Francisco Iglesias Chief Executive, ALSA
|Year ended 31 December 2019||2019 £||2018 £|
|Normalised operating profit||£109.5||£105.3|
|Normalised operating profit||€124.9||€119.1|
Overview of 2019
ALSA had another very strong year. It again delivered record revenue (up 11.7%), profit (of €124.9 million) and patronage (up 12.8%) figures. Every business area – Spanish long haul, regional and urban services, plus Morocco and Switzerland – delivered organic growth. Morocco added two major contracts in the year and is growing particularly strongly, with revenue up 31.9% in the year. The impact of higher fuel prices, coupled with reduced profitability during the mobilisation phase, lowered the ALSA operating margin by 80 basis points to 13.3% (2018: 14.1%). We expect ALSA to grow strongly in 2020 and surpass €1 billion of revenue in the year. The long haul concession renewal process has restarted, with two small contracts currently being retendered, albeit subject to legal challenge. In line with previous guidance, we do not expect any impact this year and a modest impact in 2021.
|2018 normalised operating profit||119|
|Growth in the continuing business||19|
|2019 normalised operating profit||125|
Operational excellence: the foundation of sustained growth
ALSA has firmly established itself as the leader in the markets it serves. It is a leadership that is recognised by the awards – such as the leading BCX-IZO customer satisfaction recognition and another, improved, European Foundation for Quality Management (EFQM) five-star excellence score – and apparent in the significant customer growth highlighted above. Further investment and innovation in our Revenue Management System (RMS), including a greater use of machine learning and AI tools, has helped drive both passenger growth and an increase in average occupancy, to 51.9% (2018: 50.5%). Morocco again enjoyed another record year, with its fastest ever rate of expansion. In 2019, Morocco carried over 190 million passengers, up 20.3% on 2018. Two major contracts in Rabat and Casablanca – for up to 22 and 15 years respectively – were successfully launched towards the end of the year. With the full year benefit of these contracts and the potential for further expansion, we expect Morocco to double its contribution in 2020 compared with 2019.
Our Geneva hub also continues to grow, with the first cross-border (into France) service starting in December. We believe there are further opportunities to add other contracts to complement our existing range of shuttle, bus, coach and school bus services. Our range of ski transfer services also continued to grow strongly, up 6% in 2019, and on one Saturday in January 2020 broke the previous passenger record by over 10%. We continue to develop common information and booking systems across our different alpine brands to provide customers with a greater choice of services, more sophisticated pricing and also generate operational efficiencies. Geneva remains an interesting growth hub. During the year ALSA also renewed a number of contracts, demonstrating its continued reputation for excellence. Our largest Spanish urban bus contract, Bilbao, was renewed for 10 years. ALSA’s consistent delivery of services that met the required operational and environmental targets in our over 1,000 vehicles Madrid Consortium regional contract led to an automatic renewal for another five years. This contract alone is worth over €500 million in revenue across its life. We renewed our only long haul concession that has so far completed its retendering process: our Madrid-Guadalajara services were secured until 2028. Two other important contracts also received lengthy extensions: Asturias regional services until 2024; and Almeria urban services until 2023.
Technology investment to underpin excellence, efficiency and innovation
The roll-out of the DriveCam smart safety cameras continued, with nearly 1,400 installed by the year end (up 43% on 2018). Speed monitoring is now installed in nearly 3,000 vehicles. Allied to a rigorous management oversight and coaching programme, standards and assurance continue to improve, with the lowest rates of speeding on record.
Beyond driving standards, our investment in maintenance is also helping to improve performance and efficiency. A move to a predictive maintenance regime is generating further improvements to already strong performance metrics, such as breakdowns: they have been reduced by a quarter in the year, improving both service standards and cost efficiency. ALSA has been pioneering our World Class Maintenance programme and the lessons are being applied across the Group. Investment in improving ALSA’s digital and web presence continued, with impressive results. The introduction of features such as bus location tracking, new methods of payment and enhanced marketing to customers helped drive digital revenue up to 44.6% of ALSA’s total (up 7.2% year-onyear). The increasing proportion of sales through digital channels is also enabling enhanced ancillary sales. The introduction of luggage and seat reservation has helped this segment grow by 13.9% year-on-year. An autonomous bus pilot, in partnership with the Autonomous University of Madrid, launched earlier in February 2020. This fully electric vehicle operates a 3.8 kilometre route on the university campus. It provides valuable experience and a credential in a growing market. There are further opportunities to pursue. During this year, a particularly interesting project will enhance customer services databases to make marketing even more personalised and sophisticated. Learning from UK coach’s innovation in this area, ALSA will tailor pre-trip emails to customers with information about activities at their destination, providing the opportunity for further ancillary sales.
Targeted growth through strategic acquisition and market diversification
Three acquisitions were made in 2019. ALSA bought a majority stake in a company that operates regional concession services in Aragon. This investment allows us to enter a regional market where we do not have any presence and provides the opportunity for growth when other local contracts come up for renewal. It is the same approach we successfully followed with Cal Pita, a 2018 acquisition that provided entry into the Galician market. From this initial entry, we have secured new contracts, are now the third largest operator and see further growth opportunities ahead. ALSA also acquired a bus company in the Canary Islands. The company operates school bus, coach and discretionary travel services. This provides an entry into a very interesting market where we believe there is a strong opportunity for further growth. ALSA also bought a small chauffeur business. We retain a strong pipeline of acquisition opportunities, which we will continue to pursue in a disciplined manner. Two contracts were won in Extremadura, strengthening our position in this autonomous region. Alongside the growth in Morocco, Switzerland and segments such as ancillary income, set out above, our 2019 acquisitions and contract wins help ALSA further diversify its earnings. Since 2015, the proportion of ALSA’s total revenue secured from long haul services has declined by a quarter. We expect RMS to continue to drive organic growth and improving occupancy rates. Ancillaries will continue to be a source of strong growth and January 2020 has already seen a 10.8% increase year-onyear in earnings from this segment. Airport services and our minicab businesses also provide positive sources of organic growth. It is because of this combination of diversification, growth across all business segments and the strength of our pipeline that we remain confident we will manage any impact from long haul concession renewal and continue to grow. There still, however, remains no certainty that the renewal process will proceed to plan. In the meantime ALSA will continue to focus on delivering operational excellence, securing organic growth across its existing businesses and diversifying in a targeted manner.