2017 Integrated Report – Departure into a new era

Development in the year under review

  • Start of operations in the UK Trains line of business  and the Netherlands in the previous year are driving  development.
  • Positive effects from acquisitions in the previous  year in the Mainland Europe line of business.
  • Challenging market and competitive environment in the  UK Bus line of business.
  • Negative exchange rate effects due to weaker pound.

DB Arriva

2017

2016

Change

 


2015

absolute

%

Punctuality (rail) (Great Britain, Denmark, Sweden, the Netherlands and Poland) (%)

92.3

91.0

90.6

Customer satisfaction in bus and rail in Great Britain (SI)

80

81

83

Passengers in bus and rail (million)

1,943

1,761

+182

+10.3

1,663

Volume sold (rail) (million pkm)

13,334

11,230

+2,104

+18.7

8,980

Volume produced (bus) (million bus km)

1,075

1,028

+47

+4.6

1,024

Volume produced (rail) (million train-path km)

177.6

170.6

+7.0

+4.1

132.7

Total revenues (€ million)

5,345

5,093

+252

+4.9

4,843

External revenues (€ million)

5,338

5,085

+253

+5.0

4,836

EBITDA adjusted (€ million)

569

525

+44

+ 8.4

525

EBIT adjusted (€ million)

301

280

+21

+7.5

270

Gross capital expenditures (€ million)

374

359

+15

+4.2

276

Employees as of Dec 31 (FTE)

54,650

54,150

+500

+0.9

46,484

Employee satisfaction (SI)

3.7

Employee satisfaction – follow-up workshop implementation rate (%)

89.9

88.8

Specific CO₂e emissions (rail) compared to 2006 (based on rail car units) (%)

–14.6

–13.0

–12.6

Specific CO₂e emissions (bus) compared to 2006 (based on bus km) (%)

–17.2

–16.3

–17.5

    Punctuality in rail transport increased. This was mainly due to the continued implementation of programs to improve quality and the full-year inclusion of Arriva Rail North and Arriva Rail London contracts. #PUNCTUALITY

    Customer satisfaction remained almost stable at a good level. The customer SI is based on annual surveys in the UK Bus and UK Trains lines of business.

    The development of performance figures was positive, with an increase in the number of passengers and the volume produced and volume sold.

    • The main drivers in the bus business were the new services in the Netherlands and the acquisitions made in the previous year.
    • In rail transport, the full-year inclusion of Arriva Rail North and Arriva Rail London was a key factor.

    Economic development was also pleasing in the year under review. Overall, adjusted EBIT and adjusted EBITDA in­­creased. The start of operations and acquisitions in the previous year and the operating development of UK Trains and Mainland Europe had a positive effect here. Dampening effects resulted, inter alia, from exchange rate effects and developments at UK Bus.

    • The UK Bus line of business generated 20% of DB Arrivaʼs revenues, the UK Trains line of business generated 41%, and the Mainland Europe line of business generated 39%. The increase in revenues is mainly attributable to the full-year impact of Arriva Rail North (started in April 2016) and Arriva Rail London (started in November 2016) as well as of Limburg transport services in the Netherlands (started in December 2016). In addition, the acquisitions made in the Mainland Europe line of business and the operating development of UK Trains had a positive impact. On the other hand, exchange rate effects (development of the British pound) and declines in the UK Bus line of business had a dampening effect.
    • The development of other operating income (+8.9%) was mainly influenced by the acquisitions and the commence­­­­­ment of new services in the previous year. Ex­change rate effects, in contrast, had a dampening impact.

    The development of expense items was in particular characterized by changes in the service portfolio and exchange rate effects.

    • The increase in the cost of materials (+8.7%) and personnel expenses (+8.2%) resulted mainly from the ex­­pansion of services. Exchange rate effects had an offsetting effect.
    • The decrease in other operating expenses (7.4%) was caused by settlement changes to the CrossCountry franchise (end of the transport contract and direct award in the previous year) as well as exchange rate effects. The effects from the start of operations in the previous year had a dampening effect.
    • Depreciation (+9.4%) was significantly influenced by the start of operations in the previous year.

    Capital expenditure activity was driven primarily by vehicle purchases for UK Bus in connection with transport contracts in London won in the previous year and quality im­­prove­ment measures in regions outside London. The conclusion of vehicle projects for new transport services in the previous year in the Netherlands countered this effect.

    DB Arriva employs 29% of its employees in the UK Bus line of business, 23% in the UK Trains line of business and 47% in the Mainland Europe line of business. The number of employees increased, driven by acquisitions. The discontinuation of transport services countered this effect.

    Employee satisfaction is measured every two years. In the year under review, the focus was on follow-up processes. The follow-up workshop implementation rate for the 2016 employee survey was again very high.

    In bus and rail transport, we were able to again reduce specific greenhouse gas emissions compared to 2006.

      UK Bus line of business

      • Challenging market and competitive environment.
      • Extensive countermeasures initiated.
      • Market share of DB Arriva in London increases, countering the trend.
      • Weaker pound leads to negative exchange rate effects.

      UK Bus line of business

      Selected key figures (€ million)

      2017

      2016

      Change

      absolute

      %

      Passengers (million)

      707.1

      709.0

      –1.9

      –0.3

      Volume produced (million bus km)

      353.6

      364.9

      –11.3

      –3.1

      Total revenues

      1,064

      1,164

      –100

      –8.6

      External revenues

      1,063

      1,159

      –96

      –8.3

      EBITDA adjusted

      142

      164

      –22

      –13.4

      EBIT adjusted

      66

      90

      –24

      –26.7

      Gross capital expenditures

      149

      86

      +63

      +73.3

      Employees as of Dec 31 (FTE)

      15,935

      16,588

      –653

      –3.9

      The number of passengers remained roughly stable. Positive effects due to contract wins in London were offset by a reduction in operations outside of London. The volume produced decreased as a result of network adjustments in the regions, which were only partially offset by contract wins in London.

      Adjusted EBITDA and EBIT decreased primarily due to negative exchange rate effects and the weaker revenue development due to the challenging market environment. Positive effects from the sale of real estate in the previous year were non-recurring.

      • The negative revenue development resulted from exchange rate effects and lower revenues in the non-core business (among others due to the termination of patient transport services). New transport services in London had a positive effect.
      • Other operating income (+3.4%) increased at a low level.
      • The decrease in the cost of materials (15.4%) was mainly driven by exchange rate effects, declining vol­ume produced and lower levels of procurement in the non-core business.
      • Personnel expenses (5.1%) declined due to exchange rate effects. Adjusted for exchange rate effects, personnel expenses increased slightly.
      • Other operating expenses (3.6%) declined due to exchange rate effects.
      • Depreciation (+1.3%) was at the previous year’s level. Higher depreciation as a result of increased capital expenditures was largely offset by exchange rate effects.

      Vehicle acquisitions in connection with the transport contracts awarded in London as well as measures to improve services in the regions outside of London resulted in a significant increase in capital expenditures.

      The number of employees declined, largely due to the cessation of patient transport contracts.

        UK Trains line of business

        • Operations commenced in the previous year are driving development.
        • Overall positive development; strikes had a dampening effect.
        • Weaker pound leads to negative exchange rate effects.

        UK Trains line of business

        Selected key figures (€ million)

        2017

        2016

        Change

        absolute

        %

        Passengers (million)

        387.6

        240.6

        +147.0

        +61.1

        Volume sold (million pkm)

        11,091

        9,040

        +2,051

        +22.7

        Volume produced
        (million train-path km)

        126.2

        117.2

        +9.0

        +7.7

        Total revenues

        2,223

        2,114

        +109

        +5.2

        External revenues

        2,184

        2,078

        +106

        +5.1

        EBITDA adjusted

        124

        108

        +16

        +14.8

        EBIT adjusted

        89

        76

        +13

        +17.1

        Gross capital expenditures

        65

        47

        +18

        +38.3

        Employees as of Dec 31 (FTE)

        12,656

        12,799

        –143

        –1.1

        The performance development of UK Trains was clearly positive, mainly due to the full year impact of operations at Arriva Rail North (since early April 2016) and at Arriva Rail London (since mid-November 2016) in the previous year, as well as the full commissioning of the Oxford Parkway line at Chiltern Railways. Conversely, the cessation of the Tyne and Wear concession dampened development.

        Adjusted EBITDA and EBIT improved as a result of the above average revenue growth. Negative exchange rate effects and strikes at Arriva Rail North and CrossCountry had a noticeably dampening effect.

        • Revenue development was positive overall due to performance. Revenue growth was weakened by significantly negative exchange rate effects.
        • Other operating income (6.9%) declined due to exchange rate effects.
        • Cost of materials (+13.3%) and personnel expenses (+19.1%) were also significantly higher due to the full year impact of the new operations, while exchange rates had a positive effect.
        • Other operating expenses (18.8%) decreased due to the impact of funding changes following the end of franchise and commencement of the direct award in Cross-Country trains and currency effects, partially offset by the full year impact of the new operations.
        • Depreciation (+12.9%) increased due to capital expenditures, driven mainly by Arriva Rail North.

        The higher gross capital expenditures are attributable to Arriva Rail North and Arriva Rail London.

        The number of employees decreased due to the cessation of the Tyne and Wear transport contract. Growth at Arriva Rail North had the opposite effect.

        Mainland Europe line of business

        • Year-on-year impact of commencement of operations in the Netherlands is the main driver of development.
        • Positive effects from acquisitions.

        Mainland Europe line of business

        Selected key figures(€ million)

        2017

        2016

        Change

        absolute

        %

        Passengers (bus) (million)

        747.9

        708.6

        +39.3

        +5.5

        Passengers (rail) (million)

        100.7

        102.4

        –1.7

        –1.7

        Volume sold (rail) (million pkm)

        2,234

        2,190

        +44

        +2,0

        Volume produced (bus) (million bus km)

        721.9

        663.3

        + 58.6

        + 8.8

        Volume produced (rail)
        (million train-path km)

        51.5

        53.4

        – 1.9

        – 3.6

        Total revenues

        2,158

        1,933

        + 225

        + 11.6

        External revenues

        2,083

        1,848

        + 235

        + 12.7

        EBITDA adjusted

        323

        288

        + 35

        + 12.2

        EBIT adjusted

        165

        147

        + 18

        + 12.2

        Gross capital expenditures

        148

        204

        – 56

        – 27.5

        Employees as of Dec 31 (FTE)

        25,723

        24,523

        + 1,200

        + 4.9

        Performance development in the Mainland Europe line of business was positively influenced mainly by the newly commenced services in the Netherlands (Limburg and ZOWAD) that started mid-December 2016. In bus transport, the current year acquisition in Croatia and acquisitions from the previous year in Italy, Spain and the Czech Republic also led to an increase in performance. Performance declines in Denmark had an offsetting dampening effect, as did the closing of lines in rail transport in Sweden.

        Driven by the transport services commenced in the Netherlands at the end of the previous year and acquisitions, income increased more than expenses, with the result that adjusted EBITDA and EBIT improved significantly. In contrast, the challenging market environment in Denmark had a noticeably dampening effect.

        • Revenue development was positive, mainly driven by the commencement of operations in the Netherlands, acquisitions and rail replacement transport in Sweden. Performance declines in Denmark had a dampening effect.
        • Other operating income (+14.5%) increased mainly as a result of the commencement of operations in the previous year.
        • The acquisition and commencement of operations of the previous year also increased the cost of materials (+10.5%) and personnel expenses (+11.7%).
        • The increase in other operating expenses (+ 14.7%) and depreciation (+12.1%) was mainly due to the commencement of operations in the Netherlands in the pre­­vious year.

        Gross capital expenditures fell significantly. This resulted from the elimination of the previous years capital expenditures in the Netherlands in connection with the commencement of operations.

        The number of employees increased, mainly due to the acquisition of the Autotrans Group  during the year.

        The external revenue structure changed significantly as a result of the commencement of operations in the Netherlands. Consequently, the proportion of revenues in the Netherlands increased significantly.

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