Bloomberg interview with David Martin
Name: David Martin
Position: Chief Executive
Company: Arriva
Date: 06/03/08
Time: 07:24 GMT
Channel: Bloomberg UK
Duration: 5 mins 5 secs
Mark Barton
Now, on to Arriva's earnings. The biggest operator of busses in London reported full-year profit of £86.4m. That was 16% down on last year as the company was hurt by rising fuel prices, but that was countered by rising sales. Arriva also has increased its dividend by 10% and said it's well on the way to doubling mainland Europe revenue. Joining us now to discuss this is Chief Executive of the company, David Martin. David, thanks very much for joining us.
David Martin
Good morning.
Mark Barton
Today, we saw a decline in net income, but it is understandable, isn't it?
David Martin
Well, I think our preferred measure, actually, is to look at the operating profit that we generate from continuing operations. I'm really pleased that 2007 has demonstrated 7% growth in our operating profit. Together with continued additional acquisitions and new contracts and tender wins, it really gives us great confidence to look at continued earnings growth into the future.
Mark Barton
You're growing your bus network, which also includes rural services in Wales and city services in western England as well. How big can this network get? What's your ambition?
David Martin
I think what is really pleasing is that, for the first time in 50 years, the bus industry in this country is able to generate patronage growth. We've had a 2% increase in the number of people travelling on our busses in the past year. That is something that I think will continue into the future as the environmental agenda and the political agenda really have to address the issues of traffic congestion on our roads.
Mark Barton
You do, though, have to cope with higher fuel costs. How are you addressing that issue?
David Martin
Indeed we do. We actually hedge our fuel out twelve to eighteen months in advance. Whilst we had a fuel hit, so to speak, of £8m in our UK business in 2007, our hedging actually means that fuel costs really won't impact us in 2008.
Sara Walker
It's not just here in the UK that you're expanding; you're also expanding in Europe, bought 10% of Barraqueiro as well. Where else in Europe do you see expansion coming from, growth coming from?
David Martin
I'm really pleased with our development in Europe. We effectively more than doubled our revenues in the last four years. Our aim is to continue that growth, and probably our revenues will double again between 2006 up to 2011. Every country, we are well aware of what is going on. There is rapid liberalisation of operations in most mainland European countries, and our 23% growth in revenues in 2007 will continue into the future. Every country is an opportunity for us, and we have an extremely good footprint across ten countries already.
Sara Walker
You say every country. Can you limit where you see the most growth coming from? Any particular areas you're looking at to grow more in?
David Martin
Yes; specifically Germany and Italy are two very large public transport operations in mainland Europe. We're well set in those countries, and we expect to see significant growth coming through from those.
Sara Walker
What about money for acquisitions and for buying stakes in particular companies?
David Martin
Money?
Sara Walker
Yes.
David Martin
Yes, we certainly have sufficient firepower. We have a very strong balance sheet. We have ample financial capacity to deliver the growth that we expect. As the countries consistently open up, we will make more acquisitions, and we will win new contracts and new rail and bus contracts.
Sara Walker
In regards to the stake in Barraqueiro – you smiled when I pronounced it, so I pronounced wrongly; I do apologise – when will we see an impact on the earnings?
David Martin
That will come through in 2008. Already, the impact of our initial 21.5% stake is coming through in 2007. You will see that continued growth in 2008. Barraqueiro is a very, very good company, operating across the majority of Portugal.
Mark Barton
You lost out on two rail franchises, but you did, of course, win the new CrossCountry rail franchise. Tell us about your plans for that franchise.
David Martin
CrossCountry is quite an exciting prospect. It's the most extensive franchise in the UK, and actually operates from Aberdeen to Penzance. In many respects, a CrossCountry service is one stop away from everywhere in the UK. We're really quite excited about the prospects that we have there. We will undertake a significant revolution, if you like, in developing much more sophisticated ticketing systems and the ability for people to be able to print tickets at home and use mobile phones to buy tickets. We see tremendous growth prospects coming from that franchise.Mark Barton
How do you see yourself evolving as a company? I suppose you're most noted for your bus operations, but you're branching into rail. Where do you want to be in two, five, ten years?
David Martin
We are a European company. Clearly, we've set our sights out to developing mainland Europe. We will continue that growth into mainland Europe in the future. We're developing a tremendous reputation all over Europe as a bus, a rail, and a professional operator of public transport services.
Sara Walker
In regards to franchises, how many are you planning, or hoping, to win in the next, sort of, 2008, 2009?
David Martin
I hope several, in several countries in mainland Europe. There really aren't that many franchise opportunities for rail in the UK. There's only one franchise coming up this year, and the rest will be in 2011, I think.
Sara Walker
Okay. Going to leave there, but thank you very much on that note. David Martin, the Chief Executive of Arriva.
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