Arriva aim for growth in Europe markets

Mar 4 2010 by Karen Dent, The Journal

EUROPEAN expansion will drive Arriva's growth in the next 12 months, and the ambitious public transport group hopes to announce more contract wins in the next few months.

The Sunderland-based bus and train operator, which runs services in 11 mainland European countries as well as the UK, is currently tendering for its first contract in Malta.

Chief executive David Martin said: “We believe the European bus and rail market is worth in excess of £200bn in revenues.

“Our revenues are around £1.5bn there, so there’s a clear opportunity to increase our market share in mainland Europe.”

But he refused to be drawn on the progress of recent talks with French state-owned rail group SNCF about a possible equity link-up with its transport unit Keolis.

European expansion dominated Arriva’s plans for the future as the group revealed a 19% dip in annual profits and a 3% rise in revenue as it faced a 60% hike in fuel costs, and passenger growth was hit by the recession.

Pre-tax profits fell to £121.7m in the year to the end of December, from £150m in 2008, but revenues jumped to £3,147.8m from £3,042.2m.

Mr Martin said: “Given the economic situation of the country and the whole world, people are recognising this is a pretty good set of results.

“We’ve got some following winds behind us for a change. Fuel prices are coming down and there is a recovery in the number of people using the railways.”

Income from Arriva’s CrossCountry rail franchise running between Aberdeen and Penzance did not meet its expectations and profits from the rail division, which also includes Arriva Trains Wales, plunged from 2008’s record £33.7m to £12.1m. But passenger revenue at CrossCountry rose by 8.8% in the first seven weeks of this year.

The UK bus division’s operating profit fell to £91.2m from £99.3m, mainly because of higher fuel prices and the recession. But Mr Martin said passenger numbers were growing again in the early part of this year.

“Our UK bus business achieves every year. The quality is going up and we are investing in it,” he said. “Our growth in terms of expansion will be in mainland Europe.”

Indeed, the European division was the group’s star performer where profit rose by 7% to £83.9m, with a 15% increase in revenue to £1,604.2m.

Arriva has trebled the size of its European bus and train interests in the last six years and says it remains in the hunt for more.

Arriva’s full year dividend rose by 5% to 18.8p and shares rose by 4% in mid-morning trade to a 13-month high, valuing the group at more than £1bn.