Operating and Financial Review
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Spain
Revenue was £298.0 million (2006: £249.3 million) and normalised operating profit was £50.9 million (2006: £44.3 million). In local currency revenue was €434.9 million (2006: €365.6 million) and normalised profit was €74.3 million (2006: €65.0 million). 2007 results include a three month contribution from Continental Auto. Trading improved in the second half of 2007 and we achieved a full year margin of 17.1%.
Following the successful acquisition of Continental Auto, we reinforced our position as the number one private transport operator in Spain. We believe that this positions us well to access new market opportunities in Spain as well as driving a more sales and marketing orientated agenda in our existing businesses. Continental Auto has a higher proportion of urban and commuter services which balance the long distance services – the largest part of Alsa. The integration of Continental Auto is proceeding to plan, both in terms of timing and synergies delivered, adjusting and optimising resources. We have already fully integrated our finance, sales and routing systems and implemented safety management and financial control procedures within Continental Auto. We are in the process of consolidating our maintenance facilities and the fleet purchasing process.
During 2007 we negotiated the extension of a number of contracts which now means we do not have any concessions expiring before 2013. Competition pressures exist within the market however and we have responded to the entry of low cost airlines and the development of high speed rail by varying our frequency, adapting our prices and altering our network to provide complementary services.
In addition we secured non regulated work outside the formal concessionary arrangements which we believe arises from having the scale of operations and the expertise to deliver on a timely and consistent basis.
We are developing our product offering in the market. In October we launched the new Supra class incorporating a revised on-board catering offering and wi-fi, being the first transport mode in Spain to incorporate this facility. In addition we launched a new loyalty card Bus Plus which provides benefits to our customers, and e-tickets were rolled out on long distance routes. We are also reviewing our overall distribution costs and are pleased that 15% of all sales for long distance and regional services are now via the internet.
With over 60% of the Spanish transport market represented by bus and coach, we believe there are plenty of opportunities for growth particularly in the urban bus market. We also believe that when future liberalisation of the public transport market in Spain occurs, we are well positioned to bring our experience and market presence to bear.
Business travel
The launch of the new Supra class provides a business class of vehicle for travellers in Spain. Incorporating new high-spec vehicles, on-board catering and wi-fi, the coaches are setting the standard for how we develop our UK commuter coach services.
Bus Plus
In 2007 we launched the customer loyalty card Bus Plus, providing customer benefits, and e-tickets were rolled out on long distance routes.
Driving forward
2007 has seen us consolidate our position as the number one private transport operator in Spain.
Growth through acquisition
Continental Auto was a key acquisition for the Group in 2007. Spain is one of the fastest growing European public transport markets and we are now in a unique position to participate in this growth.
