Management review

Group income statement

Revenue from continuing operations was up 16 per cent to £2,000.7 million (2006: £1,729.0 million) reflecting strong growth across the group.

Operating profit from continuing operations grew seven per cent from £119.5 million to £128.0 million. Operating profit from continuing operations before goodwill impairment and intangible asset amortisation, our preferred internal measure, was also up seven per cent to £135.4 million (2006: £126.7 million), despite significant bid costs for rail franchises and further increases in fuel costs. The operating results reflect strong progress in our UK Bus division, continued growth in mainland Europe and further improved operational performance in Arriva Trains Wales. As expected, given its short period of operation, the new CrossCountry franchise has not had a significant impact on the 2007 results.

The share of post tax profits from associates increased to £4.3 million from £1.9 million, reflecting the full year impact of the 21.5 per cent interest in Barraqueiro, acquired in May 2006. The net finance cost for the year was higher at £16.5 million (2006: £11.6 million) due to investment in acquisitions and higher interest rates in mainland Europe.

Profit before taxation from continuing operations thereby increased to £115.8 million (2006: £109.8 million). The taxation charge was £25.8 million (2006: £25.2 million), reflecting a small decrease in the effective rate from 23.0 per cent to 22.3 per cent. The effective rate of tax remains lower than the standard rate in the UK primarily due to the release of provisions for taxation, in respect of prior years, no longer required. It is anticipated that changes to UK tax rules in respect of Industrial Buildings Allowance will result in an exceptional increase in the deferred tax charge, in 2008, of around £7 million. Profit for the year from continuing operations increased to £90.0 million (2006: £84.6 million).

After taking account of minority interests, principally in our Italian and German subsidiaries, earnings per share excluding goodwill impairment, intangible asset amortisation and exceptional items, from continuing operations, increased to 46.5 pence (2006: 44.4 pence). Basic earnings per share was 43.5 pence (2006: 51.8 pence), the fall reflecting the 10.2 pence impact, in 2006, of the exceptional gain on the disposal of Arriva Vehicle Rental.