Management review

UK Bus

A strong trading performance from the UK bus business is reflected in an operating profit increase of 16 per cent to £87.9 million (2006: £76.0 million), on revenue of £814.7 million (2006: £762.8 million), up seven per cent. Margins increased to 10.8 per cent, despite the impact of fuel price increases that cost £8 million in 2007.

UK Regions

The regional bus business has benefited from rigorous and detailed network development. By understanding the varying needs of different customer profiles we have sharpened our networks and services to match demand, stimulating passenger growth, and implementing targeted revisions to fares. Over the course of the year, we invested some £30 million providing many easy-access buses for the comfort and convenience of our passengers. In 2007 we carried 414 million passengers, demonstrating encouraging patronage growth of approximately two per cent.

Overall customer satisfaction rose, with 91 per cent expressing themselves ‘fairly satisfied’ or better, with 59 per cent of those questioned 'very' or 'extremely satisfied’, the highest rating achieved to date.

Innovative partnership working continues to bring benefits for partners and customers. The Fastrack scheme in conjunction with Kent County Council has seen patronage growth of 22 per cent, in its first year of operation with 19 per cent of this reflecting conversion from car users.

A series of local marketing initiatives are currently on trial to increase passenger journeys further by boosting awareness of routes and services. In Telford we are using smart-card technology to test a new customer loyalty scheme. In February 2008, we launched a trial to test a new generation of mobile phone ticketing technology on 14 of our Fastrack B buses in Kent, enabling customers to purchase tickets quickly and easily via their mobile phones, providing the added benefit of cash-free travel.

We remain committed to developing and investing in technology for more eco-friendly vehicles. In October, we introduced the UK’s first Environmentally Enhanced Vehicle buses into our Midlands fleet. In the north-east we started a trial of B20 biodiesel giving a 20 per cent reduction in net CO2 emissions. A trial of cab-based technology to help drivers improve fuel consumption is also under way. We intend to deploy these initiatives further if the encouraging initial results are sustained.

During the year we acquired small operations in Staffordshire and Darlington. In January 2008 we announced the acquisition of UK AIM-listed bus, coach and airside passenger transport operator Tellings Golden Miller Group, which will complement our airside passenger services in Germany (Frankfurt) and Italy (Bergamo).

We continue to contribute to the Local Transport Bill debate, and welcome the process of dialogue on the development of ideas and proposals to improve effective partnership working between operators and local authorities.

London

Arriva is one of the largest bus operators in London, with annual mileage in 2007 exceeding 62 million miles. The business has done well to continue to make progress while mitigating the disruptive impact of street works, affecting much of its north London operating area.

An increase in contracted mileage of four per cent, reflects four new contracts started in 2007. Three new contracts are due to start in 2008, and with additional buses on other routes, scheduled mileage in London is due to increase by a further four per cent this year. We expect market growth of 40 per cent by 2025, from 2007 levels, in line with Transport for London’s (TfL) 2025 Vision.

Arriva London finished the final quarter of the year strongly, appearing in the top three TfL contractors for service reliability. We continue to have a positive relationship with TfL and were pleased that Brixton garage was awarded the ‘London Bus Garage of the Year’ award, following an independent nomination from TfL. The world’s first hybrid double-decker bus, on trial for TfL over the last 12 months, is running reliably with improved fuel efficiency.

In August 2007 we added 10 new buses to The Original Tour London sightseeing business and opened a visitor centre in Trafalgar Square. The business recovered impressively from a disappointing wet summer, managing to attract significant numbers of visitors during the autumn, to end 2007 with record passenger numbers, and patronage up eight per cent on the previous year.

UK Bus & Coach distribution

Our Bus & Coach distribution business has performed well, contributing operating profit of £3.1 million (2006: £3.0 million), to the divisional operating profit, on revenue of £9.9 million (2006: £12.3 million).