Results of tough year for property and transport
Mar 1 2010 by Peter McCusker, The Journal
Royal Bank of Scotland analyst William Jones – who expects a 76% fall in underlying profits to £46.9m – said: “Under a flat house-price scenario, the market may be under-estimating both average landbank profitability and cash generation potential in 2010/11.”
Transport group Arriva is likely to face questions on Wednesday over the progress of its talks with France’s national rail operator SNCF over a merger which could create a new £6bn European giant.
The company said in January it had held “very preliminary“ talks over a potential tie-up with “all or part“ of Keolis, which is 44.5% owned by SNCF.
Keolis employs 40,000 staff with operations in Europe, Algeria, Australia and Canada. It has the largest bus and coach fleet in France, where Arriva has no presence.
Royal Bank of Scotland analyst Joe Spooner said Arriva could have trouble selling the deal to its shareholders amid worries over a potential French Government stake in the combined business, as well as a lack of opportunities for cost savings.
He said: “We believe any deal would need to offer visible financial benefits beyond the longer-term strategic advantage of growing the platform to benefit from increasing liberalisation in Europe over time.”
Profits across the group are expected to be 20% down on 2008 at around £120.5m despite the group reporting a “substantial improvement“ in rail passenger revenues in December.
The CrossCountry operator warned the upturn was still insufficient to compensate for declining franchise support payments.
The company said last year it needed passenger revenue growth of around 10% a year to maintain rail profits, which stood at £33.7m in 2008. Revenue support measures from the Department for Transport do not kick in until 2011.
The CrossCountry franchise, which Arriva secured in 2007, covers 1,400 miles and calls at more than 100 stations between Aberdeen and Penzance, Bournemouth and Manchester and Cardiff and Stansted in Essex. It also operates Arriva Trains Wales.
