Bus industry profits and investment levels fall again
Pre-tax profit margins at Britain’s bus companies have fallen for the second time in three years, according to a new report published by consultants TAS. Labour costs were the most significant factor in the rise in operating costs, with an increase of over 5% in the cost of each employee – double the rate of inflation.
Bus Industry Monitor 2003, published this week, analyses the results of more than 130 local bus operators around the country. The 616-page report shows that pre-tax profit margins in 2001/02 for over 130 bus companies around the country fell to 8.9%, compared with 9.1% in 2000/01. Revenue grew by 4%.
The deterioration outside London was more marked, with a reduction of 3% in pre-tax profits, following a 1.5% increase in operating costs. Pre-tax profit margins fell to 9.8%, down from 10.2% in 2000/01. Revenue growth was restricted to 1%, well below the level of inflation.
In London, operators saw an upturn following three successive years of declining profits. Pre-tax profit margins recovered to 6.2%, compared with 5.6% in 2000/01
Labour Costs
Labour costs per employee rose by an average of 5.3%, with the largest increase (9.3%) being recorded by operators in North East England. In London, labour costs per employee rose by 6.7%.
Capital Investment
The companies surveyed invested a total of £211.6m in fixed assets in 2001/02, sharply down from the previous year’s £318m. However, analysis suggests that a further £91m worth of new vehicles were taken on operating leases.
The market for new buses and coaches in the UK recovered in 2002, with 4,634 units sold, some 436 (7.8%) more than in 2001 – almost 30% of these were double deckers, predominantly for the London market.
New estimates of future investment requirements show expenditure of £697m to update current fleets, with a further £851m by 2008 and a further £1,340m in the following five years to update fleets and maintain replacement programmes.
Company League Tables
Judged by operating profit margin:
- Yorkshire Coastliner, was the most profitable bus company in Britain in 2001/02, with a margin of 32.8%
- Second came National Express Group subsidiary West Midlands Travel on 24.2%
- Third was Arriva Kent Thamesside on 22.9%.
- Fourth was Barton Buses, on 19.1%.
By the same measure, the worst performing companies were:
- By the same measure, the worst performing company (for the second year in a row) was the London operator Connex Bus with a 13.6% loss margin
- Second worst was Arriva East Herts and Essex (10.2%)
- Third worst was First Edinburgh (5.6%)
- And fourth was Traction Group subsidiary Andrews (Sheffield) Ltd (3.7%).
Nine companies made an operating loss, one ahead of last year.
Commenting on the report’s findings, editor Chris Cheek said, "The analysis demonstrates that life at the sharp end of the bus industry continues to get tougher. Analysis shows that the real way to improve bus services is for the right long-term policy framework to be put in place, with parking restrictions, bus priorities and strong marketing. We see the benefits of this in places like London, Oxford and Brighton. But it is a consistent, long term strategy that matters – there are no quick fixes."
Local Authority Capital Spending Problems
The report suggests that there is strong evidence that local councils are finding it difficult to spend all the money allocated for bus-related capital projects. Analysis of returns provided to the Chartered Institute of Public Finance and Accountancy suggest significant underspending.Nationally, authorities spent £221.4m in 2001/02 against a budget of £311.9m – 71% of the allocated figure. This suggests that over £90m worth of planned spending did not take place that year – bringing the total under spent over the last four years to £176m.
This appears to have been particularly high in:
- the English Shires, where authorities only spent 61.5% of budget in 2001/02
- in Wales, where 57.4% of budget was spent in 2001/02.
ENDS