CHALLENGING trading conditions in the UK and overseas hit Scottish bus builder Alexander Dennis last year, but the company has predicted a return to top line growth in 2015 as it benefits from heavy investment in new products and markets.
The Falkirk-based firm, which has been the subject of recent speculation over a possible £300 million sale, saw sales drop by 7 per cent to £503m in 2014. Although pre-tax profits saw a return to the black after losses in 2013 due to administrators being appointed to its Australian business, underlying operating profits excluding discontinued operations almost halved to £18.7m.
Chief executive Colin Robertson said factors including a strong pound and the cost of investing in new facilities overseas had contributed to the fall but said there was cause for optimism about the current year’s performance at the company, which is one of Scotland’s biggest manufacturing employers.
“We expect the UK market to remain as competitive as it was in 2014, however our range of recent product launches will enable us to defend our market position robustly,” he predicted.
In the UK, Alexander Dennis managed to increase sales by 1 per cent despite total new bus registrations falling by 10 per cent, but it said margins had come under pressure.
International sales fell by 3 per cent to £165m but the company said 2014 had been an “exceptionally busy year” with two new markets opening up in Singapore and Malaysia and helping to offset lower sales in Hong Kong.
New orders secured in North America included a five-year deal with Metrolinx to supply double deckers in the Greater Toronto area. An assembly facility is being set up there to help fulfil the order.
The company continued to invest heavily in new product development with spend increasing by more than 50 per cent to nearly £13m in 2014.
Net debt fell to just £3m from £26m at the end of 2013. Robertson said the business had a strong order book both domestically and internationally.
“As ever, our approach remains focused on building a stronger business for the medium and longer term rather than pursuing just short-term financial goals.
“In 2015 we will see a return to top line growth driven by our international business.
“In particular, the Hong Kong market is currently very strong and our commitment to invest and develop a broader range of products and international markets will help continue to fuel this growth and manage the vagaries of changing market demand.”
Staff numbers were reduced to 2,248 from 2,464 and the highest-paid director, presumed to be Robertson, saw his total pay package rise to £873,000 from £853,000.
There have been recent reports that advisers have been sounded out over a possible sale of the business, which was bought by a consortium led by Sir Angus Grossart, Sir Brian Souter and Sir David Murray in a rescue deal in 2004 after former parent Transbus went into administration. Souter and his sister, Ann Gloag, along with merchant bank Noble Grossart, own the bulk of the shares in the company.
In March this year Stagecoach announced plans to invest more than £80m in hundreds of new buses, most of which will be built by Alexander Dennis.
The Perth-based firm said a new fleet of nearly 470 vehicles, many equipped with free wifi, will be introduced in the coming year as the company “continues its policy of reinvesting profits in improving services for local communities”.
It said the latest orders follow an annual competitive tendering process and under the contract with Alexander Dennis it will build 244 complete buses and the bodies for a further 164 vehicles.
The news came just weeks after the company won the Metrolinx contract, which will see it supply more than 250 vehicles in a deal understood to be worth £300m.
Metrolinx also has the option to buy a further 150 buses.
Dennis already has almost 125 double-deckers operating in the Greater Toronto and Hamilton area.