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Operating Review

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Operating Review Operating review The year to April 2002 has been uniquely challenging as a result Financial results of unparalleled acts of terrorism in North America, lengthy Turnover for the year in UK Bus was »567.9m, compared to disruption to the UK rail infrastructure and an uncertain global »547.6m in the previous year. The results for the previous year economic environment. included a full year's trading from four depots in East Lancashire, which were disposed of in April 2001. Excluding these four The year ahead will be a challenging time for the Group but depots, turnover increased by 6.2%. we have begun the year with actions that should secure our long-term interests in South West Trains and Virgin Rail Group. Underlying UK Bus passenger volumes increased by 1.4% in the At Coach USA we will be undertaking a full business review of year, with particularly strong growth in London. Our targeted our portfolio of businesses and will report the results of this by commercial and marketing plans are generating volume growth in December 2002. a number of key towns and cities, and the bus market in the UK continues to offer good organic growth opportunities, particularly We are committed to modernising public transport and playing in urban areas. a leading role in achieving passenger growth in each of our markets. In the year ahead, we will continue to focus on Operating profit was »71.1m1, compared to »73.4m in the enhancing business performance and improving the quality of previous year. This represents an operating margin of 12.5% our services by further investing in our core operations. C2001 ^ 13.4%). The reduction in operating margin principally arises from above inflation wage increases. Across the Group, we have a portfolio of valued and trusted brands and we are working hard to develop these even further in our bus, coach and rail markets. On the ground, we are providing Commercial development improved easy-to-understand networks and information, We believe that the future of the bus industry and ultimately the attractive value-for-money ticketing, friendly and well-trained long-term interests of passengers, are best served by operators, staff, and increased comfort from new modern vehicles to ensure Government, local authorities and customers working together our customers keep coming back. to improve our public transport system. Our common goals of passenger growth, improved reliability and reduced congestion Safety remains paramount across all of our businesses and is in our towns and cities can be achieved without the need for an integral part of the culture of our organisation. Each of our increased regulation. management teams has clear monitoring and reporting processes in place and immediate action is taken to address any issues. Achieving passenger growth, one of the UK Government's A key element of our safety programme is the training of staff key transport objectives, is central to the relationships we and the promotion of a strong safety culture. are building with local authorities. We now have some 50 partnership schemes in place across the UK with a further 30 schemes under discussion, most of which we expect to be in UK Bus place in the next 12 months. These schemes provide tangible evidence that Quality Partnerships can assist in achieving the Our UK Bus business, the traditional core of the Group, remains Government's transport objectives. a strong source of cash flow and retains a significant share of what is a highly competitive marketplace. As one of the biggest bus operators in the UK, we are committed to playing a major role in delivering the objectives of the UK Government's 10-year 1References to ``operating profit'' in the Operating review refer to profit before Transport Plan. interest, tax, goodwill amortisation and exceptional items. 6/ 2002 Operating review One of the Group's most comprehensive bus investment projects around 6% per annum and we expect this to continue in light outside London is in the Cambridge area. Close partnerships with of demographic and transportation trends. Our two London bus local authorities have delivered a 20% growth in passenger companies have been ranked consistently high amongst the numbers over a six month period, while the environment and operators for reliability and punctuality in Transport for London's quality of life in one of the country's most historic cities have performance tables. We now have approximately 16% of the been improved. This growth has been achieved by the London bus market and are very well placed to benefit from introduction of more than 40 new low-floor buses, together with continuing growth opportunities in the city such as the future improved and simplified routes and fare structures. We have also introduction of congestion charging. focused closely on recruiting, retaining and training staff as part of a commitment to improved customer service and reliability. Following the success of `'easy access'' lo-liner buses, we have The project has been achieved through a strong partnership with continued to invest in low-floor vehicles and have worked with the local authorities, Cambridgeshire County Council and local authorities in improving bus stops with level kerbs, shelters Cambridge City Council. They have invested in infrastructure for and information. In time our entire UK Bus fleet will feature lo- the new city centre routes, including bus gates and priority bus liner facilities. lanes and high specification park and ride sites. The new We continue to place significant management emphasis on staff prominent ``citi'' branding, combined with a major marketing and recruitment and retention to ensure we can offer the high quality advertising campaign using the Internet, door-to-door postcard of service that our passengers expect. deliveries and leaflets, has transformed the perception of public transport in Cambridge. Marketing A similar partnership approach and targeted investment, Within the framework of our overall UK Bus branding, we have supported by improved infrastructure provision and more bus developed and rolled out new marketing kits for each of the priority measures, has improved services and generated passenger individual operating companies with a consistent approach growth in many other areas of the country, including in the being adopted across the division. Dedicated route branding Blackwater Valley area in Hampshire, Exeter, Portsmouth, and promotion, such as ``Coastliner'' between Portsmouth Nuneaton and Brackley. and Brighton, is also generating additional volume growth. We are confident that this model can be applied in many areas We are continuing to roll out The Guide, the biggest of the country, delivering a sustainable balance of network commitment of any operator to improved passenger information, services, value for money for customers and growth opportunities which was launched in November 2001. This pocket-sized for bus operators. The bus plays a key role in achieving social publication provides an attractive and comprehensive guide inclusion, particularly for those who have no access to other to routes, times and prices of services, and is being developed means of transport. As a result, we will continue to work closely for our key town and city networks across the UK. It is being with our local authority partners to make the bus the transport delivered to every household in these areas with a guarantee to mode of choice for increasing numbers of people. update and distribute it for at least the next three years. Areas to benefit already from The Guide include Cheltenham, In London, our passengers are benefiting from our continuing Cambridge and Perth. substantial investment in new vehicles and the commitment of Transport for London to improving public transport. Passenger Our ticketing strategy has focused on developing simple, growth in London across all transport providers is running at easy-to-understand tickets, including the Dayrider, Megarider 2002 / 7 Operating review and Goldrider products. These represent excellent value for team, with particular emphasis on commercial development money and suit a range of consumer lifestyles, from pay-as-you- and service delivery. New commercial teams are also in place go tickets for casual users to products devised for specific types throughout the UK. of passengers, such as students. Brian Cox retired as Executive Director ^ UK Bus in July 2002. We have also undertaken specific targeted marketing initiatives Les Warneford, our UK Bus Managing Director, continues to have and have been particularly successful in encouraging more overall responsibility for our UK Bus operations. students to travel by bus. In Manchester, for example, which has the highest student population in the UK, we re-launched the Unirider student ticket range with particular focus on a route which captures traffic from three local universities. The campaign Coach USA resulted in a 48% increase in ticket sales, with many students Some of the major challenges the Group has faced over the past taking advantage of our online early booking discount. Similarly, year have been in Coach USA. The attacks of September 11 and in Fife, we launched a special ticket that was sold on site to the continuing soft US economy have had a significant effect on attract students travelling between locations on the split Lauder the travel and transport sectors, including our North American College campus. businesses. Substantial annual cost savings have been achieved and costs remain under control. As a result of the disappointing Since its launch last year, we have continued to develop and trading at Coach USA in the first two months of the new expand our UK Bus website, www.stagecoachbus.com. Offering financial year, a full business review will be carried out of our online timetables, ticket offers and latest news of service North American operations. The findings of this review will be developments, the site is now attracting more than 40,000 reported to the Board by December 2002.
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