Optare seeing the benefits of major overhaul

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BUS maker Optare said it is starting to see positive results from a major restructuring as it focuses on expanding its operations abroad.

Optare moved to a new factory in Sherburn in Elmet in North Yorkshire in 2011. The opening of the production site resulted in the closure of facilities in Leeds and Blackburn and the sale of the company’s Rotherham site.

The moves resulted in the loss of 155 jobs with the number of employees falling from 531 employees in April 2012 to 376 in March 2013.

Interim chief executive Per Gustav Nilsson said despite challenging market conditions over the last year, the group is seeing the rewards from consolidating the manufacturing sites and its significant investment in the new facilities.

“We have made considerable progress in supply chain cost reduction, implementing manufacturing efficiencies and further improving the quality of our products,” he said.

“We are confident we have built solid foundations for stability and growth to meet future challenges.”

Over the year to March 31, Optare sold 389 single deck vehicles and exported 177 kits to its partners in South Africa.

Turnover rose six per cent to £75.9m, The group posted a pre-tax loss of £7.4m, down from £13.4m the previous year, following the restructuring.

The £7.4m includes exceptional costs of £1.8m relating to further Blackburn site closure costs and the redundancy programme.

Mr Nilsson said the retail market is suppressed with volumes flat across the company’s traditional markets, with higher manufacturing capacity than demand.

“This continues to put pressure on both price and volume,” he said. “The continued financial crisis in the EU last year also put pressure on the volume front due to limited access to funding.”

Optare believes that the UK market will be flat in the near future, but there are growing opportunities in the Middle East, South East Asia and Africa.

The group is pitching for a number of contracts in overseas markets.

“We are awaiting outcomes that, if positive, could significantly change the outlook for the business. We are confident that our quality, unique design and life cycle cost will enable us to win some major tenders in the international market,” said Mr Nilsson.

Three new buses were launched over the year, Versa 11.7m, Metrocity and Bonito.

“Metrocity, which was shown in the October bus show, is a perfect example of designing a product for the London market which has been buoyant,” said Mr Nilsson

The Metrocity is undergoing trials with customers.

“Versa 11.7m has been a success story and we have already sold 40 vehicles post the launch,” said Mr Nilsson.

The group ended the year with a 36 per cent market share in its primary eight to 13-tonne segment, up five per cent on last year.

In order to reduce its dependence on this segment, which makes up 40 per cent of the overall UK market, the group has plans to diversify its product range into other bus markets in the UK and Europe. The plan is to extend the group’s reach to more than 90 per cent of the UK market.

The group’s order book has grown rapidly over the past few months. At the end of March it stood at £12.2m and it now stands at £20.2m.

“With the consolidation of site and turnaround behind us, it is time for the company to deliver profitability,” said Mr Nilsson.

“This will be driven by the product pipeline including the Double Decker and other new products for the export market in 2014.”