Arriva grows on the buses to offset rail franchise risk

Click to follow
The Independent Online

The bus and rail group Arriva yesterday unveiled plans for a further expansion of its bus operations in London and on the Continent to offset the threat of losing its remaining train franchises.

The bus and rail group Arriva yesterday unveiled plans for a further expansion of its bus operations in London and on the Continent to offset the threat of losing its remaining train franchises.

Arriva said that the introduction of congestion charging in London, where it runs about 20 per cent of bus services, had given it a big boost. The company expects to be operating about 1,400 buses in the capital by the end of this year, compared with 1,200 at the start of last year.

The group, which runs buses in Portugal, Spain, Italy, Denmark and the Netherlands, is also looking to expand further into Europe and has earmarked £50m to £60m to buy more bus operators.

Arriva suffered a setback last year with the loss of its Merseyrail passenger train franchise and its failure to be shortlisted for the new Trans-Pennine Express. This leaves it with only the Arriva Northern franchise, which comes up for renewal in September 2004, although its has also been shortlisted for the new Wales and Borders franchise.

Bob Davies, Arriva's chief executive, said: "There is clearly a risk that we will lose our remaining rail business." He said the critical decision would be the choice of an operator for the new northern franchise being created by the Strategic Rail Authority. This will take in Arriva's existing franchise and the First Group's north-west franchise, creating a business with 1,500 to 2,000 trains a day and turnover of £400m.

Arriva's underlying pre-tax profits last year beat expectations, rising by 11 per cent to £102m. The UK bus division saw operating profits fall from £68.4m to £65.4m while UK rail profits rose from £11.5m to £14.9m.

Mr Davies warned margins would be under increased pressure this year from higher national insurance contributions, which will rise to £3m, and increased pension costs. The cash cost of topping up the fund is expected to increase from £11m to £13m this year while the charge to profits will rise to £20m. But he said Arriva would continue its share buyback programme by seeking renewed shareholder approval to repurchase up to 15 per cent of its equity worth £84m.

Comments