Continental growth drives Arriva profits

Arriva, the bus and rail operator, forecast yesterday that its rapidly growing international division will have overtaken its core UK bus operation to become the group's biggest business within the next 12 to 18 months.

Arriva, the bus and rail operator, forecast yesterday that its rapidly growing international division will have overtaken its core UK bus operation to become the group's biggest business within the next 12 to 18 months.

The prediction came as Arriva reported a 15 per cent rise in underlying pre-tax profits last year to a record £116m on revenues of £1.8bn, buoyed by an improved performance from its three core divisions of buses, trains and overseas operations.

The company has been expanding aggressively into local transport markets on the Continent over the past few years since losing two of its three UK rail franchises and overseas turnover grew by more than one-fifth in 2004 to £515m.

Bob Davies, Arriva's chief executive, said it expected international revenues to grow to about £620m over the next one to two years even if it did not acquire any new businesses in Europe. But he predicted that there would be a lot of opportunities this year for expansion in Germany, where Arriva has recently acquired both bus and rail companies, and in Italy where more public bus services are being put out to tender.

To prepare for the expected overseas growth, Arriva has rejigged its board, creating three new group managing directors, one of whom, David Martin, will be responsible for all operations in the UK and mainland Europe as well as becoming deputy chief executive.

The shake-up will result in the departure of Arriva's group human resources director Mark Saxton, who will receive a £400,000 pay-off. His job is being taken over by Arriva's new group managing director for corporate affairs Steve Clayton, formerly director of the UK bus business.

Unlike its UK rivals National Express and Go-Ahead, Arriva has opted not to return extra cash to investors this year through share buy-backs. Mr Davies said: "At the moment we can see more opportunities to invest and any share buy-backs will have to be balanced against that."

The UK bus division, which operates one in five of London's buses, increased operating profits to £62m while the trains division, which now consists only of Arriva Trains Wales, increased profits to £31.5m.