The Investment Column: Arriva

ARRIVA'S chief executive, Bob Davies, at the helm since March, has been busy repositioning the bus company as a pure passenger-service operation, seeing solid expansion prospects beyond UK shores.

The City yesterday gave guarded approval to Arriva's first-half figures, pushing its shares up 4.5p to 332.5p, after it rolled out an 8 per cent hike in pre-tax profits to pounds 51.6m. Should investors clamber aboard?

Mr Davies' strategy has seen Arriva complete the sale of its fleet-management business to General Motors in July for pounds 520m, with the proceeds earmarked for more European passenger projects and further investment in the UK bus fleet.

Arriva has established itself in the Netherlands, where it commands 20 per cent of the public transport market, including its first rail service, a 50:50 venture with Dutch Rail.

There are also bus operations in Denmark and southern Sweden, and most recently a push into Spain. These ventures helped boost first-half turnover from its non-UK business to pounds 95.6m - out of pounds 833.8m in total - from last year's pounds 15.9m. Meanwhile, Arriva yesterday earmarked pounds 50m for investment in 500 new UK-based buses, boosting outlay to pounds 150m since 1996.

While these all seem sensible routes for Arriva, they are unlikely to see earnings accelerate. The European initiatives will take some time to bring in serious rewards. And, oddly, the firm lacks the passion - displayed by rivals National Express and Stagecoach - about potential opportunities in the United States.

Analysts expect full-year pre-exceptional pre-tax profits of pounds 32.5m and earnings of 32.5p per share. The shares, still off their 12-month high of 442p, continue to be dogged by scepticism over the pace of Arriva's refocusing and are unlikely to regain their previous lustre in the short- term.