Driving our business forward through our three strategic priorities
Delivering operational excellence
We aim to be the safest, most reliable, convenient and best value transport provider in the modes we operate
2017 performance
- All eligible businesses, ALSA and our UK bus and coach operations, now have EFQM* five-star ratings
- Both our UK bus and coach operations re-awarded the prestigious British Safety Council Sword of Honour
- Improved customer satisfaction in our UK businesses and in ALSA
- 19% underlying improvement in FWI index**
- Strong retention rate of 96% in our North America school bus business
- Another record year for passenger numbers at ALSA
- Launched World Class Maintenance and safety initiatives across each of our businesses
Future outlook
- Target further passenger growth in the ALSA and our UK bus and coach operations through our digital initiatives
- Launch new products and services including new routes, new express and charter services and new ticketing options
- We will continue to leverage our customer reputation to win new business in North America
- Delivering Excellence programme will continue to embed best practices across the Group including world class safety performance
- Continue implementation of our World Class Driver programmes across each of our businesses, raising driving and safety standards further
Measuring our progress
We believe passenger growth and improvements in safety standards through a reduction in safety-related incidents are key indicators of whether we are driving high safety and service standards and which will ultimately help deliver further growth in revenue, cash and profit.
Metric: Fatalities and Weighted Injuries (FWI) and Passenger journeys (%)
KPI definition
Passenger numbers as measured by the aggregate of passenger journeys across our five operating divisions
Comment
- A record number of passengers carried in 2017, with 882 million passengers travelling on our services, up 1.2% in the year
- Growth in passengers across each of our businesses
- Strong performance in ALSA, with a record 314 million passengers carried, up 2% in both Spain and Morocco
Risks
Deployment of technology
We utilise technology to raise customer and safety standards, drive efficiencies in our business and facilitate growth
2017 performance
- New mobile websites and ticketing apps are driving higher online transactions, conversion rates and lowering costs - eg ALSA has seen a 10% increase in sales through digital channels
- Contactless pay launched across the UK business, providing faster, more convenient methods of payment
- Our real-time revenue management systems in ALSA and our UK coach operations are growing revenue through both improved yield and passenger growth
- Lytx DriveCam technology is now fully implemented in our UK bus and coach operations and North America transit, delivering a reduction in the number of collisions and associated costs
Future outlook
- Further optimisation and automation of our RMS systems in Spain and our UK coach operations to drive growth in revenue, profit and incremental demand, as well as higher fleet utilisation
- Further roll-out of Lytx DriveCam across our ALSA and North America school bus businesses, strengthening driver standards and reducing collisions
- Enhanced CRM systems driving greater customer insight, to deliver greater personalisation and improved service
- Further enhancements to websites, apps and ticketless payment systems, helping to drive revenue and reduce costs
- Technology to support our World Class Driver programmes such as driver fatigue detection
Measuring our progress
A rising proportion of sales transacted through our digital channels demonstrates that our customers value more convenient and faster ways to pay. At the same time, the transfer of transactions away from traditional ticket offices and third party sales agents to digital channels is driving operational efficiencies and reducing costs.
Metric: Proportion of sales online (%)
KPI definition
Sales transacted through digital channels, including websites, mobile apps and ticket machines, as a percentage of total sales
Comment
- Continued strong growth in ALSA with sales transacted through digital channels up 9% to 40.4% and up 55% over the last three years
- With launch of new mobile ticketing app, already 10% of our UK bus commercial revenues coming from digital sales
- Contactless and on-board ticketing launched in our UK coach operations helping to drive further growth in sales through digital channels to 66% in 2017
Risks
Growing our business through acquisitions and market diversification
We continue to look to grow our unique portfolio of international bus, coach and rail businesses through selective bolt-on acquisitions and diversification into complementary markets
2017 performance
- We have acquired nine bolt-on acquisitions in the year:
- three in North America: the significant acquisition of a Chicago paratransit operator, securing entry into the second largest paratransit market in North America; and the acquisition of two school bus and charter businesses in Cincinatti and Rochester, New York
- six in ALSA: two urban transport companies in Madrid and Granada; three businesses in the Geneva area including two additional businesses in the Swiss ski transfer market; and a charter transport services company in Madrid
Future outlook
- Further selective bolt-on acquisitions principally in North America and Spain where we can extend our offering into new regional markets and cities or build further scale in existing markets and cities, also enabling us to drive incremental revenue and profit through the provision of additional commercial services such as charter services, while also making greater use of our fleet
- We see a strong pipeline of future opportunities, both in bidding and in M&A, as the liberalisation agenda continues across the world
- We will seek investments in assets that present a platform for future growth, and will consider JV arrangements with the right partners
Measuring our progress
We maintain a disciplined approach to investing and target project returns well above our cost of capital, typically targeting returns of 15% or above. Across the business as a whole, disciplined allocation of capital is measured through a focus on ROCE, a key element of executive remuneration.
Metric: ROIC on acquisitions
KPI definition
Return on capital employed (ROCE) is normalised operating profit, divided by average net assets excluding net debt and derivative financial instruments, translated at average exchange rates.
Comment
- ROCE stable at 11.9%
- Invested £165 million of net maintenance capital, predominantly in replacing our fleet in our existing operations
- Invested £13 million in growth capital expenditure to support growth in digital and e-commerce initiatives, fleet upgrades on newly acquired businesses and mobilisation costs in German Rail
- Strong returns generated by our recent acquisitions in North America, Spain and Switzerland, with acquisitions delivering ROIC of at least 15%
Risks