TAS report: bus industry profits up but climate still challenging

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Profits in the UK bus industry rose in 2013/14, which brought to an end a run of three consecutive years of falls, according to new analysis published by TAS Publications, the publishing arm of Preston-based consultants The TAS Partnership.

The 128-page report, entitled Bus Industry Performance 2015, presented the results of its annual analysis of 120 local bus companies around the UK. It is the 24th year of the firm’s Bus Industry Monitor project.

However, the report also found that revenue grew by less than the rate of inflation, and pointed to growth of 1.2% at a time when inflation was still running at around 2.5%.

The industry’s operating costs rose by just 0.6%, helped by falling fuel prices.

Turnover across the companies analysed rose to £5,500m, while operating costs reached £5,131m.

Operating profit was £369m, up by 9.6% from the previous year’s £337m. Operating margins recovered to 6.7%, up from 6.2% in the previous year, and back to the levels recorded in 2011/12.

Companies outside London saw a larger 2.3% increase in turnover, taking the total to £3,745m, while operating costs rose by 1.9% to £3,460m. Operating profit was 8.2% higher at £285m, and operating margins improved to 7.6%, from 7.2% in 2012/13. However, these margins remained short of the previous year’s 8.8%.

At the same time, the report provided an updated estimate of the levels of profits which operators require in order to meet their financial obligations and invest for the future. The model suggests that the required margins are between 9.9% and 10.3% – which are well above the levels which it claims are currently being earned.

Commenting on the report, Editor Chris Cheek said: “At a time of uncertainty prompted by savage cuts in spending on tendered services and the new Buses Bill, there is some good news from this report, in that profit levels seem to have stopped falling.

“However, with revenue continuing to fall in real terms, and signs that real-term labour costs are beginning to rise once more, the financial outlook for the industry remains extremely challenging.”