Annual Report and Accounts 2008
North America
Annual division revenue was £372.5 million (2007: £308.0 million) and normalised profit from operations was £32.5 million (2007: £37.7 million). In local reporting currency, revenue was US$690.5 million (2007: $617.5 million) and normalised profit from operations was $60.3 million (2007: $75.5 million).
In 2008, we achieved excellent customer retention in the US school bus sector, achieving a level of 95% renewal. At the same time, we maintained the momentum of our 'Business Transformation' project; its ultimate objectives are to deliver operational service excellence and administrative efficiency across our operations in 29 states (two more than in 2007) and two Canadian provinces.
In operational service excellence, we successfully rolled out the project in pilot form in Illinois and Wisconsin, putting into place a wide range of improvements. These included computerised routing support at 15 sites and the retrofitting of 1,770 buses with computer technology that not only provides GPS facilities but also revenue and payroll tracking, live route data information to the driver and options for tracking the children on the bus. The opening of an operations centre in Warrenville, Illinois - the 'Every Time Center' - centralised operational management and control in the pilot area and will contribute to eliminating cost inefficiency. This will deliver a significant competitive advantage in service and efficiency, when rolled out across the business early in 2010.
In addition to delivering an effective technical solution, good communication has been vital. We initiated a series of roadshows to get the message across about our newly improved vehicles and systems. The audience consisted of our employees and our primary market - school district officials.
In delivering administrative efficiency, during 2008 we began to consolidate our 'back office' finance and support functions at a new shared service centre. During the next 18 months, this will progressively move support activity out of the field, allowing greater local customer and operational focus. The key element delivered in 2008 was a new centralised ERP solution; despite some implementation challenges, which have required process improvements to be implemented, the system is operational and significant improvements are planned for 2009.
The combination of managing a substantial system implementation and change programme across the division resulted in some 'double running' costs. As a result, profitability dropped 20% in local currency terms. Clear actions and initiatives are planned for 2009.
In the marketplace, with growing popularity in the US of a state regulation that requires 65% of a school district's budget to be spent directly on education rather than ancillary services such as transport, many jurisdictions are looking to the advantages of outsourcing. National Express is already benefiting from this development. In 2008, we won nine new contracts, worth a total of $38 million a year. Five of those came from school districts that were looking to outside transport suppliers for the first time.
In a market conducive to growth, we expanded our North American business in 2008 with the acquisition of A&E Transport, a regional operator serving five locations in upper New York State, and performance has exceeded expectations.
National Express in North America is not only growing. We are also becoming even safer. As a company that takes the transport of children very seriously indeed, safety is an integral part of our culture. In 2008, we reduced total injury frequency by 30% and lost-time injury frequency by 28%. Total accident and preventable street accident frequency each fell by 7% and the total preventable accident frequency was 4% lower than the previous year's figures. In every case, performance not only exceeded our targets, but confirmed an improvement trend apparent over the past five years.
