VENTURES: This Bus Is For Hosken
Recent Western Cape Business News
ROUGHLY six years ago Cape Town-based empowerment group Hosken Consolidated Investments (HCI) did the unthinkable by buying out local bus company Golden Arrow.
The deal was unthinkable because HCI was considered a progressive investor with – at that juncture – stakes in mainly technology and media companies.
In any event HCI forked out R250 million for Golden Arrow, knocking down the original price tag from an initial R270 million.
A number of observers believed HCI might battle to eke a return out of an old economy asset like Golden Arrow – especially with the taxi industry rapidly encroaching on formal bus routes.
About three years ago CBN suggested that Golden Arrow, despite the lingering scepticism, was set to become an important cog in HCI’s earnings machine. CBN reckoned HCI was being prudent in committing upwards of R300 million to upgrade buses and premises for Golden Arrow.
So it’s with some satisfaction that we can scan the recently released results for the year to end March 2010, which show that HCI is getting more than a fair shake from Golden Arrow.
In fact, the bus company - which does attract some rather large capital expenditure bills when fleets are upgraded - has probably paid for itself already…including the hefty capital expenditure incurred in upgrades.
Top line numbers for Golden Arrow were not great in the past financial year with turnover coming off to R898 million (from R935 million previously).
Operating profits were static at R168 million, which might not be seen as a bad result in the Cape’s clammy economic climate.
HCI CEO Johnny Copelyn says Golden Arrow’s passenger volumes declined in line with the economic downturn and the reduction of services due to the limitations in government funding.
“Whilst the company has managed the transition from passenger to kilometre as the basis of its contract with government reasonably well, the legal framework within which it operates has not yet been finalised.”
Possibly Copelyn is being a bit modest about managing this important transition ‘reasonably well’ because Golden Arrow finished the year with pre-tax profits of R98 million (last year: R92 million) and headline earnings of R76 million (previously R71 million).
Internally, Copelyn says, Golden Arrow continues to focus on passenger service reliability as well as cost containment. “We are approaching the future confidently.”
While Golden Arrow looks like a tightly run ship, it seems there may not be too much extra impetus from the Cape Town’s hosting of the Soccer World Cup.
Copelyn notes that during the build up to the 2010 World Cup Golden Arrow played a major role in the successful hosting of events at the Cape Town Stadium. But he stresses Golden Arrow is not directly involved in transport services for the event.
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