Arriva Buses (including Greenline)

[MasterSpenny]

Arriva have recently filed their company accounts for Arriva Merseyside and Arriva North West for the year ending December 2021. These accounts should have been filed by September 2022, so they are nearly a year late filing their accounts. I always think it is quite telling on the state of a company's organisation and finances if they take so long to put a set of accounts together and get them audited. They managed to file accounts consistently on time until 4 years ago - but has gone downhill since then.

Still, they are more prompt than some of the other subsidiaries, Arriva Yorkshire and The Shires have not filed any accounts for 2021 yet.

The other odd thing about the Merseyside accounts is that they have written off the whole value of the bus fleet - all £48m of it (plus another £2m write off of property assets), turning what would have been a tidy £7m profit into a thumping loss. I can't really get my head around why they would do this..effectively saying there is no value to the bus fleet. Anyone got any ideas ?


With link to the Companies House for the accounts

ARRIVA MERSEYSIDE LIMITED overview - Find and update company information - GOV.UK

ARRIVA MERSEYSIDE LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

I wouldn’t be surprised if DB end up getting rid of Arriva sooner if they don’t fill in more accounts.

I believe there is a value to the fleet, including the batch of very expensive 10 Enviro400 FCEVs. I personally think that it might mean writing off the value means ordering new buses might not happen any time soon

 

[Mwanesh]

Arriva have recently filed their company accounts for Arriva Merseyside and Arriva North West for the year ending December 2021. These accounts should have been filed by September 2022, so they are nearly a year late filing their accounts. I always think it is quite telling on the state of a company's organisation and finances if they take so long to put a set of accounts together and get them audited. They managed to file accounts consistently on time until 4 years ago - but has gone downhill since then.

Still, they are more prompt than some of the other subsidiaries, Arriva Yorkshire and The Shires have not filed any accounts for 2021 yet.

The other odd thing about the Merseyside accounts is that they have written off the whole value of the bus fleet - all £48m of it (plus another £2m write off of property assets), turning what would have been a tidy £7m profit into a thumping loss. I can't really get my head around why they would do this..effectively saying there is no value to the bus fleet. Anyone got any ideas ?


With link to the Companies House for the accounts

ARRIVA MERSEYSIDE LIMITED overview - Find and update company information - GOV.UK

ARRIVA MERSEYSIDE LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

Arriva Shires was broken up with some depots into Arriva Midlands and Arriva Southern Counties. Maybe that's why there are no company accounts

 

[Volvodart]

The other odd thing about the Merseyside accounts is that they have written off the whole value of the bus fleet - all £48m of it (plus another £2m write off of property assets), turning what would have been a tidy £7m profit into a thumping loss. I can't really get my head around why they would do this..effectively saying there is no value to the bus fleet. Anyone got any ideas ?

Note 2 to the accounts explains the impairment. Basically they do not know what the fleet are worth in the open market so have written them down to zero.

 

[duncombec]

Arriva Shires was broken up with some depots into Arriva Midlands and Arriva Southern Counties. Maybe that's why there are no company accounts

Not quite - the Shires still exists, and the accounts are late. There was a director change as recently as 26th July.

The "Southern" management area consists of Southern Counties (Colchester, Gillingham, Harlow, Hemel Hempstead, Maidstone, Northfleet, Southend Stevenage, Tunbridge Wells, Ware and the Ebbsfleet and Watford Arriva Click operations), The Shires (Aylesbury, Luton, High Wycombe and Milton Keynes), and Midlands (Derby, Hicnkley, Leicester, Oswestry, Shrewsbury, Tamworth and Telford) - at least that's what the company fleetlist says!
(It can be downloaded under the Arriva heading here: https://www.oxford-chiltern-bus-page.co.uk/Weekly Briefing nr 258 050723.html)

 

[Pub]

Note 2 to the accounts explains the impairment. Basically they do not know what the fleet are worth in the open market so have written them down to zero.

There is always a scrap value to any vehicle

 

[F262YTJ]

Reading the accounts it appears Arriva expect to divest the company within 12 months. Writing off the cost off the fleet will make it a more attractive proposition to any potential suitors so they can trade with lower overheads.

 

[TheGrandWazoo]

Reading the accounts it appears Arriva expect to divest the company within 12 months. Writing off the cost off the fleet will make it a more attractive proposition to any potential suitors so they can trade with lower overheads.

Not quite - it says that DB is looking to sell Arriva Group as per the DB 31 December 2021 annual report

DB plans to divest of the Arriva group which could result in a change of ownership of the company within 12 months of the date of approval of these financial statements

So no real change to what they've said and before people get very excited and suggest that Arriva Merseyside will be sold in the next fortnight to <insert name of speculative purchaser>

 

[A0wen]

There is always a scrap value to any vehicle

There is - but it's how you value that. You could say scrap metal is £ x / ton and work it from there, but as that figure can fluctuate it would change every year. In the circumstances if the fleet has been depreciated over a certain period then holding them as zero value assets makes most sense as it is more realistic and if the division is sold, worst case the fleet realises zero, there's no loss to selling.

 

[F262YTJ]

Not quite - it says that DB is looking to sell Arriva Group as per the DB 31 December 2021 annual report

So no real change to what they've said and before people get very excited and suggest that Arriva Merseyside will be sold in the next fortnight to <insert name of speculative purchaser>

Maybe I did not express myself too well. The point I was trying too make was by writing off the value of the fleet would reduce outgoing costs (namely finance repayments). Saying that these accounts are for the period where the Wright Streetlites, 6006-6015, and Streetdecks, 4710-4733, were beginning to be delivered so my point could be contradictory.

Accounts can be interpreted in different ways. The ongoing saga of DB diverting Arriva continues but predominantly by retraction and the unfortunate closing of depots.

I personally feel the Merseyside and remaining North West ones (Rundown and Wythenshawe) are not particularly attractive to outsiders because of the franchising of Greater Manchester and potential franchising of Merseyside. It would not make any business sense to purchase them now when there would be no guarantee legally of winning those franchises.

The units probably will not get any substantial investment into the ageing fleet until Merseytravel and Steve Rotheram the Metro Mayor have rubber stamped their plans. Over the next 2 years some 200 or so VDL SB200/ Wright Pulsars will be life expired so their replacement will have to come from somewhere.

 

[overthewater]

Not quite - it says that DB is looking to sell Arriva Group as per the DB 31 December 2021 annual report

So no real change to what they've said and before people get very excited and suggest that Arriva Merseyside will be sold in the next fortnight to <insert name of speculative purchaser>

This is part of the reason why the operations keep on contracting, to make it more attractive for a buyer?

 

[duncombec]

This is part of the reason why the operations keep on contracting, to make it more attractive for a buyer?

It has been stated here many times before that Arriva expect every route, if not every journey, to make a profit in its own right. It's also a pretty known joke in the southern region, at least, that Arriva choose to lose tenders by putting in an expensive bid in the knowledge they'll likely be outbid.

I expect that has far more to do with contracting operations than a deliberate ploy to make it more attractive. (Are contracting businesses attractive? Surely most buyers would prefer expanding and innovative?)

 

[TheGrandWazoo]

This is part of the reason why the operations keep on contracting, to make it more attractive for a buyer?

Only to an extent. Arriva has to get capital from DB for new vehicle purchases; capital is limited and so they don't get what they need so you have life expired vehicles so cutting PVRs solves that problem.

However, it's a more intractable issue. As @M803UYA has explained in detail in the past, services have to make a certain return. Don't achieve that and they cut them; of course, if there's a fixed overhead (like a depot building), that means spreading the overhead over a smaller number of routes. That affects the viability of other routes, and so a vicious cycle ensues and ultimately they end up closing depots as loss-making.

I remember when Arriva first came into being; Northumbria was my local OpCo and had seven depots plus a number of outstations. Principle depot was Jesmond in Newcastle with an allocation of about 100, including NatEx services from Newcastle to London and a large schools and college operation. The site was always valuable, and it was expected that it would be cashed in eventually. Had I suggested the idea that it would be closed without replacement, and unilaterally ceding operation of large tracts of territory, I'd have been (rightly) ridiculed but that's where they've ended up.

DB don't want Arriva and they can't afford the investment so they're looking to offload, which is what they said. People get very excited about this OpCo or that OpCo being sold (oooh, I could see X OpCo being a good fit for Y Group) but I'd expect that they'd look to sell in one lump rather than piecemeal so you don't spend management time trying to engineer several different deals.

 

[Robertj21a]

Only to an extent. Arriva has to get capital from DB for new vehicle purchases; capital is limited and so they don't get what they need so you have life expired vehicles so cutting PVRs solves that problem.

However, it's a more intractable issue. As @M803UYA has explained in detail in the past, services have to make a certain return. Don't achieve that and they cut them; of course, if there's a fixed overhead (like a depot building), that means spreading the overhead over a smaller number of routes. That affects the viability of other routes, and so a vicious cycle ensues and ultimately they end up closing depots as loss-making.

I remember when Arriva first came into being; Northumbria was my local OpCo and had seven depots plus a number of outstations. Principle depot was Jesmond in Newcastle with an allocation of about 100, including NatEx services from Newcastle to London and a large schools and college operation. The site was always valuable, and it was expected that it would be cashed in eventually. Had I suggested the idea that it would be closed without replacement, and unilaterally ceding operation of large tracts of territory, I'd have been (rightly) ridiculed but that's where they've ended up.

DB don't want Arriva and they can't afford the investment so they're looking to offload, which is what they said. People get very excited about this OpCo or that OpCo being sold (oooh, I could see X OpCo being a good fit for Y Group) but I'd expect that they'd look to sell in one lump rather than piecemeal so you don't spend management time trying to engineer several different deals.

Totally agree. Surely, there's never been any serious suggestion that bits of the UK operations might get sold off piecemeal ? - it will all go in one transaction.

 

[overthewater]

I think DB has a much better chance selling off Arriva UK Bus if they had 2 or 3 lots. For any company to come during this period of time, would require a large cash reserve to help pay for fleet investment,

 

[TheGrandWazoo]

Totally agree. Surely, there's never been any serious suggestion that bits of the UK operations might get sold off piecemeal ? - it will all go in one transaction.

Suggestions on this forum….yes. Serious? I’d suggest not.

 

[Goldfish62]

Suggestions on this forum….yes. Serious? I’d suggest not.

Well, let's watch and wait...

 

[Simon75]

But some with some areas there would be competion issues ?

 

[WAB]

But some with some areas there would be competion issues ?

Yes, if they do have a wholesale takeover by anyone already in the UK market, they'll have to ditch certain garages.

If it gets sold as one unit as suggested by @TheGrandWazoo then I would expect some pruning to free up enough money to make the remaining units more viable.

However, I do remain sceptical that anyone will come forward for the whole lot given the amount of time Arriva has been on sale for.

 

[duncombec]

The other odd thing about the Merseyside accounts is that they have written off the whole value of the bus fleet - all £48m of it (plus another £2m write off of property assets), turning what would have been a tidy £7m profit into a thumping loss. I can't really get my head around why they would do this..effectively saying there is no value to the bus fleet. Anyone got any ideas ?

The same is true of Arriva Kent & Surrey and Arriva Kent Thameside, accounts for which were released yesterday. Both show a very significant loss as a result.

I have to keep reminding myself that these are for the year ending 2021, and thus are already 20 months old.

 

[Blindtraveler]

So what's it all about? Do they think that if they post thumping losses they'll get some additional government support that currently isn't there? Or have they found that in trying to sell the business they are getting rejected constantly due to the state of chunks of the fleet and building and depot facilities so by writing them all off they can sell the roots either piecemeal to any one who wants them or in chunks to operators that might have an interest?

 

[Surreyman]

So what's it all about? Do they think that if they post thumping losses they'll get some additional government support that currently isn't there? Or have they found that in trying to sell the business they are getting rejected constantly due to the state of chunks of the fleet and building and depot facilities so by writing them all off they can sell the roots either piecemeal to any one who wants them or in chunks to operators that might have an interest?

I'm not an accountant but am vaguely aware that you can off - set previous years losses?

 

[TheGrandWazoo]

Yes, if they do have a wholesale takeover by anyone already in the UK market, they'll have to ditch certain garages.

If it gets sold as one unit as suggested by @TheGrandWazoo then I would expect some pruning to free up enough money to make the remaining units more viable.

However, I do remain sceptical that anyone will come forward for the whole lot given the amount of time Arriva has been on sale for.

The Competition and Markets Authority will indeed be interested if an existing market player were to purchase Arriva, though less so if it were NatEx (Mobico).

It's been interesting to note that the two most recent major deals (Stagecoach and Go Ahead) were not UK transport operators but a German finance house and a coalition between an Australian operator/Spanish infrastructure firm. And indeed, when DB was looking to offload earlier, interest came from finance houses and infrastructure firms like I Squared.

Taking a hit on the value of the assets now may be a precursor to selling them (not imminently perhaps) but it does remove the challenge of establishing a realistic value that is acceptable to both sides.

 

[childwallblues]

I wouldn’t be surprised if DB end up getting rid of Arriva sooner if they don’t fill in more accounts.

I believe there is a value to the fleet, including the batch of very expensive 10 Enviro400 FCEVs. I personally think that it might mean writing off the value means ordering new buses might not happen any time soon

Are not the 10 Enviro 400 FCEVs owned by the Liverpool City Region?

 

[MotCO]

I'm not an accountant but am vaguely aware that you can off - set previous years losses?

Yes, there is something around setting off loses against taxes, but were their tax bills that large? Otherwise, it does strange to hit your bottom line, and presumably shareholder dividends, in this way.

 

[Richardr]

Note 2 to the accounts explains the impairment. Basically they do not know what the fleet are worth in the open market so have written them down to zero.

It's a combination of that and the alternative being their value in use considered as nil as the company is loss making.

 

[A0wen]

But some with some areas there would be competion issues ?

Yes, if they do have a wholesale takeover by anyone already in the UK market, they'll have to ditch certain garages.

Probably depends *who* to be fair. If it were Stagecoach or First and possibly Go Ahead, then yes, they'd probably have an issue - because of the market share they hold nationally.

If it were Blazefield or Centrebus, whilst there might be concerns about some areas, the authorities would probably ask the other large groups if they had any objections - which is what happened when Blazefield sold Sovereign to Arriva - the other major groups were approached and basically stated they weren't interested in the areas Sovereign served and had no plans to extend into it, so Arriva were allowed to progress with the purchase.

 

[Blindtraveler]

I can't see the Competition and Markets Authority letting Stagecoach by all of it. There would be some areas where there would be far too much dominance and then there are other areas where if Stagecoach were going to try and expand, and I'm surprised they haven't already done it, Transdev would be a good fit for a lot of the operations. If I'm honest, it would be interesting to see what they did with some of the less profitable bits of it. I don't know how much interest there is within first group for any expansion right now and actually my own personal prediction is that in the next few months they will advertise various operating areas separately and see who bites

 

[TheGrandWazoo]

I can't see the competition and markets boys letting stagecoach by all of it, there would be some areas where they would be far too much dominance and then there are other areas where if stagecoach we're going to try and expand I'm surprised they haven't already done it, transtev would be a good fit for a lot of the operations if I'm honest and would be interesting to see what they did with some of the less profitable bits of it. I don't know how much interest there is within first group for any expansion right now and actually my own personal prediction is that in the next few months they will advertise various operating areas separately and see who bites

Given that the last two major changes of ownership (Stagecoach and Go Ahead) didn't involve existing players in the UK market, why would you think that it would be another UK player that would be so interested in Arriva?

 

[WAB]

Given that the last two major changes of ownership (Stagecoach and Go Ahead) didn't involve existing players in the UK market, why would you think that it would be another UK player that would be so interested in Arriva?

Do you think there's much to interest an investment group? I'm no expert but their remaining territories aren't wonderful overall, and a lot of investment would be required.

 

[Surreyman]

Do you think there's much to interest an investment group? I'm no expert but their remaining territories aren't wonderful overall, and a lot of investment would be required.

Buying a UK wide bus operation isn't exactly a 'desirable investment' in a post covid world with reduced ridership and inevitable ongoing reductions in state support.
As previous posters have said, I am sure that DB would want to sell as one large Job-Lot.
Could we see a large Venture Capital Investor group buy Arriva UK (with or without Rail) and then sell it on in smaller parcels - recovering its original purchase price and a making a profit?