British bus and train operator Arriva Plc reported a 40% rise in pretax profit on Friday, reflecting rising demand for its bus operations and the first contribution from its UK Cross Country rail franchise. Arreva to look further EEC expantion.
One of the largest operators of London buses, Arriva posted a pretax profit of £66.3 million ($123.9 million) on revenue up 59% at £1.44 billion for the six months to end-June. Its shares were up 5% to 749.5 pence at 0859 GMT, their highest level since early February. “Results were slightly ahead of our forecasts due to better-than-expected performance of the UK bus division,” said Gert Zonneveld at Panmure Gordon. “Results were boosted by the contribution of the Cross Country rail franchise, which started last year, and the absence of rail bid costs.”
CEO David Martin said higher fuel prices would have an impact of the company’s costs, but they were also driving people from cars on to buses and trains. “Fuel costs are a challenge for us and the industry as a whole, but they could cause more people to utilize public transport in the future,” he told reporters in a conference call said. The group carried 2% more passengers on its UK bus services, he said, and rail demand was also strong.
A first six-month contribution from Cross Country, which links Penzance to Aberdeen and Stansted to Cardiff, boosted operating profit in the UK rail division to £14.8 million from £1.1 million, Martin said. Passenger growth in the bus division, both in the UK regions and in London helped revenue grow by 7.0%, he said. Arriva has hedged nearly all of its fuel requirements for this year and two-thirds for 2009, he said, which allowed it time to plan for sustained higher fuel costs. However, the increase in revenue meant there was no need to put up ticket fares “excessively”, he said.
Operations in mainland Europe were boosted by the acquisitions of Madrid bus group Empresa de Blas y Cia and 80% of Hungary-based bus business Interbus Invest, helping sales increase by 50% to £626 million. The group spent almost £200 million on acquisitions in the first half, and Martin said further deals were on the agenda. “We are developing across mainland Europe,” he said. “We continue to look at Eastern Europe.” He singled out Poland, where the company has a small rail operation, as a growth market, and added that the group was looking to spend £50-100 million on deals in the H2. Martin said the company’s prospect for the full year and further ahead were strong. “We are confident in the quality of our strategy and the quality of execution,” he said. Arriva is paying an interim dividend of 6.15 pence a share, up 10% on a year ago. (Reuters)