It also said it was continuing to explore potential acquisitions in continental Europe and is confident of doubling the European division's revenue by 2011.

Arriva, which runs Arriva Trains Wales (ATW) and the Cross Country rail franchises as well as bus services across the UK, said it had made solid progress in developing its business since it released interim results on Sept 6.

It said the UK trains division had started its new nine-year Cross Country inter-city franchise on Nov 11 smoothly, with 86.3 pct of services arriving on time over the first four weeks of operation, substantially better than the equivalent services run in the same period last year.

The company said ATW continues to experience strong demand, having been confirmed in recent official figures as the UK's most improved rail operator with 92.3 pct of its services arriving on time, compared to 85.7 pct for the same period last year.

However, the group said the costs of recent bids for Cross Country and other franchises would affect the full-year numbers of the UK rail unit.

'Financial results for the division will reflect substantial expenditure on three concurrent UK franchise bids and, as anticipated, the contribution of Cross Country will be insignificant,' the Sunderland-based group said in a trading statement.

Arriva said it had maintained the momentum of business development in its continental European business, positioning it for further strong progress in 2008.

It said integration of major businesses acquired earlier in 2007, including the former Veolia Scandinavia operation in Denmark and OHE in Germany, had gone well.

During November, it acquired a further small bus business near Madrid in Spain and its third bus operation near the Czech capital Prague.

It also started four German rail contracts in December and in Poland the Arriva PCC joint venture started the country's first tendered rail contract.

'We are continuing to explore numerous contract and acquisition opportunities in mainland Europe and are confident of meeting our medium term growth target of doubling revenue in the division by 2011,' the group said.

Arriva, which runs regulated bus services for Transport for London in the capital and deregulated services elsewhere in the UK, said its UK bus division had continued to grow.

'The benefits of network development and an encouraging level of patronage growth have more than offset year-on-year increases in fuel costs, while our London operations have mitigated the disruptive impact of extensive street works,' it said.

The company said it expected continued delivery from its established, robust businesses and to full-year contributions from its new ventures in Europe and from the Cross Country franchise.

'With measures in place to limit any potential impact of fuel price increases in 2008, Arriva is well positioned for another year of profitable growth and strategic opportunity.'

See also:

Franchise bids hold back Arriva rail arm

Financial Times: December 17 2007
By Tom Griggs

Arriva said “substantial expenditure” on bids for three UK rail franchises would affect financial results at its rail division but that performance for the full year would remain in line with management expectations.

In a trading statement on Monday ahead of full-year results to the end of December, the rail and bus operator said that the effect of the bid costs was “as anticipated” and that the cross-country franchise it took over from a joint venture between Virgin and Stagecoach on November 11 would not make a significant contribution to divisional results for the year.

Operational performance at the cross-country franchise was “substantially better“ than the equivalent service last year, while Arriva Trains Wales improved its operational performance with 92.3 per cent of services arriving on time compared with just 85.7 per cent last year, Arriva said.

At the bus division, which operates more London buses than any of its rivals, rising fuel costs have been offset by increased passenger numbers. Arriva added that the operational performance of the division had been disrupted by the impact of extensive road works in London.

The company said it already had measures in place to cover potential fuel price increases in 2008 and it anticipated a year of “profitable growth and strategic opportunity”.

Arriva is expanding operations in Europe and currently operates in nine countries. The group said that the integration of Veolia Scandinavia in Denmark and OHE in Germany was going well and it had acquired two further small bus businesses in Madrid and near Prague.

It added that four rail contracts in Germany started in December and that its Arriva PCC joint venture in Poland had just started the country’s first outsourced rail contract.

The group said it was exploring numerous contract and acquisition opportunities in Europe and was confident it would double revenues from its European operations by 2011.

Arriva expects to announce preliminary results on March 6.

Shares in the group closed on Friday at 761½p.