Home / papers / Road and Rail Public Transport Research Paper

Road and Rail Public Transport Research Paper

Chapter 1

Introduction

Road and Rail public transport suggests another means of transport to private vehicles owners and other means of transport. The increase in fuel price traffic jam, congestion charges, maintenance of car cost, excessive parking space and fines makes public transport an easier and cheaper way to travel.

The objective of this report is to evaluate a selection of leading services. Land Based Transport is a shared passenger transport service which is by road or rail, public transport methods includes buses, trolley buses, trams and trains from or within the UK and are available for use by general public.

Key competitors in the industry will be identified and performance indicated in this reports such as: the Political, Social, Technological and Social factors affecting the industry are yet to be discussed.

Rationale of Industry Choice

The government regulates the transport scheme through public procedure and the financial resources/budget which are procedures on energy and efficiency and reduction of co2 emissions on public transport process and all operations.

The government is dedicated to organisation development and the upkeeping in reaction to higher demand which caused the rise in population. The companies could encounter problems with space, obstruction and undependability which could disturb or affect access to leisure and business centres. The Eddington Report (2006-07) guessed that by 2025, the rise in congestion in England would raise costs to the UK economy by £10 billion.

The government attempt to reduce interruption to public transport services by adding more funds and guiding budget cut for usage in organisation development and upkeeping. As proof shown, The Chancellor of the Exchequer, George Osborne MP on the 20th of Oct. 2010 pronounced in HM Treasury: spending checks that the government puts in over £30billion in transport projects which was over what has being spent over the last few years (HM Treasury, Spending Review), strong suggestion was about the area is the main part in the making and development of other industries and the recovery of the UK economy.

Public transport industry has being nominated as well because trains and buses have essential objectives in attacking social omission and poverty. This method of transportation encourages people to associate especially on certain countryside areas where separate private car ownership is very small or does not exist. In this area, people rather uses public transport to access cultural, business and social opportunities, healthcare facilities.

The rail and road public transport industry gives job to the people in the UK. In 2007/08 coach and bus services gave job opportunities to 173,800 people. (Transport Statistics GB 2009)

Rationale for companies chosen

FirstGroup Plc, Stagecoach and Go-Ahead Plc are straight opponents with cross-modal ownership or rail and bus service in both cities and out of town (residential) areas of the UK.

FirstGroup Plc

This company was chosen for this analysis mostly because it is at the top in land based public transport industry when it comes to Market Capitalisation which is £1.90billion, Employment 124,000 and Revenue of £6.68billion.

Stagecoach Group plc

Stagecoach Group plc is one of leading international public transport that operate in the UK, US, Canada. They operate coach, trains, and bus and tram services. It covers more than 90 major urban and suburban areas in Uk.

After FirstGroup, Stagecoach can be classified as second in the industry in terms of its Market Value. Stagecoach plc Market Capitalisation was reported to be £1.7billion as at 29 Oct 2012.

Also the Group has been nominated for this analysis as a result of the organisation efficiency. Average return on investments is 20.02% for the past five years which is the highest so far in the public transport industry. Also the Return on Assets 11.88% is also the highest in the industry so far. Stagecoach Group`s management efficiency overtakes Go-Ahead group and FirstGroup plc. It points out the company `s competitiveness in the land based public transport segment.

Go-Ahead Group plc

This Group has been selected as it is the first public transport operative in the UK that was legitimately granted Carbon Trust Standard Certification in 2008. This indicates that this group is a main opponent in the sector in terms of meeting regulatory standards and the quality of service. Compare to all the land based public transport firms that was listed on the London Stock Exchange. Go-Ahead has the lowest Market Capitalisation of £535.13million.This Group yet has one of the uppermost turnover £2.4billion for the year ended October 2012.

Companies Profile Summary

All of the three chosen companies offer commercial and passengers transport services, so by choosing these companies, a good evaluation of the industries would be made in order to find an suggestive feature that will draw attention to one of these companies as the strongest and the weakest.

Five Forces Analysis

Porter’s Five Force Analysis may have impact on the three companies because it analyse the industry’s profitability of the organisation in a certain competitive situation (Hill & Jones, 2009).

Power of Suppliers

The power of suppliers is weak because there are large numbers of suppliers from different part of the world and can influence important economy scale due to the size of the company (creevy, 2009, Talking Retail, 2008).

Power of Buyer

The power of buyer is average because they offer the same service as their competitors. The passengers are not price sensitive as they might buy premium price for high quality service.

Competitive Rivalry

This is also average because of competitors. Passenger’s loyalty is very high and there is not much difference between the qualities of service offered.

Threat of New Entry

The threat is average because there are numbers of organisations that have established their presence in the industry.

Chapter 2

PEST ANALYSIS FOR LAND BASED PUBLIC TRANSPORT in United Kingdom:

Literature review

The industry organisation environment involves all outside macro-economic features which disturbs operations, decisions, and competitions in certain industries. (Grant, R.M 2005).This influences might be categorised by basis into political/legal, social, technological and economic factors. Here is a table below that summarise the PEST factors which affects the Land Based Public Transport Industry in UK.

Political/Legal factors

Corporate/Employee taxation

Price regulation concessionary travel systems

Employment legislation

Amendment/continuance of government

Competition regulation

 

Social factors

Health and Safety

Social attitudes, awareness and concerns

Lifestyles trends

Decreasing Carbon footprint

Population shifts/growth

 

Economic factors

Government spending, monetary policy /economic priorities

World economic conditions

Inflation rates

Volatility in oil prices

Disposable income

 

Technological factors

New discoveries

Investment in technology

Spending on research and development

Rate of change

 

There are several macro-economic environmental factors that affects the land based public transport industry in the UK as listed, though just the main ones will be looked at in this report.

 

Political Factors

The Transport Act 1986 regulated UK Bus Service which came to a result in transfering of possession from public sector to private sector (Beesley, M, E 1997). Takeovers and mergers have resulted to an important cross-modal ownership of passenger and rail services. Deregulation of Bus signifies the initiation of opposition between the private operators when it comes to market dominance, pricing and reliability. In spite of these key changes in the public transport industry, UK government still has huge power through policy and funding. Also it influenced issues of pricing for example concessionary travel systems for the disabled and people from the age of 60 (DfT 2008/9).

Land Based Public transport companies are controlled by the UK government to reduce Carbon Dioxide (CO2) and increase fuel efficiency in their operation as essential by Kyoto Protocol (1997, 2005, 2010) to the United Nations Framework Convention (UNFCCC). These was put into service through a strategy obtained in October 2007, Directly to a transport system that is sustainable, supportive economic growth in a small carbon world that sets out the government`s tactic to transport development (Dft 2007). This kind of policy may have a bad effect on transport operators` competitiveness and performance. The present strategy is also meant to target congestion and shifting travel behaviour from private cars to public cars and this had good influence to the industry/organisation.

The EU Road Working Directive 2002/15/EC directs work conditions for people carrying out mobile road transport activities to include travelling staff, drivers and crews (DfT 2011). The legislation conditions states that working hours should not be more than:

60 hours in a week.

An average 45 – 48 hours a week.

10 – 12 hours in a 24 hours.

The EU Road Working protocols are imposed in the UK. Also business operations and planning of companies are directly influenced in public transport industry.

Changes in government may result to cuts in spending priorities and this can lead to bad effect in public transport industry. The changes in UK government from Labour to Britain`s coalition government in May 2010 came with large cuts on public costs for the industry and the new government pronounced £638million Public Transport expenditure cuts from £22billion budget for 2010/2011.This cuts contain Bus service operator`s grant for fuel, concessionary fare rebates, and duty . Transport operators extremely rely on the grants and rebates to undertake their jobs. These cuts really had a bad effect and it is still on.

Economic Factors

The UK economy is facing challenges which were as a result of the credit crunch, high unemployment and slow growth (money 2010). CPI rose to 2.7% and RPI 3.3% between 2009 and 2012. This signifies a reject in consumer confidence and failure in average disposable income for individuals and family. Failure in Consumer confidence may have effect on public transport industry in a negative way due to decrease in discretionary travel by passengers, nevertheless increase in inflation can be positive for the industry because most people are not expected to be able to afford buying new private car.

Instability in oil price had bad effects on public transport operators` financial positions as their fuel prices might not be fully moderated by fuel hedging programmes and company policies. The largest increase to CPI annual inflation from March 2009 March 2012 in the chart above has caused a rise in costs for lubricants and fuel.

Social Factors

Population Growth

The UK population was 56.1million in 2011, which has increase of 3.7million (7.1%) between 2001 and 2011.The population growth partially added to the inflow of immigrants and has caused a positive impact on rail and road public transport industry. The most significant users of other public transport are elderly age set which creates gradually growth percentage, and the working class set. Rise in population mostly indicates that there is high demand for transport services and broader sales for workers in the predictable future. (UK National Statistics Office)

Social Attitudes

Health and safety issues have significantly influenced traveller’s choice of mode of transport. Especially when crime, assaults, accidents and anti-social behaviour on public transport could discourage public from using public transport. This had serious effects on Public Transport Industry. Public transport workers are financing in CCTV equipment and other safety machines. British Transport Police has 2,835 police officers and 1455 staff all over the UK who are working together alongside with transport service organisations trying to make public transport a better and safer choice for tourist in UK (British Transport Police 2008).

Greenhouse gas emissions from transport service represent 21% of entire UK domestic emissions (Department of Transport 2009). In 2009, the govt introduced Green Bus Fund £30million, local authorities and bus companies had to compete to purchase new low-carbon buses. The congestion charge system introduced in Feb 2003 influenced travel activities by more people switching to public transport so as to improve traffic flow and local air quality (TfL 2009). Changes like this in travel activities had helpful and positive impact to land-based public transport industry.

Factors

Public transport operator’s Investment in technology has competitive advantage over competitors. Punctuality, safety, comforts and reliability influenced consumer behaviour when choosing the type of transport. The UK government encourages transport companies that meet its technological needs under Bus Operator Grant (BSOG). UK govt had a plan to give incentives to operators for every passenger they carry (Parliamentary business, 16 February 2010). For this reason, public transport companies intensely battle to exploit their loadng factor.

Ticketing Strategy

The UK govt approach is dedicated to widespread (ITSO) England`s smart-ticketing largest external cities in London by 2015 (Announced 15 December 2009 DfT). ITSO is a multi-operator, multi-modal smart-ticketing (www.itso.org.uk).The environmental profits of ITSO involve getting better fuel efficiency, reduced congestion. After researching recommendations was that integrated and smart ticketing might fetch whole profits of more than £1 billion a year and can drastically increase the offer to the passengers by reducing queuing period, getting rid of moving around with cash and providing flawless journeys (Smart Telecom Products 2004).After the launching of the Oyster electronic ticketing scheme in London in 2003, purchasing tickets has been easy and queuing at stations has decreased.

To be able to claim for BSOG incentive public transport operatives are required to deliver details about the entire amount of fleet fitted with fully operational ITSO smartcard tools and the ones with fully operational (hand held) ITSO smartcard readers (DfT 2010).

Automated Vehicle Incentive

Public transport operatives are required to have their coach/bus fleet built-in with Automatic Vehicle Location (AVL) systems so they can meet up with the standards for receiving BSOG incentives. Operatives are expected to share data with DfT from Avl schemes, information collected consist of data on passengers route, measures of reliability and punctuality (http://services.parliament.uk)

Chapter 3

General Overview: Company Ratios between 2008 and 2012 and Discussion

Rationale For chosen Ratios

The financial and non-financial ratios for Stagecoach Group Plc, FirstGroup Plc and Go-Ahead Group Plc are listed in the tables beneath and evaluated. Ratio analysis is to present information about financial statements in a modest form and measures efficiency, profitability, risk, liquidity and financial state of the companies (siddiqui2007). The ratios are for a five year period 2008 to 2012. The three companies have revealed their financial informations in their annual report accounts, it allows further purpose for inter-company and averages evaluation and comparison. Though many non-financial key performance indicators has not been known by some companies in their annual reports. -The performance score card underneath is to show how to use a device in the ratio analysis in deciding the best and worst transport operator.

Asset Turnover: These measures the company’s skill to produce sale related to the capital asset. It is an advantage to stakeholders as it signifies how organization can be effective using asset to produce sales.

Liquidity Ratios: Current Ratios

Quick Ratio

This method measures the company’s capability to deal with debt and when it drops because of the use of cash.

Capital Gearing Ratio: This method deals with the financial construction of company. It signifies to shareholders and investors the amount of risk involved with the company. Also the understanding of dividends and incomes to change in levels of profit. The ratios have impacts on share market price in Public Transport Industry.

 

Profitability Ratios: Net Profit Margin

ROCE

Operating Profit Margin

ROA

Operating Cashflow

This important in public transport industry since it access organisation’s efficiency price policy, cost structure, sale volume and effectiveness of the use of assets to generate profits. The ratio is useful to shareholders, opponents and possible investors.

Price/Earning Ratio: This measures market assurance in share of companies. In transport industries, the ratio is used by investors, opponents at potential investors to strategies their plan.

Employee Turnover Ratio: This indicates important act in transport industry. Rise in staff turnover can propose low staff, poor working conditions. It can involve quality service provision.

Bus Punctuality: This is important to the industry because it indicates poor quality service provision which can affect the company’s customer service. It is also important to competitors and government authorities.

Vehicle Accident per million miles: This indicates safety and is important for the quality transport service provision. Rise in accidents rate can decrease public transport passenger growth.

The perfect current ratio is more than one, though every single one the three companies that have been chosen has an average current ratio which is less than 1 and has been consistent for the industries from 2008 to 2012, This shows relatively weak liquidity positions. Although the groups tried to stay above the 0.6 transport benchmark, this means they have enough current assets to meet up with their short term liability, which indicates a good symbol of liquidity.

In the year 2010, Stagecoach leaded the group with a current ratio of 0.97, which was an increase of 80% from previous years after the group experienced a fall of 32% in current liabilities, which is caused by the decrease of loan notes payable to zero therefore resulted to more cash and less payable from borrowing agreements.

Nevertheless Go-Ahead sustained excellent level during the year but with minor variations, it suggests the Group obtainable assets and cash is possibly not too low to meet its debt requirements.

Operating Performance

Every year analysis of this three transport operators points out considerable increase in Stagecoach and Go-Ahead `s ROCE since the year 2008, although First Group signifies a decline in its operating performance. Also the Public Transport industry was poorly affected by the UK coalition government budget cuts in 2010/11, resulting to an unforeseen rise in operating cost. This has lead to the decline of ROCE for all companies in the industry.

Go-Ahead Group has achieved moderately the highest ROCE for the past five years and leading with 5years average of 25.35%. Also, Go Ahead had an exceptional 5 years Sales growth of 11.73%. In 2012, the Group`s improved sales were offset by £33million government cuts to its high-speed-rail operations from St Pancras to Ashford and incentive payments on its London bus routes. The budget cuts seriously reduced Go Ahead `s ROCE in 2012. in spite of of the rise in operating costs its ROCE is still the best, clearly signifying the effectiveness of the management and efficient in assets operation to produce profits.

FirstGroup had the lowest average ROCE 10.064% in the last 5years. Though the company had the highest Sales growth of 18.33%, every year changes shows 36.05% decline in ROCE from 2008 to 2012. The company has a very good way of producing sales, although its management has failed to cut down the operating costs because it brings down profits. The increase in operating costs was caused by higher hedged fuel costs and a weak pricing scheme. This operational not been efficient has weakened FirstGroup`s financial performance and its competitive position in the public transport industry.

Operating Gearing

FirstGroup had the highest average operating gearing ratio of 45% in 5 years. Since 2008, FirstGroup has not tried to reduce its long-term borrowing. FirstGroup had an of 45.35% in gearing over the past 5 years, this is considerably higher than other transport operators. They have experienced each year of increase in gearing which signifies that the Group finances the larger amount of capital through debt. Its ratios for 2009 and 2010 are more compare to the other years, this is as a result of the US$3.8Billion acquisition debt of Laidlaw, its North American subsidiary in the last quarter of 2008. The debt had a high increase from £518million to £2.16billion (Oxera 2008).This is due to FirstGroup`s credit rating dropped from BBB to BBB- (Refer to table underneath S&P 500 ranking 2011)

Source: Standard & Poor 500 (2012).

Stagecoach illustrates a good financial strength with the lowest average operating gearing 13%.which is considerably the lowest out of the other operators, and signifies an acceptable performance. Analysis of Stagecoach`s capital gearing each year changes points out an 40.20% increase from the year 2008 to 2012. In 2009, they obtained Eastbourne buses and in 2010 obtained Preston buses that caused an increase in its debt. Stagecoach put on several Acquisitions, Mergers and profitable disposals since 2008, and these performance are mostly debt financed and the company still obtained the best credit rating BBB (S&P 500) .So Stagecoach has the strongest financial strength.

Stagecoach Group had the highest net profit margin, with 5 years average 7.27%.Despite having the lowest 5 years Sales growth in the industry 5.27%, operating margins remain the best. Year on year analysis shows a significant increase in 2008.The Group has maintained 26

 

fairly the highest operating margins compared to its competitors since 2008.Highest reported margins were in Year ended 2008.Stagecoach realised gains on disposal on its East London Bus Group sold for £254million to Australian bank Macquarie, which consequently increased its profits before tax (Digitallook.com 2008).

In 2010 Stagecoach experienced the impact of recession and government cuts which lead to a significant drop in its operating margins to 4.98%. The group`s rail segment reported a decline in turnover during this period though, the company managed to reduce its operating costs on its East Midland train services (operating from London, Derby, Nottingham, Sheffield and East Midlands). Operating cost was reduced by 10% thereby offsetting the fall in turnover. A big quantity of the reduction was through £16million penalty payments from Network rail (TAS Business Monitor 2010). In spite of Stagecoach having poor operating efficiency it remains winner in effectiveness, its cost reduction strategy and maintaining high operating profit margins.

Go Ahead Group Plc. has the lowest 5years average operating margin, mostly due to poor pricing, increasing operating costs of hedged fuel prices and weak economy. Its net profit margin has dropped by 40.2% since 2008.The group reported 2.09% the lowest operating margins in 2012.

Price /Earnings Ratio FirstGroup Plc Stagecoach Plc Go-Ahead Group Plc
As of 8 April 2012 10.48 10.93 9.66
Score(Points) 2 3 1

 

Stagecoach has poor staff retention in comparison to its two competitors. The company has the highest 5 years average 39.04% employee turnover rate. Year on year analysis shows the highest 45% rate in 2010 ,this was following the Stagecoach Group`s takeover of Preston buses for £10million .Stagecoach made significant job lay-offs as it restructured operations to its loss making Preston segment. The Group reduced bus service routes and cut down on amount of drivers. The move left a number staffs disgruntled and be frightened for their jobs causing significant increase in staff turnover as they moved to more job secure companies (Competition-Commission.org.uk).

Chapter 4

SWOT ANALYSIS

SWOT (strength, weaknesses, opportunities and threats) analysis is used to assess the fit linking a company`s internal resources and capabilities with external political, economical, social and technological factors offered by the business environment (Babette et al 2008). In this project, SWOT analysis is used as a means to evaluate individual company performance in the transport industry.

Industry Swot Table Strength

 Bus and rail travel is an essential part of the public transport system in the UK.

 There is high level of financial support by government

 The bus and rail network is wide and covers all parts of the UK.

 The leading operators are continues to introduce new buses to services and this has increased the bus travel experience for passengers.

 The UK is home to quite a lot of the world’s leading bus and rail operators.

 The Government is dedicated to boost local bus use as a way to tackle congestion on UK roads.

 

Weakness

 Economic downturn and increase of unemployment have negative effect on demand for bus services.

 There is high level of car ownership in the UK and this may limit the ability of the bus and rail sector to attract substantial levels of new patronage.

 In normal economic times, bus and rail operators often experience problems in employing staffs and retaining them.

 Between some members of the public, buses continue to have a negative image.

 Outside London, number of passenger journey in Great Britain shows small year-on-year growth.

 

Comparative SWOT analysis of these three companies indicates that FirstGroup had the highest number of strengths in the UK land based public transport industry. In terms of road and rail market share, FirstGroup is the leading operator running more than one in five of all local bus services. The group has a fleet of 8,500 buses and carry around 3million passengers per day in more than 40 cities (Travel & Tourism Market Review 2011). In 2011, FirstGroup had 24% of the UK deregulated bus market share, 24% share of UK Rail Market (refer to Appendix E ). FirstGroup is the biggest employer and has best staff maintenance percentages. It also has the smallest amount number of vehicle accidents per million miles. First Group continues to be a fierce competitor to Stagecoach Plc and Go Ahead Group Plc.

BEST AND WORST PUBLIC TRANSPORT OPERATOR

Based on the findings from SWOT, Financial and non-Financial ratios analysis of the three companies, Stagecoach was the overall best performer, then First Group followed by Go Ahead. This classification is based on the following results:

Stagecoach Group Plc

Stagecoach having the highest P/E ratio of 10.93 in 2012.Its share value has significantly increased and continues to be above all its opponent. Investor’s confidence in Stagecoach remains the strongest so far.

Stagecoach has experienced in strategic mergers, acquisitions and disposals; its acquisition of the East London Bus Group in October 2011 marks its re-entry into the London market ahead of the London 2012 Olympic Games (The Guardian, 15 October 2011). The East London Bus Group is the third largest operator in London with 10 depots and 1500 buses and provides a strong platform for Stagecoach`s maintainable future growth in the UK.

UK transport operators are under stable monitoring from the Competition Commission in an effort to stop monopolies. In 2010, Stagecoach lost market share in Preston as a result to a Competition Commission decision which had the determination that it had used its financial muscle to out-price competition by presenting low-cost fares and ordered the disposal of Preston Buses.

Stagecoach has a strong Credit rating of BBB (P&S 500). After examining, it shows that Stagecoach have still got credit access lines to finance future capital expenditure projects. The company`s 5 year average liquidity ratio of 1: 0.812 is relatively weak, though it‘s roughly the same as its top rivals/opponents. Strong credit rating signifies that Stagecoach has not had any failure in paying its debt interest payments and short term obligations.

Stagecoach has strong financial strength with the best operating gearing ratio of 13% .Such low levels of debt gearing are a positive sign to its investors, it gives confidence that Stagecoach has low financial risk compare to Go-Ahead Group and First Group. From investors perception it gives confidence that dividends would likely to be paid out than its opponents. The analysis indicates that Stagecoach still has a promising future and a credit access line to finance future capital expenditure projects.

In spite of the group having the best 5 year average operating margins, Stagecoach is still depend on its UK buses revenue and profits which account for 70% of its total. Changes in the UK`s macro-economic conditions expose Stagecoach to business risk. Government policy changes and budget cuts are possibly going to weaken Stagecoach`s better proportion of operating margins.

Stagecoach is rated as proposing the lowest average fares on each type of journey in the UK compare to the Five Big public transport operators according to TAS National Fares Survey 2011 (Refer to appendix C). Lowest average fares on travelling are 31% less than those charged by First Group, Go Ahead and other operators. In order to continue been highly competitive in the long term, Stagecoach would have to maintain its pricing and cost reduction tactic on its operations and service provision in the UK.

“Stagecoach has outstanding credentials for its plan on reduction of Carbon Footprint. Its strategy on reducing greenhouse gases has been ahead of its competitors. Stagecoach launched the first nine bio-fuel buses in Scotland in October 2008, prior to the Government`s creativity of the Green Bus Fund” (Stagecoach Group Annual Accounts 2008).The bio –fuel buses are powered by 100% recycled cooking oil. An 80% reduction in C02 emission is expected from the fleet. Stagecoach is the only UK transport operator which runs the Green incentive system, whereby its customers exchange recycled cooking oil (biodiesel) for discounted bus travel. Since the introduction of the £30million Green Bus Fund by the UK government in 2009, bus companies and local authorities ferociously compete for the price which finances the buying of new low-carbon hybrid buses. Stagecoach was one of the Green Bus winners in 2009.

Go Ahead Group Plc

Though Go Ahead is the market leader in the regulated London bus market with 20% market share, this group has been considered as the worst company out of the three selected. Go ahead broaden economies of scale through commuters’ volumes in city areas in London and South England. Market share in London is important to Go Ahead`s sustainable growth.

The company has over confidence on one geographical region, especially London. This opens the company to business risk such as changes in government policies on London Transport, also as funding on services and infrastructure and demographic changes in population.

Go Ahead had sustainable business growth in terms of increase in passenger’s volume since the introduction of the congestion charge system in London in 2003.The scheme has succeeded in influencing travel behaviour in London with more travellers changing to public transport which thus improve revenue, local air quality and traffic flow (TfL 2009).In spite of of these positive changes Go Ahead`s net profit margin has dropped by 40% since 2008. An indication of poor costing system.

In terms of operational efficiency the group has the best asset turnover ratio in the sector 2.248, Despite of having the highest accidents per million miles of 53.47. On its deregulated bus segment it holds 6% market share (refer to Appendix F).The Group liberates its punctuality statistics on its segment (Table 12 above), this showed small improvement from 89 in 2008 to 90 in 09/10.By sharing these statistics with DfT through its Automated Vehicle Location (AVL) systems the Go Ahead meets the standards for receiving Bus Operator Grant (BSOG).This places the group at a competitive advantage over other operators who do not release punctuality figures.

Public transport in London is regulated by Transport for London. TfL collects revenue from passengers and reimburses to Go Ahead group on a cost per mile bases. In this kind structure of regulated bus operation the group does not place revenue risk. Therefore Go Ahead group has competitive benefit over its opponents that have smaller proportions of the regulated bus market share in London.

“Go Ahead`s operational scheme is on efficiency and also quality of service provision. The company works in partnership with British Transport police and steadily invest in CCTV`s and driver training focused on safety”.(Go Ahead Group ,Annual Report 20011).In 2010, the company capitalize in new technology on its trains that automatically counts the amount of passengers by weight , and also providing improved travel data on its operations.

Conclusion

This project has carried out an evaluation on the three selected road and rail public transport operatives in the UK, they are all listed on the London Stock Exchange FTSE 250. Selection standards for these three companies were based on size of market capitalization, return on investment and the annual turnover.

The point of the study was to make a decision on the overall best and the worst public transport company in the industry when it comes to investors’ confidence, profitability, operational efficiency, business growth prospects, environmental, social impact and liquidity. SWOT analysis, financial and non-financial ratios are the tools used to evaluate each company`s performance. Political, Economic, Social and Technological factors have also been considered during this evaluation process.

Ratios analysis summary in table 14 concluded that Stagecoach is the best company with total points of 29, First Group stands in the middle with 28 points. Go Ahead is at the bottom of the league with 27 points. Though, the difference is very marginal.

What was discovered from SWOT analysis also signifies that Stagecoach has the highest ranking principally as a result to its management effectiveness in recognizing and exploiting 43

 

business growth opportunities through mergers and acquisitions. Re-entry of Stagecoach into London bus market in 2011 gave the group high ranking. The company also has an enormously ambitious and effective social and environmental system which consists of lowest average bus fares in UK and use of bio-fuel on its fleet. The group achieved 52% C02 reduction per million miles on its vehicles in 2010/11 period.

Go Ahead was ranked the worst company mainly due to the highest average accidents per million miles, limited geographical coverage and also weak investor confidence in the company`s shares. The group has the 41.6% sharp decline in its net profit margin since 2008.This can be primarily attributed to poor management of operating costs which consist of fuel hedging, pricing of fares and also business risk connected with over reliance on UK market alone.

Top