Financial and Operational Information On

2015 More About KMB

Financial and Operational Information on

The Kowloon Motor Bus Company (1933) Limited

This booklet provides an overview of the performance of The Kowloon Motor Bus Company (1933) Limited (“KMB”) over the ten-year period ended 31 December 2015. It also covers various aspects of KMB’s operations, financial position, services and customer relations.

KMB’s fare revenue for 2015 increased by 3.6%to HK$6,532.7 million from HK$6,304.0 million for 2014. The increase was mainly due to the patronage growth and the full year effect of the 3.9% fare increase which took effect on 6 July 2014. During the year, with improvements in service levels and bus network efficiency as well as bus service reliability, KMB’s total ridership increased by 1.5% to 969.2 million passenger trips (a daily average of 2.66 million passenger trips), as compared with 955.2 million passenger trips (a daily average of 2.62 million passenger trips) for 2014 in spite of the adverse impact arising from the HKSAR Government’s phased extension of the Public Transport Fare Concession Scheme for the Elderly and Eligible Persons with Disabilities (the “HK$2 Scheme”) to green minibus routes from 29 March 2015. Total operating expenses for 2015 amounted to HK$6,185.6 million, a decrease of 1.6% compared with HK$6,285.1 million for 2014. The decrease was mainly attributed to the reduction in fuel and oil costs of HK$496.3 million as a result of the fall in international fuel prices and continued improvement in bus operating efficiency. This positive factor was, however, partly offset by an increase of HK$218.9 million in staff costs due to the annual pay rise at an average rate of 4.6%, an increase in depreciation charges, and an increase in other operating expenses due to general inflation. As a result, KMB recorded a profit after taxation of HK$546.9 million for its franchised public bus operations compared with HK$205.4 million for 2014.

In 2015, we submitted 107 route reorganisation proposals to the Government, 60 of which were put forward for consultation with District Councils, of which 43 were agreed in principle by the relevant District Councils (including 26 that were implemented in 2015 and 17 that will be implemented later). With the support of the Government, large-scale route reorganisation exercises were successfully implemented in Sha Tin, Tai Po, Yuen Long/Tin Shui Wai and Tsing Yi in 2014 and 2015. The opening of the Tsing Sha Highway Bus Interchange in January 2015 means that passengers travelling from the Eastern New Territories to West Kowloon can choose from 11 bus routes to reach their destinations, at various discount combinations.

During the year, KMB continued to make substantial investments in new buses with the latest safety, environmental and design features. A total of 586 new super-low floor air-conditioned buses, consisting of 583 Euro V double-deck busesand threeGovernment-sponsored supercapacitor air-conditioned 12-metre single-deck buses (“gBuses”), were added to the fleet. Since August 2014, when KMB introduced four 12.8-metre double-deck buses to run on Route 73X, an additional 150 12.8-metre buses have been ordered, with the first batch commencing service in November 2015. The 12.8-metre buses exhibit the same fuel efficiency and reliability that have been achieved by the 12-metre version. KMB will continue to further expand its fleet of 12.8-metre buses in 2016 to provide increased passenger capacity on routes with high demand.

KMB’s free Smartphone App Version 2 gives users access to real-time special traffic information and enables them to make route searches on a map or by means of major landmarks on Android and iPhone platforms. In 2015, we further enhanced the App by introducing an Estimated Bus Arrival Time (“ETA”) function that provides real-time bus trip information to facilitate journey planning. By the end of 2015, the ETA service covered all solely-operated bus routes of KMB and Long Win Bus Company Limited”

In addition to the initiatives mentioned above, other major service enhancement measures implemented by KMB in 2015 include:

KMB upgraded the passenger waiting areas at the Kowloon-bound side of the Tai Lam Tunnel Bus-Bus Interchange (“BBI”) and the Tate’s Cairn Tunnel BBI, and enhanced the bus shelters on Lung Cheung Road in Wong Tai Sin. Other improvements included prominent rooftop signage, large graphic information boards, benches, standing seats and a free Wi-Fi service. KMB is also providing ETA panels, which notify passengers of the arrival time of the next bus on LED display panels, progressively at bus stops. By the end of 2015, around 300 ETA Panels had been installed across our network in busy urban areas and interchange areas;

40 bus shelterswere constructed or extended, raising the total number of bus shelters to 2,519 at the end of 2015. In addition, illuminated bus route information panels were installed at bus shelters to help passengers read bus route information at night;

To provide more convenient and enjoyable bus journeys for local passengers and tourists, KMB continued to offer the “Five Route Day Pass”, which entitles holders to enjoy a day’s unlimited travel on designated routes connecting major tourist spots in the New Territories, Kowloon and Hong Kong Island. The standard price of the day pass is HK$54.50 (half fare HK$27.30 for children aged under 12 and for senior citizens aged 65 and over); and

To boost passenger awareness, KMB launched a new series of safety messages, which were broadcast on the on-board Bus Stop Announcement System (“BSAS”) and the Multi-media On-board (“MMOB”) System in Cantonese, English and Putonghua to remind passengers to hold the handrail at all times.

In recognition of its commitment to outstanding performance, KMB was presented with the following prestigious awards in 2015:

“10 Years Plus Caring Company Logo” in the Caring Company Scheme granted by the Hong Kong Council of Social Service;

2014 Hong Kong Top Service Brand organised by the Hong Kong Brand Development Council and the Chinese Manufacturers’ Association of Hong Kong;

Yahoo Emotive Brand Awards 2014-2015 in the Logistics/Transportation category organised by Yahoo Hong Kong;

Award of Distinction presented by The Community Chest of Hong Kong;

First runner-up in the Highest Service Hour Award (Private Organisations – Best Customers Participation) and Merit in the Highest Service Hour Award (Private Organisations – Best Staff Participation) organised by Social Welfare Department;

Trusted Brands 2015 Gold Award in the Public Transport category organised by Reader’s Digest;

Award of 10,000 Hours for Volunteer Service organised by the Social Welfare Department;

Triple Gold Award and Most Favourite Website Award for the KMB website in the Web Accessibility Recognition Scheme co-organised by the Office of the Government Chief Information Officer and the Equal Opportunities Commission; and

Top 10 Meritorious Website in the Meritorious Websites Contest 2014 organised by the Office for Film, Newspaper and Article Administration.

As for challenges, KMB continues to be affected by the Government’s focus on the railway as the backbone of its transport policy. It is expected that the Kwun Tong Line Extension and the South Island Line, due to commence operations in 2016 and 2017 respectively, will adversely affect our bus operations. KMB will work closely with local communities and the Transport Department to reorganise the routes affected, with a view to redeploying bus resources to routes with higher passenger demand so that passengers can be better served. In 2016, we will purchase the most modern green buses, continue to add Estimated Time of Arrival displays at major bus stops, and install seats at bus stops for the convenience of passengers.

Roger LEE Chak Cheong

Managing Director

31May 2016

Summaries of Operational and Customer Service Information

Operational Information Summary

In the ten years from 2006 to 2015, KMB:

added 1,817 new buses fitted with Euro III, Euro IV, Euro V, Euro VI standard environment-friendly engines or supercapacitorsto its bus fleet at a total cost of HK$4,791 million;

introduced a total of 30 new bus routes;

constructed or renovated 250 bus shelters;

improved frequencies and services on 190 occasions;

upgraded the standard of bus maintenance to improve service reliability and delivery;

enhanced the training programmes for bus captains to improve safety and customer service standards; and

provided concessionary fares to senior citizens.

In the past years, the quality of KMB’s bus services has been improved in various aspects. For instance, we have:

introduced the free KMB smartphone app, which provides access to real-time traffic information, enables route searches by map or major landmark and gives suggestions on bus routes with the fewest en-route stops and lowest fare. KMB has improved the App by introducing an ETA function that provides real-time bus information to facilitate journey planning;

improved the ventilation system and air quality in bus compartments through a comprehensive scheme for the cleaning and maintenance of the ventilation system. Sample checks on CO2 concentrations are conducted regularly in accordance with the Environmental Protection Department’s Practice Note for Managing Air Quality in Air-conditioned Public Transport Facilities – Buses;

maintained ISO 9001 accreditation on a company-wide basis for quality management systems since 1999, and ISO 14001 certification for environmental management for Sha Tin Depot and Lai Chi Kok Depot since 2001 and 2003 respectively;

achieved Occupational Health and Safety Assessment Series (OHSAS) 18001 certification from the Hong Kong Quality Assurance Agency in recognition of our effective risk management systems in bus operations and maintenance activities;

obtained certification from the Hong Kong Q-Mark Council of the Federation of Hong Kong Industries for meeting the Hong Kong Green Mark Standard laid down by the Hong Kong Green Mark Certification Scheme;

introduced Octopus Bus-Bus Interchange Schemes (“Octopus BBI”). At the end of 2015, a total of 136 Octopus BBI schemes were in operation;

installed Multi-media On-board Systems on around 2,800buses providing passengers with bus service information and infotainment;

installed Bus Stop Announcement Systems on our entire bus fleet to broadcast and display information about the next bus stop;

installed Integrated Bus Service Information Display Systems at selected major termini, providing information on next departure times, destinations and fares of individual bus routes, as well as urgent messages on major traffic disruptions;

equipped our entire fleet with the Octopus Smart Card System for fare payment;

added new buses with barrier-free facilities for the convenience of disabled persons;

used ultra-low sulphur diesel in our bus fleet since January 2001 and “Euro V Diesel” with 0.001% sulphur content since December 2007; and

broadcast various educational television programmes to convey safety tips to passengers on our Multi-media On-board Systems.

Customer Service Information Summary

We use different channels to maintain open communications with our customers. For example, we have:

operated a number of KMB Customer Service Centres to provide information on bus services and to collect customers’ opinions;

run a Passenger Liaison Group programme to gather the views of passengers and better understand their expectations;

launched an online map-based point-to-point bus route search function on the KMB website ( allowingthe public to access information on more than 5,000 bus stops on around 400 bus routes in graphic form, and a“Street View” feature giving passengers a 360-degree photo tour of the street near their chosen bus stop;

maintained a Customer Service Hotline Operator Service to serve customers from 7 a.m. to 11 p.m. every day, as well as a 24-hour Customer Service Hotline that provides on-demand bus route information, service updates, traffic news and a voicemail service in Cantonese, English and Putonghua;

installed the Digital Map Passenger Enquiry System on the Customer Service Hotline to enhance the efficiency of handling customers’ enquiries and, for Hotline mobile phone users, launched a Short Message Service (“SMS”) facility to provide bus route information and a digital map service giving bus stop locations;

equipped our Customer Service Centres with the Digital Map Passenger Enquiry System to provide customers with the advanced bus route information search facility;

set up a Ticketing Office at Lok Ma Chau, at which Octopus services, bus route information and the “Five Route Day Pass” are available;

introduced a Customer Feedback Form on the KMB website to collect passengers’views;

installed route information displays at bus stops and termini as well as inside bus compartments to provide bus service information, such as timetables, fare tables and route information; and

launched the free KMB smartphone app, which enables users to obtain bus information and real-time traffic news.

By unleashing the power of the bus to make it the preferred choice of passengers and by constantly staying ahead of passengers’ expectation with innovative services, we aim to benefit all our stakeholders: customers, employees, shareholders, members of the public and the government alike.

Results for Franchised Public Bus Operations
for the year ended 31 December 2015
2015 / 2014
HK$'000 / HK$'000
Revenue
Fare revenue / 6,532,746 / 6,303,952
Advertising income / 184,686 / 130,257
Other operating income / 2,013 / 2,477
6,719,445 / 6,436,686
Otherincome / 131,852 / 97,645
6,851,297 / 6,534,331
Operating costs
Staff costs / (3,483,071) / (3,264,147)
Fueland oil / (734,644) / (1,230,908)
Spare parts and stores / (252,479) / (241,637)
Toll charges / (358,255) / (344,823)
Depreciation / (724,872) / (689,508)
Other operating expenses / (632,230) / (514,053)
(6,185,551) / (6,285,076)
Profit from operations / 665,746 / 249,255
Finance costs / (9,674) / (5,022)
Profit before taxation / 656,072 / 244,233
Income tax / (109,192) / (38,839)
Profit after taxation from franchised public bus operations / 546,880 / 205,394
Accumulated balance of passenger reward
as at 31 December (Note) / 59,798 / -

Note:

Under the revised Modified Basket of Factors (MBOF) approach, which is the existing basis for the Administration to assess bus fare adjustment application, 50% of any return of a franchised bus operator in a given year in excess of a prescribed triggering point of return on its average net fixed assets would be shared with passengers to relieve the pressure for future fare increases and to facilitate the offer of bus fare concessions. The prescribed triggering point of return for the period from 1 January 2014 to 31 December 2015 was 9.7% per annum.

Fixed Assets

Buses and
other / Buses / Tools / Interest in / Total
motor / under / and / leasehold / fixed
Buildings / vehicles / construction / others / Sub-total / land / assets
HK$’000 / HK$’000 / HK$’000 / HK$’000 / HK$’000 / HK$’000 / HK$’000
Cost:
At 1 January 2015 / 1,088,060 / 9,092,027 / 263,290 / 3,138,976 / 13,582,353 / 115,102 / 13,697,455
Additions / 28,601 / 14,992 / 1,640,816 / 235,918 / 1,920,327 / - / 1,920,327
Transfer of buses / - / 1,598,283 / (1,598,283) / - / - / - / -
Adjustment to capital stores and spares unused / - / - / - / 25,454 / 25,454 / - / 25,454
Disposals / (16,275) / (1,112,823) / - / (482,039) / (1,611,137) / - / (1,611,137)
At 31 December 2015 / 1,100,386 / 9,592,479 / 305,823 / 2,918,309 / 13,916,997 / 115,102 / 14,032,099
------/ ------/ ------/ ------/ ------/ ------/ ------
Accumulated depreciation:
At 1 January 2015 / 826,276 / 6,249,263 / - / 2,828,915 / 9,904,454 / - / 9,904,454
Charge for the year / 24,957 / 442,523 / - / 257,392 / 724,872 / - / 724,872
Written back on disposal / (16,275) / (1,112,766) / - / (468,154) / (1,597,195) / - / (1,597,195)
At 31 December 2015 / 834,958 / 5,579,020 / - / 2,618,153 / 9,032,131 / - / 9,032,131
------/ ------/ ------/ ------/ ------/ ------/ ------
Net book value:
At 31 December 2015 / 265,428 / 4,013,459 / 305,823 / 300,156 / 4,884,866 / 115,102 / 4,999,968
======/ ======/ ======/ ======
Add: Deposits paid in respect of buses on order / 89,050 / - / 89,050
4,973,916 / 115,102 / 5,089,018
====== / ====== / ======
Net book value:
At 31 December 2014 / 261,784 / 2,842,764 / 263,290 / 310,061 / 3,677,899 / 115,102 / 3,793,001
======/ ======/ ======/ ======
Add: Deposits paid in respect of buses on order / 129,588 / - / 129,588
3,807,487
======/ 115,102
======/ 3,922,589
======