Arriva warns of revenues pressure

Arriva said revenues at its CrossCountry rail franchise improved over the last six weeks

Transport group Arriva has warned that slackening growth at its CrossCountry rail franchise would dent first-half results.

The franchise - which includes services from Aberdeen to Penzance and Bournemouth to Manchester - saw revenue growth slow to 2.4% in the first five months of 2009.

This compares with the 4.5% reported in the firm's last update two months ago as the recession puts pressure on the business.

Arriva - which won the CrossCountry franchise in 2007 - needs passenger revenue growth of around 10% a year to maintain 2008 profits.

Revenue support measures from the Department for Transport do not kick in until 2011.

The firm said: "The results for the six months will reflect the lower revenue growth rates in CrossCountry, and are otherwise expected to be broadly in line with management's overall expectations."

Shares slipped 3% following the update. Revenues from the group's other rail franchise, Arriva Trains Wales, also eased slightly to 8.7% from 9.7%.

"Economic conditions make it difficult to predict with accuracy the short to medium-terms trends in passenger demand," the firm added.

There were also signs of faltering growth in Arriva's UK bus business, which runs services in London as well as major cities including Liverpool, Leeds, Glasgow and Newcastle.

The group said the division was "trading strongly" but revenues rose by 5.2%, less than the 7.1% reported two months earlier.