Bus profits continue to fall
Profits in the UK bus industry fell for the second successive year in 2011/12, according to The TAS Partnership’s 22nd annual Bus Industry Performance report. The report says operators have continued to control costs, with increases ‘well below inflation’. At the same time, revenue growth was also well under inflation, implying a sharp real-term fall in all the markets. Turnover across the companies analysed increased by 0.5%, reaching £5.23bn. Operating profit was £352.6m, 9.8% lower than in 2010/11. Operating margins fell to 6.7% (2010/11: 7.5%, 2009/10: 7.9%). The Partnership claimed the profits decrease was partly driven by further falls in London. However, companies outside the capital also reported lower operating profits. These businesses saw a 1.2% increase in turnover, taking the total to £3,531m, whilst operating costs rose by 2.2% to £3,222m. Operating profit was 8.7% lower at £309m and operating margins fell back to 8.7% (2010/11: 9.7%, 2009/10: 8.8%).
The report’s author, Chris Cheek, said, ‘When you remember that these falls occurred before the further reductions in government and local authority funding taking place in 2012/13 with more in prospect for future years, you can begin to understand why the last few months have not been the happiest in the industry. It would not take too many more years of revenue loss to wipe out the current levels of profit especially as costs (and particularly labour costs) start to rise once more.’
Wellglade subsidiary Kinchbus was the most profitable company in the country, with an operating margin of 22.6%. Next came two Stagecoach subsidiaries, Oxford (Thames Transit Ltd) on 22.1% and Warwickshire (Midland Red South) on 21.9%. Seven out of the top ten were Stagecoach subsidiaries. First West Yorkshire came tenth on 18.7% and Bristol 11th on 17.7%. Stagecoach also owned one of the three biggest loss-makers – Orkney Coaches (14.6%). Other big loss makers included First, with its Devon & Cornwall company on 14.8% (prior to the closure of its North Devon operations) and First Capital East (22.7%).
Looking at operating costs, there was a second successive real-term fall. In nominal terms, costs rose by 1.3% nationally against an inflation rate of around 3%. Measured against the RPI, though, they fell by 1.2% in real terms. This came despite a 17.7% real rise in diesel prices during the year. The total employed by the companies fell by 1.5% (around 1,500 jobs). Outside the capital, unit labour costs started to rise once more, after three years of real-term stability. The rise was 0.8%, taking the average unit cost to £25,424. In London, unit labour costs fell back by 0.5% to stand at £37,242.
Chris Cheek said, ‘There may have been signs recently of an upturn in bus demand on the back of what certainly begins to feel like a proper economic recovery, but there is no escaping the fact that the last couple of years have been pretty grim, and this latest analysis serves to remind us of the fact.’