BIM 2007 Executive Summary
A flavour of the comprehensive nature of the Bus Industry Monitor analysis is provided by the following Executive Summary from the 2007 edition, published in December 2007. This has analysed the accounts of companies with financial years ending between June 2005 and July 2006.
Executive Summary
The 2005/06 analysis reports on the accounts of over 130 companies, and enables the following broad conclusions to be drawn.
Industry Viability
- Operating profitability fell during the year – for the seventh time in eight years. This meant that margins were at their lowest for over ten years.
- Turnover across the companies analysed increased by 8.1% during the year, well ahead of the rate of inflation, reaching GBP4,042.3m.
- Operating costs rose by 9.3%, bringing the total to GBP3,760.6m.
- Operating profits for the industry fell by 5.6% to GBP281.7m.
- Operating margins fell to 7.0% (2004/05: 8.0%).
- Pre-tax profits were 2% down in cash terms at GBP265.2m.
- Pre-tax margins fell back to 6.6% (2004/05: 7.2%).
- Outside London, the deterioration was more marked:
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- Companies outside the capital showed a lower 5.5% increase in turnover to £2,682.2m.
- Operating costs rose by 7.4% to reach GBP2,514.5m.
- Operating profit was 17.1% lower at GBP167.7m
- Operating margins slipped back to 6.3% (2004/05: 8.0%).
- Pre-tax profits were 11.1% lower at GBP163.8m.
- Pre-tax margins fell back to 6.1% (last year 7.2%).
- Analysing the performance by area, the report finds that:
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- Companies in the PTE areas delivered the highest returns, with a pre-tax margin of 8.4%, down from 10.3% in 2004/05.
- Next came Scotland, on 8.3%, down from 10.5% the previous year
- Companies in the English Shires achieved a margin of 3.9%, down from 4.3% in 2004/05.
- In London, margins improved slightly, from 7.2% to 7.5%.
- Welsh companies achieved 3.9%, up from 3% in the previous year.
Operating Costs
- Operating costs for the companies surveyed rose in real terms, with a cash increase of 7.4% nationally against an inflation rate during the period of between 2.7% and 3.2%.
- Labour costs per employee rose by an average of 4.4%, still above inflation, but a lower rate of increase than the last three years. The highest increases occurred in Yorkshire (10%). Other areas with significant growth included:
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- London (7.8%)
- the North East (5.3%)
- the PTE areas (5.2%)
- the South West (4.1%)
- There is insufficient published data on other cost levels in the accounts to enable any meaningful conclusions to be drawn about other categories of operating costs.
Revenue
- Across the industry as a whole, revenue increased by 8.1%. Outside London, the increase was lower, at 5.5%. The largest growth was in Wales, up by 8.5%, followed by PTE areas on 6.3%. Revenue grew by 5.2% in the English Shires and by 3.5% in Scotland.
Employment
- Numbers employed by the companies grew by 3.2% during the year, mainly driven by a 4.7% expansion in London. There was a 4.2% increase in the English Shires, and smaller increases elsewhere.
- The number of management and administrative staff increased by 6.0%, continuing growth seen in 2004/05 as well.
- Turnover generated per administrative employee in the West Midlands and London is still substantially ahead of the levels achieved in most other industry sectors.
League Tables
- Judged by the ratio of operating profit (before interest and taxation) to turnover - operating profit margin – Arriva Derby, was the most profitable bus company in Britain in 2005/06 – though the position is slightly false since the company’s overhead costs are borne elsewhere.
- Second came Yorkshire Coastliner maintained its presence amongst the most profitable companies. This subsidiary of Transdev earned a margin of 24.6%.
- Third came Wellglade subsidiary Barton Buses on 20.8%
- Fourth was National Express Group subsidiary Tayside Public Transport (which trades as Travel Dundee) on 16.7%
- Fifth was a second National Express Group subsidiary, West Midlands Travel on 16.4%
- Arriva achieved four top 20 places (seven last year) – in addition to Arriva Derby, Arriva Kent Thameside, Stevensons of Uttoxeter, Arriva Teesside and Arriva Durham County were represented.
- FirstGroup achieved five top twenty performances (one down on last year): apart from First Aberdeen, these were First West Yorkshire, First Glasgow No 1, First York and Leicester Citybus.
- The Go-Ahead Group had a single representative, Brighton & Hove at no 9.
- Stagecoach achieved three (the same as last year): Busways, Stagecoach Scotland and Midland Red (South).
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By the same measure, the worst performing company (for the sixth year in a row) was the NEG’s Travel London (formerly Connex Bus) with a 64.1% loss margin, followed by Arriva Colchester (34.4%). Next came Arriva Kent & Sussex (30.3%), Comfort Delgro’s subsidiary Armchair (15.9%) and First Devon and Cornwall (9.7%). Nineteen companies made an operating loss, up from 14 last year.
Regional Profitability
- The main report shows marked variations in both levels of and changes in profitability in the English Regions.
- Judged by operating profit margin, the North East took over as the most profitable region (10.0%), followed by West Midlands (9.5%) and the East Midlands (8.4%)
- The lowest returns were achieved in the South West (a loss of 5.9%) and the North West (5.1%).
Ownership & Market Share
Previous trends towards consolidation of ownership in the industry have been reversed slightly, with the result that the five quoted groups control some 66% of the market (as measured by turnover).
- Companies owned by the second tier groups were the most profitable during 2005/06 (8.1% pre-tax, down from 9.2%), followed by:
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- the overseas owned companies (6.6%, down from 6.9%)
- the major groups, 6.3% (down from 7.5%) and
- management-owned, 5.1% (down from 6.3%).
- There was an improvement in the performance of the remaining municipal companies, with pre-tax margins at 4.5% (up from 2.9%)
- Evidence suggests that group companies have been consistently more profitable throughout the period since 1988/89. It is concluded that there are significant economies of scale to be gained from industry consolidation.
Public Expenditure
- Budgeted public expenditure on bus services rose by 10.4% per cent in 2006/07 to GBP2,359m, up from GBP2,053.9m in 2005/06.
- As a result, spending is now 45.2% up in real terms compared with the position five years earlier. Of this, GBP2,005m was for England, GBP268m for Scotland and GBP86m for Wales. Budgeted expenditure on supported services in England outside London grew by 1.6%, but fell in Wales and Scotland.
- Budgeted spending on concessionary fares rose by 13.4% in England, 26% in Scotland, and by 1.4% in Wales.
- The disparity in expenditure between areas of Britain continues to be substantial, ranging from GBP62.68 per head of the population in the English PTE areas (including local rail support), through GBP25.12 per head in Scotland, to GBP24.73 per head in Wales and GBP13.52 in the English Shires. Even within these regions, expenditure varies substantially between authorities.
- In order to improve comparability, this year's analysis for the English Shires includes the spending of the districts in each county on concessionary fares. Taking this into account, Cambridgeshire has the lowest per capita spending in England at GBP6.45, followed by Durham (GBP7.24), Northumberland (GBP8.11), Northamptonshire (GBP9.21) and Buckinghamshire (GBP9.39).
- In the English PTEs, per capita spending ranged from from GBP46.56 in West Midlands to GBP108.96 in Merseyside. In mainland Scotland, between GBP5.49 per head per annum in Edinburgh to GBP51.69 per head in Dumfries & Galloway.
Vehicles and Investment
- Total industry investment in 2005/06 is estimated at GBP563.3m, up from GBP541.9m in 2004/05. Of this sum, GBP430.2m went into local bus services, up from GBP426.5m in 2004/05.
- Estimates of future investment requirements show expenditure of GBP415m to update current fleets; GBP1,217m worth of new vehicles will be required by 2012 and a further GBP1,872m in the following five years to update fleets and maintain replacement programmes.
- The companies surveyed invested a total of GBP421.8m in fixed assets in 2005/06, up from the previous year’s GBP313.4m in 2004/05. This analysis suggests that demand for vehicles on operating leases has virtually disappeared.
- The market for new buses and coaches in the UK was slightly down in 2006, with 3,522 vehicles purchased (excluding minibuses, which are no longer bought by major bus operators), compared with 3,655 in 2005.
- Double deck purchases were 737 down from 849 in 2005 and 1,183 in 2004 and representing a cut in market share down to 21%
- Purchases of full-size single deck buses fell back to 775 in 2006, from 897 in 2005.
- Purchases of midibuses rose, from 544 to 678
- Superminibus sales were virtually unchanged at 274.
- Coach sales fell back from 856 to 825.