Tough times down under take toll on Alexander Dennis

The Falkirk factory of Alexander Dennis
The Falkirk factory of Alexander Dennis
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DIFFICULT trading conditions at its Australian business pushed bus manufacturer Alexander Dennis into the red last year despite strong sales growth.

The Falkirk-headquartered business, one of Scotland’s biggest manufacturing employers, said the market in Australia had been “extremely challenging” with a reduction in demand and a shift toward lower-cost imported vehicles.

The level of losses being incurred at Sydney-based Custom Coaches – which Alexander Dennis acquired in 2012 in a £25 million deal – saw it placed into administration in May this year.

Alexander Dennis chief executive Colin Robertson, pictured, said although that had been a very difficult decision to take, it enabled the company to focus on its core markets and the launch of new products. He said the group had made “significant progress” in its long-term strategy and that the underlying financial performance had been strong.

Overall turnover in 2013 rose to £541.1m from £481.1m in the previous year, according to Companies House accounts, operating profits edging up to £29m from £28.5m. But £23.2m of exceptional costs including writedowns on the value of Custom Coaches saw the firm swing from a pre-tax profit of £24.2m to a loss of £1.2m,

As the firm had previously forecast, the UK bus market declined following a strong 2012 ahead of the London Olympics. Although new registrations fell by 9 per cent across the market, Alexander Dennis sales only dipped by 2 per cent to £311m.

But key overseas markets, particularly in Asia Pacific, delivered strong growth. The launch of the Enviro500 double-decker model in Hong Kong helped the firm secure the lion’s share of the market there during the year and orders for the model in Singapore and Malaysia have also underpinned sales for 2014.

Although sales in North America fell by 20 per cent to £41m, the firm said it was “very excited” about the prospects there in the medium-term.

Net debt at the end of the year rose to £26m from £12.8m in 2012 and Robertson said 2014 would see an unprecedented level of investment, with six new products being launched in the UK and overseas.

The group, whose investors include Stagecoach co-founder Sir Brian Souter, is also opening up in new markets such as the Middle East.

“Operating margins will be tighter in 2014 as a function of this continuing investment and a stronger pound. Our approach, however, has always been to focus on building a stronger business for the medium and longer term rather than pursuing short-term financial performance,” said Robertson.

Employee numbers rose by 200 to 2,464 during the year with around 900 in Falkirk and significant workforces at its other production facilities in Guildford and Scarborough. The highest-paid director received a package of £853,000, compared to £817,000 in 2012.