Slowing economy gives public transport a lift

Not everyone's finding business tough at the moment: Arriva just posted a 40% jump in profits...

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Last Updated: 31 Aug 2010

Arriva, the train and bus operator that runs London buses and the CrossCountry rail franchise (amongst others), said it had enjoyed a bumper first half of 2008, as high petrol prices and shrinking budgets forced more people onto public transport. Revenues were up by nearly 60% in the six months to June, while pre-tax profits jumped to £66m.

Rail has been a big success story for the Sunderland-based company. Since it took on the CrossCountry franchise last year, passenger numbers have increased by 10%, helping it to boost UK rail profits from £1.1m last year to £14.8m this time round. Its burgeoning international business (it's now in 12 countries) also seems to be thriving: an acquisition in Hungary increased revenues by 50%, while profits jumped 24%. And its bus division is also rolling along nicely: profits were up 20% to £46m, on revenues of £454m.

Arriva CEO David Martin was predictably cock-a-hoop this morning, saying he was ‘delighted’ with the group’s showing. ‘All three divisions are growing strongly, and the business has real momentum,’ he crowed. Rising fuel prices and a slowing economy did present some challenges, he admitted, ‘but bring with them the possibility of higher demand for our transport solutions’ (that’s ‘buses’ and ‘trains’, if you don’t speak jargon). Arriva has also secured most of its fuel for next year, so it won’t suffer too much if the price rockets again.

So it was good news all round for shareholders. Arriva’s results would be impressive enough at the best of times, but they’re even more so given how the rest of UK plc is doing. While Arriva motors ahead, the economy as a whole has ground to a halt: the Office of National Statistics said today that UK growth was flat as a pancake between April and July, the first time in 64 quarters that this has happened. The figure, which was below the government’s prediction of 0.2% growth, is the worst since 1992 and makes a full-blown recession look ever more likely.
 
But Arriva won’t mind too much: with long-term contracts in place for its rail and bus franchises, and cash-strapped (not to mention environmentally-aware) consumers shunning their cars in increasing numbers, public transport looks like a great business to be in at the moment...


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