Optare on road to success following shake-up

Jim Sumner Chief Executive of Optare
Jim Sumner Chief Executive of Optare
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A SUCCESSFUL export venture into South Africa and investment in new hybrid technology helped to transform the fortunes of Yorkshire bus manufacturer Optare.

The business reported a 106 per cent increase in sales to £46.7m in the six months to September 2012.

Optare slashed labour and administration costs, reduced losses by 54 per cent during the period and achieved a small but significant core earnings profit of £146,000, it announced yesterday.

Jim Sumner, chief executive, told the Yorkshire Post that “conscious changes” to strategy contributed to the company’s success.

“We are seeing the benefits of a successful venture building buses for the city of Cape Town,” said Mr Sumner.

“We picked up a large contract last December for 189 buses worth about £18m in total.”

Optare’s investment in low carbon technology through the Government’s green bus fund also benefited the business in the first half of the year.

Mr Sumner said: “The underlying markets are pretty challenged at the moment and will remain so with fiscal austerity in place.

“The traditional business has been with local authorities and small independent operators who have been squeezed by Government cuts.

“Obviously, we have had to reposition and respond to that challenge.” Optare said year on year UK market registrations rose 46 per cent. In total, the company manufactured around 350 buses in Yorkshire during the period.

It reduced direct labour costs from 15.2 per cent to 7.9 per cent of sales and cut administration expenses from 23.7 per cent to 10.2 per cent.

Optare consolidated operations from former sites in Rotherham, Crossgates and Blackburn at a new 140,000 sq ft base in Sherburn in Elmet.

Mr Sumner has axed nearly half the workforce since he joined in June 2009. The company employs 430 people, down from 900.

He said: “It’s not something I’m proud of but that’s something it’s taken to rescue the company.”

Back in 2009, the company was struggling with problems including production delays, soaring costs, rising debt, withdrawal of trade credit insurance and falling spending by bus operators.

A year ago, Ashok Leyland, which is part of the Hinduja Group, increased its shareholding from 26 per cent to 75.1 per cent in return for a refinancing, after Optare’s attempts to access bank finance failed.

The Indian owner has invested £1m in the first half in new computer-aided design systems, paint plant and new product development.

Mr Sumner said: “They are taking a long-term view and are very much committed to developing Optare into a global brand. I think they will be great.

“If you are looking for a parallel, Tata and Jaguar Land Rover is a good example.”

Under Indian ownership, JLR has become a global force in automotive manufacturing.

John Fickling, chairman, said: “The group is now positioned to increase UK and export sales in both retail and fleet segments.”

Mr Sumner, who agreed to stay on for a period following the Ashok Leyland takeover, will leave the business this month. He said he is considering a few options.

Asked about the secret of successful turnaround work, he said: “Honesty. A simple plan. Thinking out of the box.”

He said the days of merely cutting costs are gone.

“The most difficult challenge is how do you regenerate a business?

“How do you create and develop sales? Most people are struggling with that issue,” said Mr Sumner, who is originally from Lanca-shire.