% since. And it is definitely far below its pre-pandemic levels of over 400p. As travel improves, I reckon it will rise.
I think it is curious that National Express’s share price has not risen far more already, when other travel companies in a similar situation have bounced back in a big way. One such is the FTSE 250 low-cost airline Wizz Air. Its share price actually touched all-time highs a few months ago, even though it faces uncertainty owing to coronavirus.
Would I buy the stock?
I think there is a case for buying the stock, in fact I already have. It is true that the pandemic can rear its head again. Even though we are restriction-free now, caution is still encouraged as Covid-19 cases rise. But it is also true that travel is expected to make a comeback soon enough. And with a pick-up in the economy, more consumer spending is likely, which will also give some fillip to National Express stock.
