Alexander Dennis runs to its target timetable

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Scottish bus manufacturer Alexander Dennis Ltd (ADL) was bought out of administration eight years ago, but it has rebounded despite the economic downturn and last year won nearly half of the UK bus market.

Based at Falkirk in central Scotland, ADL has more than doubled its turnover in the past four years, from £170m to £360m last year. Based on the strength of its order book, sales should increase by a further 20 per cent this year.

It has consistently made money since 2007 and last year is expected to have more than tripled the previous year’s pre-tax profits of £4.5m.

Colin Roberston, who joined ADL as chief executive in 2007, told the Financial Times in an interview at his Falkirk headquarters: “I set a target to go for turnover of £500m by 2015. For a private company, looking more at organic growth than acquisitions, that was quite heady – but thankfully we seem to be pretty much on course.”

Mr Roberston attributes much of the success of the group – which has employees at Falkirk, Scarborough and Guildford – to its focus on lean manufacturing, coupled with steady investment in product development, capital equipment and service levels.

“Our employment base has gone from 2,200 to around 1,900 – so we have doubled our output with 300 fewer employees,” he said. “The average double-deck bus took around 1,100 to 1,200 hours to build five years ago – today it takes 900 hours.”

On arrival, Mr Robertson identified that ADL was too dependent on the UK markets, and last year increased the proportion of overseas sales to nearly 40 per cent, thanks to deals in Hong Kong, New Zealand and North America. “Even back in 2006, we had 25 to 35 per cent of the UK market,” he said. “It is very difficult to expand beyond that. I don’t care what you are selling – be it Mars bars or whatever. To me it was always clear we were going to have to take these British products that were known for their long life and reliability, for being lightweight and fuel-efficient ... How did we position those products in other markets?

“Where we got lucky was that the price of oil went ballistic. With diesel at $1 a gallon in the US, fuel becomes a rounding error. But with fuel at $4 or $5 dollars a gallon, fuel becomes an incredible focal point for most operators.”

Doug Jack, director of Transport Resources International, the Rugby-based industry consultants, said ADL’s focus on double-deck vehicles – of the 2,000 buses it makes a year, 1,400 are double-deckers – had helped it win export orders in markets such as Hong Kong but it was also doing very well in Europe.

“ADL actually registered more city buses last year in western Europe than either Volvo or Scania, which are both strong in their own Nordic markets, but weak in continental Europe,” he said.

ADL still has an appetite for further growth and acquisitions. Just after Christmas, it withdrew a tentative takeover approach for UK rival Optare after Indian-owned Ashok Leyland, the Leeds-based group’s largest shareholder, pressed ahead with plans to triple its stake.

The consortium that bought ADL for £90m from the collapsed US engineering group Mayflower includes Brian Souter and Ann Gloag, founders of Stagecoach; Sir Angus Grossart, the veteran Edinburgh merchant banker; and Sir David Murray, the metals and property magnate still best known as the former owner of Rangers FC.

Mr Robertson – who has also taken a small stake in the company – said the owners were all “medium to longer-term” players. He added that ADL’s debt had peaked at more than £70m in 2007, but it finished last year with cash on the balance sheet.

“The UK market dropped by more than third between 2009 and 2010. We maintained a modest level of profitability, while some of our competitors lost a significant amount.

“The owners were unwavering in their support – there was never any push for redundancies and consolidation, or to cost-cut our way out of the problem,” he says. “We continued to invest in people, our service capability and our product lines, when if we had been in the private equity space, we would have had to slash and burn – and paid the price for it today.”

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