ONTIME AUTOMOTIVE

Our UK automotive service companies had a disappointing year as a result of adverse economic factors – principally a 40% year-on-year rise in fuel prices and unfavourable eurosterling exchange rates – compounded by aggressive tendering and procurement practices in core areas of our business.

We remained faithful to our policy of seeking acceptable margins while renegotiating or resigning loss-making contracts. As a consequence, our volume vehicle distribution business was impacted by several lost contracts. This was unavoidable in a market characterised by excess capacity and the implementation of rigorous cost-reduction programmes by major motor manufacturers. Early action limited losses (which were much lower than those posted by some “successful” bidders for business) and some job losses were sustained. Even with our retained business, fuel escalation clauses failed to keep pace with oil price inflation.

Changes of ownership at major motoring organisations led to the institution of new procurement systems and the market-testing of the value offered by Ontime Rescue and Recovery and its vehicle roadside assistance services. The outcome was favourable in some geographic regions; less so in others. The net result was a mismatch between infrastructure and the sources of new business. Three depots were closed. Redundancy and property closure costs were absorbed into June’s figures, clearing the way for significant improvement.

In contrast, Ontime Parking Solutions won a major new tender from Transport for London for its parking enforcement services. A £3 million investment in new vehicles was made in support of the five-and-a-half-year contract while 138 jobs were created. Start-up costs were absorbed upfront, diluting profit.

Profit at Specialist Transport Operations was below target as a result of increased costs, exacerbated by the effects of the strong euro on contracts within Europe. Profit targets were exceeded, however, by the worldwide containerised operations of Prestige Vehicle Distribution.

We strive to reduce the environmental impact of our operations. All new vehicles have a Euro 5 rating, the European standard for exhaust emissions that will be a requirement by 2009.

Industry developments late in the year indicate that other players are beginning to question the sustainability of the aggressive pursuit of low or no margin tenders. Our fair pricing, quality service business model was under pressure. However, the right-sizing of our operations is all but complete and most costs have been fully absorbed, setting the scene for a return to profitability.