• Year in review
• Market overview

Overall performance

The ALSA business proved during 2010 that it is robust, flexible and sustainable, defying tough economic conditions in Spain to produce a good increase in margin, on flat underlying revenue. Revenue trends were much better in comparison to the sharp falls of 2009, set against a backdrop of slight GDP decline and high unemployment in Spain, the latter remaining at around 20% in 2010.

The ALSA business proved during 2010 that it is robust, flexible and sustainable, defying tough economic conditions in Spain.

Revenue in local currency was broadly flat at €612.7 million (2009: €612.9m; in Sterling terms, 2010: £525.6m, 2009: £546.8m). Revenue in Urban bus grew strongly, whilst the Intercity coach business declined for much of the year but saw a positive trend in the final quarter. On current performance, we expect a slow but steady improvement in revenue.

Normalised operating profit was €100.5 million, a 17% increase from €85.7 million in 2009 (in Sterling terms, 2010: £86.2m, 2009: £76.5m). Improved operational efficiencies from reduced mileage operated drove the margin increase, together with reduced fuel prices.

Driving revenue

In Intercity coach, underlying revenue decreased by 3%, with yield down by 1% and annual passenger volumes 2% lower. Revenue trends improved progressively throughout the year, exiting 2010 in growth. The competitive position also improved for ALSA during 2010; since mid-year the national railway operator has had to comply with new EU regulation on subsidies of public services. Some of ALSA’s long distance and regional services have seen an improvement in volume as a result. Revenue remained depressed in Asturias and the Mediterranean area, whilst there has been some recovery in passenger traffic in much of the rest of Spain.

Urban underlying revenue growth of 9% reflected both patronage and yield growth. Strong growth was seen in suburban Madrid services. Our new €16 million per annum revenue contract to operate urban buses in Agadir, Morocco started up successfully in September 2010. By mid 2011, the current fleet of 80 buses will have expanded to 160 buses. Overall, urban contracts have seen little or no impact from the public austerity measures in Spain, with most cities retaining solid contracted revenues and only marginal softness in tendered and weekend services.

Revenue in ancillary areas, such as motorway service stations, remained depressed, whilst fuel distribution volumes increased as the recession eased.

Managing costs

The overall improvement in margin was driven by continued excellent ongoing cost control. Lower hedged fuel prices benefited the year by €12 million, supplemented by improving network efficiency in the long distance coach business. Investment in maintenance improvement reduced costs by over €1 million. Strong credit control also saw a reduction in doubtful receivables, with council debt management a key focus.

A good safety performance saw an 8% reduction in the overall accident rate in 2010 and helped reduce insurance and vehicle maintenance costs. With a focus during the year on improving driver training, monitoring and review, there was a 50% reduction in the accident rate of drivers identified to have a higher risk profile.

Developing opportunities

In addition to the major Agadir contract, Morocco remained a key driver of growth, with ALSA adding a tourist transport concession in Marrakech to the existing urban operation. The international coach business carried an extra 20,000 passengers as the Icelandic volcano shut down much of Europe’s air travel; this has also provided a longer term benefit to the image of coach travel in Spain and to ALSA, in particular.

ALSA launched an upgraded website during the year and now generates 25% of revenue through this channel, despite lower domestic penetration of the internet. ALSA has also pioneered the use of social media sites to generate customer interest, while its loyalty programme brought 160,000 new customers to the BusPlus card. With over 400,000 members of the scheme, customers benefit from booking priority and flexible travel, and it allows ALSA to increase the sophistication and targeting of its sales and marketing investment. Meanwhile, the executive Supra class coach service continues to be extended, with successful launches in Andalucia and on the Madrid to Barcelona route.

ALSA continues to lead in technological development and environmental management of its services, with 100% of the fleet now operating on a diesel/biodiesel mix, and hybrid vehicles being introduced into urban transport services alongside some LPG vehicles.

We expect the economy in Spain to remain challenging in 2011 but, in the absence of further negative impacts to GDP and unemployment, ALSA should benefit from some organic revenue growth and new tender opportunities. With very few contracts and concessions due for renewal during 2011, ALSA will continue to drive cost efficiency, utilise Group procurement scale and manage services to match closely customer needs.

We believe that the regulated concession model where private operating companies are involved, and in which ALSA is the leading player, will be attractive to other European markets as liberalisation develops, and we expect to be able to leverage ALSA’s expertise in selected international tenders and bolt-on opportunities.

ALSA is the largest private operator of buses and coaches in Spain.