Arriva boosted by franchise victory

TRANSPORT group Arriva looked ahead to its new Cross Country rail franchise starting yesterday, as it posted a 6% rise in turnover to £909.2m.

TRANSPORT group Arriva looked ahead to its new Cross Country rail franchise starting yesterday, as it posted a 6% rise in turnover to £909.2m.

The Sunderland company has not run trains on its ‘home patch’ in the North-East since losing the northern rail franchise in December 2004.

But the Cross Country franchise, won from rival Virgin in July this year and which will start operating in November, has given the company’s UK business a big lift.

However Arriva revealed yesterday that competing for franchises, including the East Coast business won by National Express, had eaten into the profitability of it UK trains business with operating profits falling to £1.1m from £5.9m in 2006. Higher fuel costs also impacted group-wide results, with half-year pre-tax profits down 1.5% to £47.3m.

Arriva said the cost of franchise bids was worth the profits drop, saying its new franchise – covering 1,500 miles from Aberdeen to Penzance – would “transform” its trains division and is expected to bring in additional revenue of £600m.

Arriva chief executive David Martin confirmed the group was looking at further opportunities for development, including the possibility of bidding for Chiltern Railways, which is widely expected to be put up for sale in the coming months.

Mr Martin said Arriva would improve its UK franchises through knowledge built up in mainland Europe, but this country had plenty to be proud of too.

He said: “We are very good at castigating ourselves for the state of our railways in this country. But here, we are far more customer focused than on the continent. We are also strong here on marketing information, and the way we present the product to the passenger.”

Meanwhile Arriva’s UK bus operations delivered a £5.1m increase in operating profits to £37.8m, despite a £4m year-on-year hike in the cost of fuel.

Arriva’s mainland Europe business saw a £3.1m rise in operating profits to £28.1m. The group has significantly expanded its European operations since the start of the year, with acquisitions in Germany, Scandinavia, the Czech Republic and Spain.

Gary Fawcett, assistant director and investment manager at Wise Speke, said: “First half figures are solid and show that the company has been very busy over the past few months, boosting its presence in mainland Europe, which saw double digit growth in both revenues and operating profits.

“The strengthening of its UK rail business and expanding operations across Europe should continue to drive growth over the coming years.”

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