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Knutsford pumps more capital into buses, gains efficiency

Published:Tuesday | January 19, 2016 | 11:03 PMCamilo Thame

Luxury coach service operator Knutsford Express ramped up its expansion and issued $60 million in new corporate debt to support the purchase of new buses towards the end of 2015.

The company pumped $80 million into its latest acquisitions having signalled at the outset of its current financial year, which began June 1, that it would add seven coaches to the fleet by this January.

In the 2015 financial year, Knutsford added three buses after increasing its fleet count by four the year before that.

At the beginning of the expansion drive in 2014, when it went to the market to raise capital through a public offering, it had 14 coaches. Then, the company had 105 weekly departures, but it increased its weekly number of trips to over 180 having grown its routes outside of Kingston from four to 11 towns and cities.

expanding north-coast service

More recently, it has been focused on expanding its north-coast service having realised some amount of maturation of the south coast routes it took on in 2014.

Revenue grew by 31 per cent from year-earlier levels to $272 million during the six months to November 2015. The luxury coach service company has also realised greater efficiencies with its increasingly newer fleet.

"The new investment in these coaches has yielded immediate returns through their significant enhanced efficiencies," Knutsford directors Oliver Townsend and Anthony Copeland wrote in the latest financial report.

Expenses fell from 84 per cent of revenue during the first six months of the 2015 financial year to 75 per cent during the half-year under review. This proportion was 82 per cent of revenue in the 2014 financial year.

The new buses are said to be more fuel efficient, thus the company's fuel cost, which is the second highest expenditure for Knutsford after wages and salaries, would not have grown proportionately with the increase in routes and buses in operation. What's more, diesel prices have also fallen with international oil prices (and the Gulf Coast Reference prices which influence Petrojam's pricing of its products). Ex-refinery prices fell from an average of $121 per litre during the six months to November 30, 2014, to $98 per litre in the review period last year.

Net profit more than doubled to $61 million for the first half of the current financial year, up from $29 million for the comparative period the year before.

Capital expenditure since the company listed in January 2014 totalled over $200 million as at November. However, Knutsford's management has been careful to maintain a strong working capital, which stood at $77 million at the end of November, as well as low gearing ratio its long-term debt represented one-fifth of its $275 million equity base, even after the company raised $60 million through note financing and paid out $15 million to shareholders through its first dividend payment since listing.