Management review

• Chairman’s statement
• Chief executive's review
• Financial review
• Group income statement
• Cash flow
• Treasury and financial risk management
• Capital structure
• Borrowing facilities
• Retirement benefit obligations
• Return on capital employed
• Financial summary
• Principal risks and uncertainties

Capital structure

Total shareholders’ equity was £710.2 million (2006: £542.5 million) at the end of the year, a substantial increase. Retained profits contributed £44.5 million to group distributable reserves, actuarial gains on retirement benefit obligations added a further £70.6 million and fair value of derivatives added £48.6 million. During 2007, the group undertook an internal reorganisation, which resulted in there being approximately £600 million of available distributable reserves in the parent company Arriva plc. Gearing for the group at 31 December 2007 was 61 per cent (2006: 68 per cent). The 2007 interest cover (the ratio of EBITDA to net finance costs), from continuing operations excluding goodwill impairment and intangible asset amortisation, was 15 times (2006: 20 times).

The ratio of year end net debt to EBITDA was 1.8 times (2006: 1.6 times). Arriva remains comfortably within the financial covenants set by its lenders, the principal covenants being that the ratio of EBITDA to net finance costs is not less than 3:1, and the ratio of net debt to EBITDA is not more than 3.5:1.