Arriva plc Annual Report and Accounts 2005 CONTENTS
DELIVERING THE
VISION
Arriva’s vision is to be recognised as the leading transport
services group in Europe.
Arriva is already one of the leading providers of public
transport in the UK. Our strategy is to build on this position
and to capitalise on the range of opportunities resulting from
the increasing pace of market liberalisation in mainland
Europe. A constant drive to improve our existing businesses,
selective investment in targeted acquisitions, and a clear focus
on winning and retaining contracts underpin our record of
consistent delivery.
Arriva delivered a strong performance in the year. We made
further acquisitions in mainland Europe and have achieved
organic growth, including contract wins, in the countries in
which we operate. Building relationships with stakeholders
and contract awarding authorities, often national or local
governments, has established a strong base for the future.
In 2005, we continued to make significant progress towards
achieving our strategic goals and achieving our vision. We are
working to deliver further progress in 2006.
01 Highlights of the year
02 Chairman’s statement
06 Group development across Europe
08 Chief Executive’s review
14 Financial review
20 Corporate responsibility review
26 Board of directors
28 Directors’ report
30 Statement of directors’ responsibilities
31 Directors’ remuneration report
38 Corporate governance
43 Independent auditors’ report on the
Group financial statements
44 Financial statements
48 Accounting policies
52 Notes to the accounts
76 Group five-year financial summary
77 Extracts from the report on transition to
IFRS
80 Parent company financial statements
88 Statement of directors’ responsibilities on
the parent company financial statements
89 Independent auditors’ report 
on the parent company financial
statements
90 Financial calendar, registered office and
advisors Arriva plc  Annual Report and Accounts 2005  1
www.arriva.co.uk
HIGHLIGHTS OF THE YEAR
• Strong performance from mainland Europe
operations: 
– 37 per cent increase in operating profit* 
with revenue up 18 per cent 
– contract wins and acquisitions provide a
platform for continuing growth
• UK Bus operating profit* increased by 7 per cent
despite cost pressures
• Improved strategic focus and additional 
resources for core business growth provided 
by vehicle rental disposal
• Adjusted EPS* at 45.0p (2004: 45.1p)
• Basic EPS increased to 43.7p (2004: 42.6p)
• EBITDA excluding vehicle rental up 8 per cent 
• Final dividend up by 5 per cent to 14.77p, 
giving a total dividend for the year of 19.84p 
*Excluding goodwill impairment, intangible asset
amortisation and exceptional items.
BASIC EARNINGS 
PER SHARE* (P)
EBITDA (£M)
DIVIDEND PER SHARE (P)
OPERATING
PROFIT* (£M)
45.0p
£127.4m
£246.8m
19.84p 2 Arriva plc  Annual Report and Accounts 2005
CHAIRMAN’S STATEMENT
PROGRESS
DELIVERING Arriva delivered a strong performance in 2005.
Firm management of our businesses and continued
growth from our operations in mainland Europe
ensured that profits were maintained in the first
full year without our Northern rail franchise, and
despite rising fuel costs. At the same time, we won
new contracts and made further acquisitions that
will underpin sustained growth. 
Our ability to grow our core business in the future
was enhanced by the disposal of our vehicle rental
division, which further focused the Group on its core
strategy and strengthened the balance sheet.
Group revenue in 2005 was £1,626.8 million 
(2004: £1,759 million) and Group operating profit
was £123.1 million (2004: £126.3 million). As
expected, revenue was lower after the loss of the
£285 million contributed in 2004 by the Arriva Trains
Northern franchise, but it has been substantially
replaced by growing turnover and profits from our
investment in mainland Europe. 
Basic earnings per share increased to 43.7p 
(2004: 42.6p). We have maintained earnings per
share, excluding goodwill impairment, intangible
asset amortisation and exceptional items, at 45.0p 
(2004: 45.1p). 
“As market liberalisation gathers 
pace in mainland Europe, we are
benefiting from our established
market positions on the ground. We
believe that mainland Europe will
continue to provide opportunities 
for us to grow profitably.”
SIR RICHARD BROADBENT CHAIRMAN Arriva plc  Annual Report and Accounts 2005  3
www.arriva.co.uk www.arriva.co.uk
Excluding our vehicle rental operations, EBITDA
(earnings before interest, tax, depreciation, goodwill
impairment and intangible asset amortisation) rose
eight per cent to £213.1 million (2004: £197.8 million).
The Board is recommending a final dividend of
14.77p per share. Together with the interim dividend
of 5.07p per share paid in October 2005, this makes
a total dividend of 19.84p per share, five per cent
higher than last year, maintaining our policy of stable
dividend growth. The final dividend will be paid on 
2 May 2006 to shareholders on the register at the
close of business on 31 March 2006.
In my report last year, I identified three areas of focus.
First, our strategic goal of being recognised as the
leading transport services organisation in Europe.
Second, the reorganisation of our senior management
to reflect this focus. And third, ensuring good
corporate governance to support Arriva’s growth. 
We have made progress in all three areas. 
STRATEGY
Our strategy of selective investment in operations
outside the UK has increased our resilience and
provided us with further growth in mainland Europe.
During 2005 we won significant bus and rail contracts
in Germany, the Netherlands and Scandinavia, and 
we have made acquisitions in Germany and Italy,
consolidating our existing position. In January 2006
we won our first rail contract in Sweden. We now 
run bus services in seven mainland European countries
and have rail operations in three, with a fourth
(Sweden) in the pipeline. As market liberalisation
gathers pace in mainland Europe, we are benefiting
from our established market positions on the ground.
We believe that mainland Europe will continue to
provide opportunities for us to grow profitably.
In the UK we continue to be a major public transport
operator. Arriva is the largest bus operator in London,
with its growing populations of residents and
commuters. We have continued to invest both in
London and in the UK regions to maintain our leading
position. We have a long-term presence in UK rail with
Arriva Trains Wales operating the Wales and Borders
franchise and we are seeking to develop our rail
portfolio in the UK as well as mainland Europe. We
have pre-qualified for the South Western passenger
rail franchise which will be awarded later in 2006.
Arriva has a strong balance sheet. Our substantial cash
generation, combined with the recent vehicle rental
disposal, gives us the flexibility to continue to take
advantage of high quality investment opportunities.
Arriva has a strong balance sheet. Our 
substantial cash generation, combined with 
the recent vehicle rental disposal, gives us the
flexibility to continue to take advantage of 
high quality investment opportunities. 4 Arriva plc Annual Report and Accounts 2005
CHAIRMAN’S STATEMENT
continued
MANAGEMENT 
I reported last year how in March 2005 we
reorganised the senior management team under 
the Chief Executive, Bob Davies, including the
appointment of David Martin as Deputy Chief
Executive and Group Managing Director – Operations.
In addition to aligning the management of the
business with our strategic goals, the changes paved
the way for succession at Chief Executive level. 
In December we announced that Bob would retire 
at the AGM in April 2006 after more than seven 
years in post, to be succeeded by David. 
Bob’s vision and leadership over the last seven years
have transformed Arriva, giving the company both 
a focused strategy and a record of consistent 
delivery. He has led Arriva to be one of the leaders
within its sector, and he has developed an excellent
management team, which will ensure continuity
under David’s leadership.  The Board wishes to place
on record its appreciation of Bob’s outstanding
contribution to Arriva plc.
The management development process continued
during the year with a number of additional senior
appointments being made below Board level. 
Our intention is to continue to strengthen our
management team to take the Group forward.
GOVERNANCE
As Arriva grows, it is important that corporate
governance develops in line with best practice to
support ambitious and well-controlled business
development. In 2005 we appointed two new non-
executive directors, with the result that 
from April 2006 the Board will have three executive
directors and four independent non-executive
directors, in addition to me as Chairman.
Nick Buckles, Chief Executive of Group 4 Securicor
plc, joined the Board in July. He has extensive
experience of operating businesses in the UK and
mainland Europe, which has already enabled him 
to make a valuable contribution to the Group. Steve
Williams, Company Secretary and General Counsel 
of Unilever, joined the Board in September as our
Senior Independent Director. He brings a wealth of
experience of both corporate governance and
operations across a wide range of markets. 
In June, Michael Allen retired as a non-executive
director, having served on the Board for eight years.
The Board wishes to thank him for his contribution 
to the Group. Arriva plc Annual Report and Accounts 2005  5
www.arriva.co.uk
During 2005, we also reviewed the terms of reference
and membership of all the Board Committees. The
new terms of reference are available on our website.
We reviewed the financial and other authorities of
the Board, making changes where appropriate to
reflect the scale and complexity of our current
business. Following an internal Board evaluation
exercise, the Board’s agenda was re-orientated to 
give more emphasis to strategic issues central to
Arriva’s business development.
This is an exciting time for Arriva as we strive for
further profitable growth and development in
markets where increasing liberalisation provides both
opportunities and competitive challenges. We are very
aware that public transport is a service business and
ultimately it is the quality of the service we provide
that will underpin our leadership in the transport
sectors we serve. 
To meet these challenges, our employees work hard
to meet our customers’ needs. The events of 7 July in
London showed again the quality and commitment of
Arriva’s employees and I would like to express the
Board’s appreciation and thanks to all our employees
for their contribution to another successful year for
the Group. 
SIR RICHARD BROADBENT CHAIRMAN
Ultimately it is the quality of the service we
provide that will underpin our leadership in the
transport sectors we serve.
“This is an exciting time for Arriva as we
strive for further profitable growth and
development in markets where increasing
liberalisation provides both opportunities
and competitive challenges.”
SIR RICHARD BROADBENT CHAIRMAN 6 Arriva plc  Annual Report and Accounts 2005
GROUP DEVELOPMENT ACROSS EUROPE
1999
2000
2001
2002
2003
2004
2005
Our route to becoming Europe’s leading
transport services operator started in 1997
when the company entered mainland Europe
with the acquisition of Unibus, Denmark. In the
same year, the Arriva name was introduced.
Arriva acquires Bus
Danmark, building
on its position in
Scandinavia. After
gaining 20 per
cent of the Dutch
bus market in
1998, it enters 
the Dutch rail
sector through
NoordNed, a joint
venture with the
state operator. 
It also enters 
the Spanish bus
market and
disposes of 
Arriva Automotive
Solutions in 
the UK.
Arriva acquires
MTL in the 
UK with bus
operations and
two rail franchises
in the north of
England. It enters
the Portuguese
bus market,
acquiring four
family-owned
businesses in the
north west of the
country.
Arriva acquires 
a third Danish 
bus company,
Combus, and
wins the first two
passenger rail
franchises in
Denmark under
new legislation 
to privatise the
industry.
Arriva announces
the decision to
dispose of its 
UK Motor 
Retail business. 
It consolidates 
its position in
Portugal with a 
51 per cent stake
in TST and
acquires a bus
operator in
Mallorca. It also
acquires SAB,
making a
significant entry 
in the Italian bus
market.
Arriva commences
operation of the
new Wales and
Borders rail
franchise in the
UK and the two
Danish rail
franchises in
Jutland. It takes
100 per cent
control of both
TST in Portugal
and of NoordNed,
its Dutch bus and
rail joint venture.
Arriva enters the
German transport
market, acquiring
rail companies PEG
and Regentalbahn.
It also consolidates
its position in the
Danish bus
market, with the
acquisition of
Wulff, and in Italy,
with a 49 per cent
stake in bus
operator SAF 
and an option to
purchase a further
11 per cent.
Arriva enters 
the German bus
market with its
acquisition of
Sippel Group. 
In Italy, the
shareholding in
SAF is increased
from 49 per cent
to 60 per cent,
and an 80 per
cent stake in
Italian bus
company SADEM
is acquired.
Significant bus and
rail contract wins
are announced in
Germany, the
Netherlands and
Scandinavia. Arriva plc  Annual Report and Accounts 2005  7
MARKET OVERVIEW
www.arriva.co.uk
UNITED KINGDOM
BUS
17,700 employees
6,000 vehicles
RAIL
1,900 employees
116 trains
BUS AND COACH 
50 employees
Outside the capital, bus services are deregulated and
operate commercially. In London all bus services are
regulated and Arriva operates as a contractor to Transport
for London. In UK Rail, the Government awards passenger
rail franchises through a competitive bid process. The Bus
and Coach business provides distribution, sales, rental and
finance services for the bus and coach market in the UK.
GERMANY
BUS
400 employees
200 vehicles
RAIL
600 employees
115 trains
Tendering of regional rail services by federal states is
becoming established. In the German bus market
tendering has started in the Rhine-Main region. 
IBERIA
BUS
2,000 employees
1,100 vehicles
The Portuguese and Spanish bus markets are
fragmented with long-term concessions granted to local
operators without a formal tendering process. In Lisbon
and Porto competitive tendering by new metropolitan
authorities is expected.
ITALY
BUS
2,700 employees
1,700 vehicles
Italy has a public transport market similar in size to the
UK. Public tendering for urban and regional bus services is
being progressively introduced throughout the country.
NETHERLANDS
BUS
2,100 employees
1,300 vehicles
RAIL
350 employees
78 trains
Competitive tendering is a key feature of the Dutch bus
market. All regional bus transport must be awarded to
contractors through competitive tendering by 2010.
SCANDINAVIA
BUS
4,200 employees
1,600 vehicles
RAIL
360 employees
44 trains
Both the Danish and Swedish bus markets are fully open
to competition. Local authorities, which manage
contracts through competitive tendering, provide the
funding for contracts. Competitive tendering for rail
services is being progressively introduced. 8 Arriva plc  Annual Report and Accounts 2005
CHIEF EXECUTIVE’S REVIEW
OPERATING REVIEW
We have achieved strong results across the
Group as a whole, delivering consistently in line
with our strategy. Increased fuel costs and the
one-off reduction in revenue and profit from the
loss of the Arriva Trains Northern franchise have
been substantially offset by growth elsewhere,
demonstrating the resilience that our strategy
gives us. We made further progress in mainland
Europe, winning significant contracts in northern
Europe, and acquiring businesses in Germany
and Italy, achieving the European growth that
we planned. 2006 has started well with a further
European rail tender win.
UK BUS
Our UK Bus operations achieved an operating 
profit of £68 million before exceptional items 
(2004: £63.6 million) on revenue of £697.5 million
(2004: £651.5 million), maintaining margins at just
under 10 per cent, and increasing absolute profits
despite cost pressures in the business, including a fuel
cost increase of more than £6 million for 2005.
Arriva’s policy is to fix fuel prices 12 to 15 months
ahead. We have now fixed the price for our fuel
requirements for 2006, and this will result in additional
costs for this division of approximately £14 million. 
We are working to offset this as far as possible 
through further revenue growth underpinned by
effective marketing and strong partnerships with local
authorities, combined with effective cost management.
DELIVERING
PERFORMANCE
“Arriva has an excellent portfolio of
growing, cash-generative businesses.
Our acquired businesses are
delivering profitable growth and 
we have significant opportunities
for further strategic investment.”
BOB DAVIES CHIEF EXECUTIVE Arriva plc  Annual Report and Accounts 2005  9
www.arriva.co.uk
REGIONS
It has been a year of significant change for our UK
regional business. Following the reorganisation early
in 2005, we have restructured the business to reduce
overheads and embarked on a drive for innovation 
in the way we approach the market. We continue 
to develop our techniques for in-depth analysis of
population and neighbourhood profiles to find how
we can meet demand more effectively. We are also
running trials of fresh marketing and information
initiatives to improve services, and make it easier 
and more convenient to travel by bus. 
For the first time in several years, we are seeing
industry consolidation with a number of smaller
operators being acquired by major groups. We
acquired operations in Stevenage at the beginning of
2005 and in July we bought the assets of Blue Bus,
operating in Bolton and north of Manchester. In
February 2006 we acquired Premier Buses, operating
in Milton Keynes. We also recently contracted to
acquire an operation in Bishop Auckland. 
The reliability of services is vital in broadening the
appeal of buses to the public. In January 2006 the
Secretary of State for Transport, Alastair Darling,
called on the industry to develop partnership schemes
which deliver a new way of planning and operating
bus networks in big urban areas, with local
authorities and bus operators working together to
improve services. We fully support this approach. 
Arriva is committed to working in partnership with
local authorities. In 2005 we delivered the first year 
of a five-year programme to develop services on
Merseyside. Further partnership schemes in Durham,
Thurrock and Medway have seen the introduction of
new network designs, new and refurbished vehicles
and improved information and facilities at bus stops.
Passenger numbers have increased as a result of
improved travel experiences and reduced delays.
The introduction in April 2006 of free off-peak local
bus travel in England for passengers who are over 60
or who have disabilities is an important initiative. On
the basis of similar experience in Scotland and Wales
we expect this initiative to stimulate growth. We are
currently in detailed discussions with local authorities
to establish how the individual schemes will operate. 
2005 has been an important year in the development
of our UK regional business. The action we have taken
positions the business well to absorb future cost
increases and we believe the outlook is favourable. 
2005 has been an important year in the
development of our UK regional business. 10 Arriva plc  Annual Report and Accounts 2005
LONDON
Arriva is the largest bus operator in London,
accounting for more than 19 per cent of the 
network at the end of 2005. Improved operational
performance led to better service delivery and
enhanced our revenue under Quality Incentive
Contracts. Over the last five years we have invested 
a total of £159 million in new vehicles for London,
substantially renewing and expanding the fleet.
We expect to see continuing increases in usage of 
the overall London bus network. Transport for London
continues to predict long-term growth as London’s
residential and commuting populations increase. 
The actual and attempted bombings in July had a 
big effect on public transport in London. Passenger
numbers for our London tourism and sightseeing
operation, The Original Tour, fell by 40 per cent in the
peak tourist months but the business is well placed to
regain its position as confidence increases and tourist
numbers return to previous levels.
UK TRAINS
Our UK Trains division achieved an operating profit 
of £14.9 million before intangible asset amortisation
(2004: £31.9 million) on revenue of £239.4 million
(2004: £509 million). Operating profit includes some
residual income from the Arriva Trains Northern
franchise that ceased in December 2004. Arriva 
Trains Wales (ATW) was our only UK Trains business
operating in 2005. 
Our ATW franchise runs until December 2018, and 
is supported by the Welsh Assembly Government
(WAG) which, in partnership with Arriva, is
committed to bringing forward innovation and
investment. In January 2005 the WAG announced
funding of £50 million over the life of the franchise to
allow the leasing of additional trains to accommodate
high demand for peak time services in the Valley Line
network. In partnership with the WAG, Arriva
announced a £3 million station upgrade programme
in North Wales, and the installation of CCTV on
trains. During 2005 Arriva made further investments
in stations to improve the service for our customers
and enhance revenue. 
In December 2005, following extensive consultation,
we introduced a new timetable adding 950 services 
a week across the network and providing more seats
on peak time train services among other benefits. 
Passenger numbers, particularly in South Wales’
Valleys, are continuing to grow significantly. The 
new timetable has started to deliver improvements 
in operating performance. We remain focused on
delivering continued improvements, listening to our
customers, and working with stakeholders to ensure
the franchise has the resources needed to respond to
growing demand.
We see opportunities to grow our position in UK rail,
and are pleased to have pre-qualified for the South
Western passenger rail franchise. We have the
resources in place to develop robust bids for franchises
which may be tendered in the coming months.
CHIEF EXECUTIVE’S REVIEW 
continued
ARRIVA WORKS POSITIVELY
TO PROMOTE ACCESSIBLE
PUBLIC TRANSPORT AS A
TRAVELLING CHOICE
TO IMPROVE SERVICES 
FOR OUR CUSTOMERS WE
CONTINUE TO INVEST IN
NEW TICKET MACHINES,
BARRIERS AND STATION
FACILITIES AND SECURITY  Arriva plc  Annual Report and Accounts 2005  11
www.arriva.co.uk
MAINLAND EUROPE
Our mainland European division delivered an excellent
performance, increasing operating profit by 37 per
cent to £48 million before goodwill impairment,
intangible asset amortisation and exceptional items
(2004: £35.1 million) on revenue of £621.2 million
(2004: £525.6 million). Included in the results are 
£19 million of revenue and £2 million of operating
profit from acquisitions in the year. Indexation on
contracts and state-approved fare increases helped 
to limit the impact of increased fuel costs. 
Revenue from our mainland European operations 
has doubled over the last three years. We have
consistently maintained that local authorities in
mainland Europe would introduce competitive
tendering to reduce the cost of providing public
services, in response to legislative and economic
pressures. We see this as the key driver for growth 
for Arriva outside the UK, as the volume of contract
work available to private operators increases. 
This view has been confirmed clearly during the year
across our businesses in northern Europe, where we
have seen a number of significant contract wins. In the
Netherlands, Arriva won the contract to operate all
regional rail services for the next 15 years in the
northern provinces of Friesland and Groningen, with
projected total revenue of around £500 million. We also
won a 120 bus six-year contract in Waterland, north of
Amsterdam, worth £120 million in lifetime revenue.
In Germany, there is now an accelerating programme
of tendering of regional rail services, as we
anticipated when we entered this market in 2004. 
In November we won a ten-year contract, with total
revenue of some £150 million, to operate rail services
in Bavaria between Munich and towns close to the
border with the Czech Republic.
The German bus market is also introducing tendering,
although the pace is slower than in the rail sector. In
February, we acquired Sippel, a bus company with
operations in the Rhine-Main area, where a five-year
programme of tendering has been established. Sippel
is part of a consortium that will operate the team and
FIFA official coaches for the World Cup in Germany in
2006. It will also operate additional buses for
spectators.
Our operations in Scandinavia have also increased
through tender wins. We won new contracts in the
Swedish towns of Helsingborg, Trelleborg and Malmö
and remain the largest bus operator in Denmark with
a good rate of contract retention. Building on our UK
experience of introducing technology has significantly
helped us to win these tenders, where we are
adopting ‘black box’ journey recorders similar to
those we have introduced in the UK, passenger
information systems and CCTV systems. 
OUR NEW TRAIN TIMETABLE 
IN WALES, INTRODUCED IN 
DECEMBER 2005, IS DELIVERING
IMPROVED PERFORMANCE 
FOR CUSTOMERS 12 Arriva plc Annual Report and Accounts 2005
CHIEF EXECUTIVE’S REVIEW 
continued
In January 2006 we won our first rail contract in
Sweden, to operate the Pågatåg regional rail services
in the south of the country. The nine-year contract is
initially worth approximately £15 million of revenue
per annum, and has considerable potential for
growth with no significant capital expenditure.
More rail tendering in Denmark is expected in 2006.
We expect to participate fully, building on our
reputation for excellent delivery. Our train punctuality
averages 97.5 per cent and we have received bonuses
for reliability and customer satisfaction throughout
the year.
In southern Europe, we have highlighted Italy as
another key area for development, as the Italian public
transport market is one of the largest in Europe. In
October, we completed the acquisition of eighty per
cent of the SADEM bus businesses, which operate in
the Piemonte and Valle d’Aosta regions of northern
Italy to the west of our other operations. SADEM 
co-managed, with GTT of Turin, all transport for the
2006 Winter Olympics. This involved procurement and
planning of an operation which ran up to 1,000
coaches and buses a day for competitors and
spectators.
Our other bus operations in Italy, SAB and SAF, have
been excellent investments. We now own 60 per cent
of SAF, having purchased a further 11 per cent in
December 2005. We have also increased our
shareholding in other Italian businesses.
In November, the Portuguese Competition Authority
denied clearance of our proposed joint venture with
Barraqueiro Group to combine the Lisbon public
transport operations of the two companies. We are
appealing the decision. 
In the summer we sold part of our Spanish operation
in Galicia for £7.7 million, in line with book value. 
The sale of the more rural operations has allowed the
business to focus on working with the metropolitan
transport authorities to develop our operations in 
La Coru
~
na and Ferrol.
As we expand our operations in mainland Europe we
continue to innovate and gain valuable experience
which strengthens the management of Arriva as a
whole. We were the world’s first transport company
to use palm oil based bio-diesel for rail services, on
several of our trains in Germany. Our introduction of
contactless ‘smart card’ ticketing in Portugal went
well, and is enabling us to gather valuable market
information to tailor services more closely to market
requirements. Our introduction of new trains into
Denmark and Germany was on time and notably free
of teething problems. We are providing experimental
‘on demand’ bus services in some of Italy’s high
mountain valleys such as Alta Valle Brembana. 
As the pace of liberalisation picks up across Europe our
proven expertise and innovative thinking make us well
placed to achieve further growth and market success.
“As we expand our operations in mainland
Europe we continue to innovate and gain
valuable experience which strengthens the
management of Arriva as a whole.”
BOB DAVIES CHIEF EXECUTIVE Arriva plc Annual Report and Accounts 2005  13
www.arriva.co.uk
BUS AND COACH
Bus and Coach achieved an operating profit of 
£3 million (2004: £3.2 million) on revenue of 
£13.1 million (2004: £13.8 million). The business
continues to match its resources closely to the needs of
the market place and has, once again, achieved a solid
profit performance with little new capital requirement.
VEHICLE RENTAL
Our vehicle rental business achieved an operating
profit of £10.1 million before exceptional items
(2004: £12.6 million), on revenue of £55.6 million
(2004: £59 million). In common with the rest of the
sector, we experienced downward pressure on daily
hire rates as well as lower residual values and reduced
profits. In February 2006 we sold the business to
Northgate plc.
OUTLOOK
We are driving the business forward with a clear vision
of becoming the leading transport services organisation
in Europe. We expect strong growth to continue
through acquisitions and tendering opportunities. We
have businesses in seven mainland European countries
and are confident that, with our established presence,
Arriva is in a strong position to benefit from the
increasing liberalisation of European transport markets.
We see further opportunities for our UK bus operations
and are committed to bringing forward innovative
approaches to developing this market. 
Arriva has an excellent portfolio of growing, cash-
generative businesses. Our acquired businesses are
delivering profitable growth and we have significant
opportunities for further strategic investment.
BOB DAVIES CHIEF EXECUTIVE
WE HAVE INVESTED IN EASY
ACCESS BUSES, NIGHT BUS
SERVICES AND IMPROVED
SECURITY TO GROW AND
DEVELOP REGIONAL BUS
SERVICES IN MERSEYSIDE 14 Arriva plc  Annual Report and Accounts 2005
FINANCIAL REVIEW
FINANCIAL REVIEW
The Group delivered a robust financial
performance in 2005. Against the background 
of substantially higher fuel prices and the end 
of a significant UK rail franchise, Arriva Trains
Northern (ATN), in December 2004, earnings per
share, excluding goodwill impairment, intangible
asset amortisation and exceptional items were
broadly maintained, at 45.0p (2004: 45.1p). 
The improvement in basic earnings per share, 
at 43.7p (2004: 42.6p) demonstrated the
financial resilience of the Group, the increasing
contribution from our growing mainland Europe
operations, and reflected a reduced tax charge. 
This report represents the first set of annual results
prepared using International Financial Reporting
Standards (IFRS). The transition to IFRS has not had 
a material impact on cash flow or reported profits
except for changes to amortisation of goodwill and
intangible assets. Adjustments to the balance sheet,
particularly in respect of accounting for pension
schemes, were more substantial.
We have continued to make substantial investments
for future growth, making use of the strong cash
generation that our business provides. The financial
position of the Group remained strong at year end,
whilst the £129 million disposal of the vehicle 
rental division in February 2006 has provided
additional resources to assist the future development
of the Group.
DELIVERING
FINANCIAL STRENGTH
“The Group’s strong balance sheet at the
year end has been further strengthened
by the proceeds of the disposal of the
vehicle rental division in February
2006. The Group is therefore well
positioned to take advantage of
opportunities to invest through both
organic growth and acquisition.”
STEVE LONSDALE GROUP MANAGING DIRECTOR – FINANCE Arriva plc  Annual Report and Accounts 2005  15
www.arriva.co.uk
RESULTS
Revenue in 2005 decreased by 8 per cent to 
£1,626.8 million (2004: £1,759 million). The
reduction was due to the expiry of the ATN franchise
which had contributed £285 million to revenue in
2004, but was partially offset by increased revenue
from recent German and Italian acquisitions. Group
operating profit post goodwill impairment, intangible
asset amortisation and exceptional items was 
£123.1 million (2004: £126.3 million), largely
reflecting the impact of these changes.
The interest cost for the year was £15.2 million
(2004: £17 million). The reduction principally reflects
the inclusion, in the preceding year, of the £4 million
cost of pre-paying US Private Placement loan notes 
in December 2004. Net debt was higher in 2005 
due to capital expenditure and investment through
acquisitions. However, the underlying average cost 
of debt fell, the result of an increased proportion of
Euro denominated debt in the overall debt structure. 
Before goodwill impairment, intangible asset
amortisation and exceptional items, operating profit
decreased to £127.4 million (2004: £132.8 million). 
An analysis of this operating profit by division is shown
in the segmental results. The increased charge for
goodwill impairment and intangible asset amortisation
of £6.6 million (2004: £3.2 million) was largely the result
of the full-year impact of acquisitions made in 2004.
Exceptional profits of £2.3 million (2004: £1 million)
arose from the disposal of properties. There were 
no exceptional costs in 2005 (2004: £4.3 million
restructuring costs).
Profit before taxation fell slightly to £107.9 million
(2004: £109.3 million). The taxation charge was
£21.6 million (2004: £26 million), an effective rate of
20 per cent. The effective rate of tax is reduced from
the standard rate by tax losses brought forward and
release of provisions for taxation, no longer required,
from prior periods. Profit for the year increased 4 per
cent to £86.3 million (2004: £83.3 million).
CASH FLOW
EBITDA (earnings before interest, tax, depreciation,
goodwill impairment and intangible asset
amortisation) increased by five per cent to 
£246.8 million (2004: £235.5 million) contributing to
net cash inflow from operating activities for the year
of £207.9 million (2004: £254.6 million). The increase 
in EBITDA is the result of increased investment in
profitable growth through acquisitions and capital
expenditure and was achieved despite the loss of
contribution from ATN. Settlement of trading
balances following the end of the ATN rail franchise
caused a significant working capital outflow early in
the year and a reduction in reported net cash inflow.
We have continued to make substantial
investments for future growth, making use of the
strong cash generation that our business provides. 16 Arriva plc  Annual Report and Accounts 2005
We increased net capital expenditure to 
£195.9 million compared with £125.5 million in the
previous year. Expenditure on new buses in the UK
was £65.1 million (2004: £47.8 million) including
£42.2 million (2004: £25 million) invested in new
buses in London during the year. Overseas capital
expenditure on vehicles increased to £95.6 million,
from £42 million in the previous year as the scale of
the Group’s mainland Europe activities increased.
Nearly half of this expenditure was incurred in the
Netherlands following major bus and rail contract
awards. Net capital expenditure on short-term rental
vehicles decreased from £29.9 million in 2004 to
£25.3 million, reflecting the harder trading
environment during the year.
Acquisition expenditure in the year was £46.3 million
and included:
• Bus company Sippel in Germany, purchased for
£11.6 million (with an additional maximum
performance-related consideration of £2.1 million
up to 2008)
• An increased shareholding in our businesses in
Italy, from 49 per cent to 60 per cent in SAF in
December 2005 for £4.3 million; SAIA from 
51 per cent to 88 per cent in February 2005 for
£5.2 million; and additional consideration for SAB
of £4.3 million
• An increased shareholding in RAG, in Germany,
from 89.8 per cent to 96.7 per cent for 
£3.8 million
• The acquisition of 80 per cent of bus company
SADEM, in Italy, for £9.5 million
• Two acquisitions of smaller bus businesses in the
UK for £6.9 million. 
The increased shareholding in SAF has created an
additional intangible asset, amounting to £1.9 million,
in line with the acquisition of the initial shareholding
in 2004. Provisional goodwill arising on the
transactions was £22.5 million.
Servicing the debt and equity through interest and
dividend payments absorbed £52.9 million 
(2004: £52.6 million), whilst there were corporation
tax payments during the year of £25.8 million. New
shares issued on exercise of share options generated
£3.8 million. There was an increase in net debt to
£435.9 million (2004: £350 million) mainly reflecting
the increased acquisition activity and increased
investment in trains and buses arising from tender
awards. The ratio of net debt to EBITDA at the end 
of the year was 1.8 times.
On 3 February 2006, the Group completed the
disposal of the vehicle rental business for a total
consideration of £129.3 million, comprising 
£53.9 million for the equity in the business, and
£75.4 million in reduced debt. £4.2 million of 
the consideration is deferred to June 2006. The
transaction represents a £23 million surplus over net
assets before any adjustments arising from the
completion accounts process and selling expenses.
FINANCIAL REVIEW 
continued
Expenditure on new buses in the UK was 
£65.1 million (2004: £47.8 million) including 
£42.2 million (2004: £25 million) invested in 
new buses in London during the year.
ACROSS OUR BUSINESSES
WE DEVELOP INNOVATIVE
TRAVEL CAMPAIGNS WHICH
OFFER VALUE FOR MONEY
AND ENCOURAGE GREATER
USE OF PUBLIC TRANSPORT
WE ARE AN EXPERIENCED
EUROPEAN RAIL OPERATOR
DELIVERING SERVICES IN FOUR 
EU COUNTRIES. IN EARLY 2006 
WE ALSO ANNOUNCED OUR FIRST
RAIL CONTRACT WIN IN SWEDEN Arriva plc  Annual Report and Accounts 2005  17
www.arriva.co.uk
Following the disposal, on a pro-forma basis, the 
net debt at the year end would have been reduced 
to £306.6 million.
IFRS
The main impacts of IFRS on the Group’s reported
results, as compared with the results for 2004
reported under previous accounting standards, are 
as follows:
• An increase in profit before tax for the
comparative year ended 31 December 2004 of
£10.9 million, principally the result of acquired
goodwill no longer being amortised
• Basic earnings per share for the same period
increased from 36.2p to 42.6p, principally the
result of not amortising goodwill. Earnings per
share, excluding goodwill impairment, intangible
asset amortisation and exceptional items,
increased marginally from 44.9p to 45.1p
• Net assets at 1 January 2004 decreased by 
£107.8 million, mainly arising from:
–recognition of obligations in respect of 
defined benefit pension schemes (decrease 
£174.8 million), and a related intangible 
asset (increase £12 million)
–recognition of fair value of UK land and
buildings as deemed cost (increase £24.6 million)
–elimination from liabilities of 2003 final
dividends (increase £26.1 million)
• Net debt decreased by £3.4 million at 
31 December 2004 due to the proportional
consolidation of joint venture cash.
The transition to IFRS is the latest in a series of
changes in financial reporting in recent years that
have had a material impact on the Group’s reported
balance sheet.
The most significant has been in respect of defined
benefit pension schemes whereby anticipated
liabilities are, under IAS19, discounted at highly-rated,
quoted bond rates rather than at the expected rate of
return on the assets invested to pay those liabilities in
the future. The result is the significant retirement
benefit obligations now recorded in the Group’s
balance sheet.
Notwithstanding this accounting change, the true
cost of providing pensions has irrefutably increased
over recent years, primarily due to extended life
expectancy. This is resulting in greater contributions
from both the Group and members to the schemes. 
There was a further change in accounting for
deferred taxation with the result that the Group 
now carries a provision for deferred taxation of 
£89.9 million in respect of accelerated capital
allowances and revaluation surpluses on properties.
We consider it unlikely that any material amount of
this provision will ultimately be payable. 
Goodwill on acquisition, which prior to 1998 was
largely written off immediately to reserves is now
included on the balance sheet but is no longer
amortised, being instead subject to an annual
impairment review. The Group now carries 
£277.5 million of goodwill on the balance sheet.
The changes to financial reporting on adoption of
IFRS have no impact on the cash flows of the Group’s
businesses and therefore no impact on the underlying
value of the Group. 18 Arriva plc Annual Report and Accounts 2005
FINANCIAL REVIEW 
continued
CAPITAL STRUCTURE
Total shareholders’ equity was £487.4 million 
(2004: £427.6 million) at the end of the year. Retained
profits contributed £48.2 million to distributable
reserves, representing the bulk of the increase.
Gearing at 31 December 2005 was 87 per cent 
(2004: 81 per cent). The 2005 interest cover (the ratio
of EBITDA to net finance costs), excluding goodwill
impairment, intangible asset amortisation and
exceptional items, was over 16 times (2004: 14 times). 
At the year end, the ratio of net debt to EBITDA 
was 1.8 times (2004: 1.5 times). This reduces, on a 
pro-forma basis, to 1.5 times on the disposal of Arriva
Vehicle Rental. The Group recognises that at debt
levels above two times EBITDA, the cost of debt
increases for companies with similar characteristics to
Arriva. Taking this into account, we do not intend to
allow net debt to exceed these levels on a sustained
basis. Arriva remains comfortably within the principal
financial covenants set by its lenders, the principal
covenants being that the ratio of EBITDA to net
finance costs is not less than 3:1 and the ratio of 
net debt to EBITDA is not more than 3.5:1.
BORROWING FACILITIES
A large proportion of available finance for the Group 
is provided by the £310 million five-year syndicated
loan facility whilst much of the Group’s bus fleet is
financed on medium-term hire purchase or finance
lease arrangements. The typical duration of these
arrangements is three to five years. As part of the UK
rail franchising arrangements the Group has provided
guarantees of £13 million (2004: £19 million). 
The rolling stock of the UK, Netherlands, Danish 
and German rail businesses that is provided through
operating leases has annual commitments of
approximately £48 million. All material commitments
will cease on expiry of the franchises. Bonds
amounting to £13 million have been provided in
respect of our Danish and Netherlands rail businesses.
Letters of credit amounting to £29 million are provided
as part of the Group’s UK insurance arrangements.
The Group’s working capital and ancillary
requirements are mainly provided by our principal
bankers and reviewed annually.
TREASURY
The Group’s financial risks are managed by the 
Group Treasury function in accordance with a formal
treasury policy approved by the Board in July 2005.
The policy sets a range of formal targets for
managing the Group’s exposure to interest rate
changes, currency movements, and fuel prices. These
targets are achieved through the use of interest rate
and exchange rate swaps, forward fuel price fixes,
and fixed rate finance. In addition, foreign operations
The Group is well positioned to take advantage 
of opportunities to invest through both organic
growth and acquisition. Arriva plc Annual Report and Accounts 2005  19
www.arriva.co.uk
are funded in local currency where possible. The
result of this policy has been to reduce to insignificant
levels the foreign exchange risk when translating
overseas assets and liabilities into sterling, and to
maintain fuel fixes at least 12 to 15 months ahead 
on a rolling basis. The requirement to fix fuel is
determined after taking into account the extent to
which businesses are protected from fuel price
volatility through contract price indexation. 
TAXATION
The taxation charge was £21.6 million 
(2004: £26 million) representing an effective rate of 
20 per cent (2004: 24 per cent). The reduction in 
the effective rate arises from a review of Group tax
liabilities as a result of agreeing prior year issues and
also from the utilisation of tax losses.
The effective rate of tax might be expected to
increase in future periods as an increasing proportion
of the Group’s profits is derived from territories with
higher corporate tax rates than the UK rate.
TOTAL SHAREHOLDERS’ EQUITY
Total shareholders’ equity was £487.4 million 
(2004: £427.6 million) at the end of the year
representing 248p per share (2004: 218p per share).
Total shareholders’ equity excludes goodwill 
previously written off to reserves of £236.3 million
(2004: £236.3 million). 
SUMMARY
A significant typical feature of the Group’s finances 
is the up-front investment in new vehicles or
acquisitions followed by strong cash flows arising
from those investments. This allows the Group to
readily fund its growth.
In addition, the Group’s strong balance sheet at 
the year end has been further strengthened by the
proceeds of the disposal of the vehicle rental division
in February 2006. The Group is therefore well
positioned to take advantage of opportunities to
invest through both organic growth and acquisition.
STEVE LONSDALE GROUP MANAGING DIRECTOR – FINANCE
WE CONTINUE TO RESEARCH
THE NEEDS OF OUR CUSTOMERS
AND COMMUNITIES SO WE CAN
DEVELOP AND DELIVER SERVICES
THAT MEET THEIR NEEDS
OVER 3,200 ARRIVA BUS
DRIVERS SUCCESSFULLY
COMPLETED NVQ AND
BTEC QUALIFICATIONS
IN CUSTOMER CARE
TRAINING IN 2005 20 Arriva plc  Annual Report and Accounts 2005
CORPORATE RESPONSIBILITY REVIEW
Our full Corporate Responsibility report, 
policies and practices can be viewed on our
website www.arriva.co.uk
Corporate Responsibility at Arriva is about
recognising the contribution we can make to
communities and the impact we have on our
environment.
We play a vital role in the social and economic lives 
of the communities we serve across eight European
countries. We take our responsibilities as a large
business seriously and we work hard to build positive
relationships with all of our stakeholders.
Our Board of Directors recognises that our long-term
success depends on these positive relationships and
our values being embedded into the culture of our
company.
We established our Corporate Responsibility Working
Group in 2004 which consists of representatives from
each Arriva business. Reporting directly to the Board
at regular intervals, this group reviews best practice,
reports on new initiatives, and works on corporate
responsibility benchmarking.
We have continued to work closely with Business in
the Community to embed best practice throughout
the business and to help us report to our stakeholders
in a meaningful way.
Our policies, which are published at www.arriva.co.uk,
set out our approach to the wider community.
DELIVERING
RESPONSIBL Y Arriva plc  Annual Report and Accounts 2005  21
www.arriva.co.uk
SAFETY
The safety of our customers and employees always
comes first.
Our Group-wide practices are reviewed regularly by
the Board Safety Committee which is chaired by a
non-executive director, Nick Buckles.
This Committee reviews the key safety performance
indicators across the Group and the operation of the
self-certification programme. Reporting to the Board,
the Committee also reviews Arriva’s in-house safety
management system and supports the Group’s health
and safety policy.
Each of the Group’s businesses is accountable for its
own safety performance, and follows self-certification
and self-auditing processes which reflect best practice
guidelines for successful health and safety
management.
As part of the self-certification process, Arriva managers
conduct annual reviews of their business to ensure that
they meet Group safety standards. The reviews are
subject to external verification. 
The self-certification process, which is underpinned by
the audit procedure, ensures that safety is reviewed
regularly by senior management. 
We have an extensive portfolio of in-house 
training initiatives, ranging from the Institution of
Occupational Safety and Health (IOSH) approved
programmes in the UK, to courses that develop
competence in risk assessment, fire safety, display
screen equipment, manual handling and first aid. 
In 2005, we received further recognition of our
commitment to health and safety with a total of six
safety awards: the Royal Society for the Prevention 
of Accidents (RoSPA) Gold Award for Managing
Occupational Road Risk; the RoSPA merit award for
Occupational Health and Safety; the Institute of
Transport and Logistics Excellence in Safety award;
the Brake Best Risk Managed company of the Year
award supported by highly commended rankings in
the Safety in Vehicle Maintenance and Road Safety 
in the Community awards.
We were the first public transport company to sign
up to support the European Road Safety Charter,
which aims to achieve a 50 per cent reduction in 
road accidents by 2010. We have contributed to 
the development of the road safety debate at 
events throughout 2005.
In Denmark, we have received the prominent
European Certificate of Working Environment –
DS/OH 18001 standard for Occupational Health 
and Safety Management Systems.
We play a vital role in the social and economic
lives of the communities we serve across eight
European countries.
ARRIVA IS LONDON’S LARGEST
BUS OPERATOR, WITH MORE
THAN 1,400 VEHICLES
OPERATING UNDER CONTRACT
TO TRANSPORT FOR LONDON 22 Arriva plc  Annual Report and Accounts 2005
CORPORATE RESPONSIBILITY REVIEW
continued
ENVIRONMENT
Our environmental policy is in place across all of the
Group’s operations and in determining this policy, 
we sought advice from external consultants. The
policy complies with all legal requirements and
incorporates industry best practice.
Our three key areas are the promotion and use of
public transport, the reduction of waste emissions
and the efficient use of water and energy.
We continue to research ways of reducing further 
the level of harmful emissions we release into the
environment. During 2005, we made progress in
several ways. We invested over £130 million in new
buses, all of which meet Euro III environmental
requirements. Some of our older buses have been
fitted with Euro III compliant engines. In Denmark, we
operate 29 new Coradia Lint trains which have Euro
III compliant engines. We announced plans to buy 43
new Stadler diesel-electric trains worth around £95
million when we won a 15 year extension of our rail
franchise in the north of the Netherlands. These trains
also comply with Euro III standards. In Italy, several
Arriva companies use ‘white diesel’ – a water in
diesel-oil emulsion which can be used in diesel
engines without the engines being modified. This has
led to a reduction in emissions of fine particulates
and nitrogen oxides.
We are working hard to reduce the environmental
impact of our business by using different fuels,
including ultra low sulphur diesel and compressed
natural gas.
In some parts of Arriva, innovative trials of alternative
fuels are taking place. Arriva PEG in Germany is the
world’s first transport company to use palm oil based
biodiesel to operate several of its trains. In late 2005,
representatives from the business were invited by the
Malaysian German Chamber of Industry and
Commerce in Kuala Lumpur to talk about the trials.
We are now exploring opportunities as to how we
can use this biofuel elsewhere.
Across the Group, we aim to dispose of all waste
using environmentally sympathetic means. Waste is
segregated at source and is stored pending the most
appropriate and effective disposal by relevant specialist
contractors. This includes recycling and reducing the
amount of waste being sent to landfill sites.
EMPLOYEES
We have more than 30,000 employees, across eight
European countries, who are key to Arriva’s success.
We are committed to creating a working environment
where everyone has the opportunity to learn and
develop, and where we share many common values.
Over the past few years, we have grown our
transport business significantly and developed
through contract wins and acquisitions. We have
established a series of policies and procedures to help
employees integrate and to ensure that their training
needs are addressed. 
We manage the environmental impact of our
operations and encourage the sustainable
development of public transport.
OUR REPUTATION FOR
EXCELLENT SERVICE
DELIVERY IN DENMARK
CONTINUES WITH HIGH
CUSTOMER SATISFACTION Arriva plc  Annual Report and Accounts 2005  23
www.arriva.co.uk
Leadership, Management and Supervisor
Development
We are committed to developing our people and
provide development opportunities for employees
across Arriva.
In 2005, we launched our Graduate Development
Programme, the first phase of which will be a
recruitment drive across Europe to encourage
graduates to work in the passenger transport industry.
To encourage people to apply, we have launched our
graduate website www.wheredoyouwanttobe.com
Other development programmes within Arriva
include: Mastering People Skills for supervisors and
middle managers in UK bus operations; the Institute
of Leadership and Management programme for
middle managers in Arriva Trains Wales; a
Management Development programme for head
office managers, and Arriva’s NVQ in Customer Care. 
Our Danish business continues to develop its
programme to train bus drivers to be managers within
the organisation following a 12 month training period.
Vocational Training
Our UK vocational training programme is a major 
part of our investment in developing Arriva people.
In our UK bus operations, dedicated Development
Managers provide support to businesses by focusing
on basic skills and vocational training.
Meanwhile, in Denmark, we provide our drivers and
mechanics with advanced training covering areas such
as dealing with conflict, service and quality, and
computer skills.
In Portugal, our vocational training programmes
deliver great results. In Lisbon, we offer drivers
refresher training to adopt better defensive driving
techniques. We measure fuel consumption during
training, showing environmental and safety benefits
as well as clear cost savings.
In Portugal and in Italy we have been awarded the
ISO9001 quality standard.
Valuing Difference
Arriva aims to acknowledge, understand and value
differences in people, whether they are our customers
or employees.
We introduced the ‘Arriva Approach to Diversity’ to
create an environment that maximises the potential 
of all current and future employees.
As part of this approach, and highlighting Arriva’s
commitment to the diversity agenda, we have a
Diversity Committee and Diversity Best Practice Forum.
Committee members include senior managers from
across our businesses who meet regularly and report
to the Board annually.
In the UK, we have recently run awareness workshops
for 2,060 employees utilising 90 trained, internally
appointed facilitators.
WE CONTINUE TO INVEST 
IN EMPLOYEE TRAINING
TO EMPOWER OUR PEOPLE 
TO DELIVER FOR OUR
CUSTOMERS AND THE GROUP 24 Arriva plc Annual Report and Accounts 2005
CORPORATE RESPONSIBILITY REVIEW
continued
Valuing Employees
We value the work of our employees and the
contribution they make towards the successful
development of Arriva, and periodically seek their
feedback.
The Arriva Learning and Development Gateway (ALDG)
gives employees access to an extensive range of online
courses and provides them with the opportunity to
further their learning and development. The popularity
of the Gateway has grown and, in 2005, there were
around 12,000 visits to the site by our employees.
COMMUNITY
We know that we are an important part of the
communities we serve. By the very nature of our
business, we have a responsibility to these
communities across the UK and mainland Europe.
For that reason, our community relations activities 
are at the heart of our commitment to corporate
responsibility.
Our Community Relations Committee, which is
chaired by an executive director, Steve Clayton,
includes representatives from across the Group and it
continues to work towards the vision we established
in 2004:
“As a people business, we value, encourage and
celebrate the contribution our employees and others
make to the communities we serve.”
Arriva has worked hard to establish a series of long-
term partnerships giving not only financial, but also
practical support. One such partnership is with 
Age Concern. As part of this developing partnership,
in 2004 we supported Age Concern’s information
technology (IT) project in Hertfordshire to help older
people take part in computer training. A facility was
established to help them use IT in a number of areas,
including keeping in touch with family and friends,
finding out information such as bus and train
timetables and ordering shopping for home delivery.
Arriva’s support has meant that this project was able
to continue throughout 2005.
We have joined forces with the Wales Deaf Rugby
Union as official sponsor of the team in another
successful partnership. In addition to supporting the
development of deaf rugby in communities right
across Arriva’s rail network, the partnership is also
helping us to understand better the needs of people
who are hard of hearing and ensure we offer the 
best possible service to all our customers.
Employees in the Community 
Our employees are involved in our Community
Relations Programme and vote each year for their
‘Charity of the Year’ for the UK. This has been
running for six years and provides employees with 
the opportunity to select a charity that they would
like the Group to support for 12 months.
Our employees voted for Cancer Research UK as the
2006 Charity of the Year for the third year running. Arriva plc Annual Report and Accounts 2005  25
www.arriva.co.uk
In the Netherlands, some of the charities we have
supported during 2005 include ‘Doo een Wens’, 
the Dutch Make a Wish Foundation whose aim is to
grant the wishes of children with life-threatening
illnesses around the world; ‘Cool Flevoland’, a youth
panel initiative which aims to improve young people’s
interest in politics and social themes, and ‘Dance4Life’
which has been set up by young people to fight the
spread of Aids. 
Many of our employees across the UK and mainland
Europe make valuable contributions to their local
communities outside of their working life with Arriva.
We value this and we recognise many of their 
efforts through our Community Action Awards.
Employees are encouraged to tell us about their
charitable work. In return, they are put forward for
consideration of an award, which is donated to the
organisation they support. In 2005, we presented 57
cash awards to our employees for their chosen causes.
Business in the Community
We are a national member of Business in the
Community (BITC) and we actively support some 
of its initiatives.
BITC is a charitable organisation which helps
businesses contribute to the social and economic
regeneration of local communities.
During 2005, Arriva employees from the north east 
of England took part in a reading programme with 
a local primary school, which selected pupils it felt
would benefit from extra support. They listened to
the children read and helped with the reading
process. The project proved enjoyable and worthwhile
for both the children and volunteers.
We were also named as one of BITC’s top ten overall
performers in the Race for Opportunity awards. This
recognises efforts that organisations make to ensure
that their workforce is diverse and that differences 
are valued and understood. 
WE ARE COMMITTED 
TO DEVELOPING PUBLIC
TRANSPORT THROUGH
INNOVATION AND
WORKING IN PARTNERSHIP
WITH OUR STAKEHOLDERS 26 Arriva plc  Annual Report and Accounts 2005
BOARD OF DIRECTORS
1. Sir Richard Broadbent KCB
Chairman 
Aged 52. Sir Richard was appointed to the
Board in July 2004 and was appointed
Chairman in November 2004.
Sir Richard is the Senior Independent Director 
of Barclays plc and was executive Chairman,
HM Customs and Excise, from 2000 to 2003.
He started his career with HM Treasury in
1975. In 1986 he joined Schroders plc where
he held a number of senior positions including
Head of European Corporate Finance (1995)
and Group Managing Director, Corporate
Finance (1998).
As Chairman, Sir Richard chairs the
Nomination Committee of the Board and is
also a member of the Safety Committee.
2. Bob Davies LLB, FCMA
Chief Executive
Aged 57. Bob joined the Board as Chief
Executive in December 1998, having
previously held the same position at East
Midlands Electricity plc, before which he 
had been Finance Director of Ferranti
International plc (1991–1993) and 
Waterford Wedgwood plc (1988–1991). 
Bob had earlier held various senior positions
with the Ford Motor company over a period
of 15 years in the UK, in the USA with Ford
Motor Credit and at Ford’s Spanish operation
as Director of Finance. He is currently a 
Non-Executive Director of Barratt
Developments PLC, and is Chairman of the
Board of Governors of The University of
Sunderland.
As announced on 14 December 2005, 
Bob will retire as a Director and as Chief
Executive following the conclusion of the
Annual General Meeting on 19 April 2006.
3. David Martin BA, FCMA, MiMgt 
Group Managing Director – Operations 
& Deputy Chief Executive
Aged 54. David qualified as an accountant 
in 1977 after graduating in Business Studies. 
He held a variety of general management
positions before joining the bus industry in
1986. After leading a management buy-out of
an East Midlands based bus company, he was
involved in the acquisition of National Express
and subsequent management buy-outs leading
to the creation of British Bus Group Limited.
David joined the Arriva Group in 1996 on the
acquisition of British Bus, becoming a member
of the Board in February 1998 with specific
responsibility for the Group’s international
operations and development. 
In March 2005 he was appointed Group
Managing Director – Operations and Deputy
Chief Executive with responsibility for all
Group operations, and on 14 December 
2005 it was announced that David would
succeed Bob Davies as Chief Executive on
Bob’s retirement immediately following the
Annual General Meeting on 19 April 2006.
4. Steve Lonsdale BA, FCA
Group Managing Director – Finance
Aged 48. Steve graduated from the University
of Newcastle upon Tyne with a degree in
Economics and Accounting before joining
Coopers & Lybrand in 1978. He qualified as 
a Chartered Accountant in 1981 and spent
eight years working in the profession in the
UK and overseas. Steve joined the Group in
1987 where he worked as Group Accountant
until 1991 when he was appointed to the
Board as Group Finance Director.
In March 2005 he was appointed Group
Managing Director – Finance with
responsibility for all finance, legal and
company secretarial matters. 
2
3
4
1 Arriva plc  Annual Report and Accounts 2005  27
www.arriva.co.uk
5. Nick Buckles
Non-Executive Director
Aged 45. Nick was appointed to the Board 
as an Independent Non-Executive Director 
on 19 July 2005 and on 18 October 2005
was appointed as Chairman of the Safety
Committee; Nick also sits on the Nomination
and Remuneration Committees.
He was appointed to the Board of Securicor
plc in 2000, having joined the group in 
1985, and became its Chief Executive in
January 2002. Following the merger between
Securicor plc and the security businesses of
Group 4 Falck in July 2004, he was appointed
Deputy Chief Executive and Chief Operating
Officer of the merged company, Group 4
Securicor. He was appointed Chief Executive
of Group 4 Securicor in July 2005.
6. Steve Clayton BA, FCIT, MiMgt 
Group Managing Director – Corporate Affairs
Aged 52. After graduating from London
University in 1975, Steve held various
management positions with London
Transport. He was Managing Director of
Leaside Bus Company Limited from 1988,
which was acquired by the Group in 1994.
Steve was appointed to the Board in 
February 1998 with responsibility for the
Group’s UK Bus operations. In March 2005 
he was appointed Group Managing Director –
Corporate Affairs, with responsibility for
Human Resources, Health, Safety and the
Environment, Corporate Communications
and all Government Relations activities 
across the Group. He sits as a member of 
the Safety Committee and is Chairman of 
the Community Relations Committee. 
Steve was President of The Confederation 
of Passenger Transport UK in 2005.
7. Simon Batey MA, FCA 
Non-Executive Director 
Aged 52. Simon joined the Board as an
Independent Non-Executive Director on 
1 October 2003 and since 1 January 2004 
he has been Chairman of the Audit
Committee; he also sits on the Remuneration
and Nomination Committees. 
After he graduated from Oxford, Simon
worked for Armitage and Norton (now part
of KPMG) where he trained and qualified 
as a chartered accountant and worked in 
a number of management posts. 
He joined the Board of United Utilities plc 
as Group Finance Director in 2000. Before 
this appointment he was Group Finance
Director of AMEC plc from 1992 and prior 
to that was Deputy Finance Director.
On 8 February 2006 it was announced that
Simon would leave United Utilities on 31 July
2006. It was also announced that he would
be appointed as a Non-Executive Director 
of THUS Group plc on its acquisition of Your
Communications from United Utilities.
8. Veronica Palmer OBE 
Non-Executive Director
Aged 65. Veronica was appointed to the
Board as an Independent Non-Executive
Director in September 2001 and since 
June 2005 has chaired the Remuneration
Committee of the Board; she also sits on the
Audit and Nomination Committees of the
Board. Prior to this she had held the position
of Director General of the Confederation of
Passenger Transport UK from 1989 until June
2001. Earlier she worked in the brewing
industry’s trade association as Parliamentary
Secretary following a successful career in the
Royal Air Force and work as an employment
consultant in Europe. Veronica has an MBE
for military services and an OBE for services
to the transport industry. She is Chairman 
of the Northern Ireland Transport Holding
Company Board.
9. Steve Williams LLB
Non-Executive Director
Aged 58. Steve was appointed to the Board
as an Independent Non-Executive Director on
1 September 2005 and on 18 October 2005
was appointed Senior Independent Director;
Steve also sits on the Nomination, Audit and
Safety Committees.
Steve is General Counsel and joint Company
Secretary of Unilever plc and Unilever NV.
Prior to joining Unilever, Steve spent 11 years
at Imperial Chemical Industries plc in the legal
and company secretarial departments and
served for nine years as a Non-Executive
Director of Bunzl plc, relinquishing that post 
in 2004.
8
7
6
5 9 28 Arriva plc Annual Report and Accounts 2005
DIRECTORS’ REPORT
The directors submit their report and the audited accounts of Arriva plc for the year ended 31 December 2005.
Principal Activities of the Group
The principal activities of the Group at 31 December 2005 comprised:
Passenger Services 
Operation of bus and train services in the UK and seven countries in mainland Europe, coach
commuter services and private hire.
Vehicle Rental
Corporate vehicle rental and personal self-drive hire. This business was subsequently disposed of on 
3 February 2006. Further details are given below.
Bus & Coach
Bus and coach distribution, rental and finance.
Review of Operations
A review of operations, together with an indication of future prospects, is given in the Chief Executive’s
Review on pages 8 to 13.
Results and Dividends
The profit for the year amounted to £86.3 million (2004: £83.3 million). The directors recommend the
payment of a final dividend on the ordinary shares of the company of 14.77 pence per share (2004: 14.07
pence) which, together with the interim dividend of 5.07 pence (2004: 4.83 pence) represents a total of
19.84 pence per ordinary share (2004: 18.9 pence). The proposed final dividend, if approved, will be
payable on 2 May 2006 to shareholders on the Register of Members at the close of business on 
31 March 2006. The total amount paid and proposed to be paid is £39.1 million in respect of 2005 
(2004: £37.1 million).
Share Capital
The movement in the share capital during the year is detailed in Note 22 to the Annual Report and Accounts.
Directors
The names and biographies of the present directors appear on pages 26 and 27.
Mr S G Batey and Mrs A V M Palmer retire by rotation, and, being eligible, offer themselves for re-election
at the Annual General Meeting on 19 April 2006.
Mr N P Buckles was appointed to the Board on 19 July 2005 and Mr S G Williams was appointed on 
1 September 2005. Resolutions to approve their appointments will be proposed at the Annual General
Meeting. 
Mr A M Saxton resigned from the Board on 2 March 2005, and Mr M J Allen retired from the Board on 
30 June 2005.
No director was interested in any contract or arrangement which was significant in relation to the Group’s
business.
Directors’ Interests
The interests of the directors (including their family interests) at the end of the year, including details of
directors’ share options and interests under the Long Term Incentive Plan appear in the Directors’
Remuneration Report on pages 31 to 37.
Purchase of Own Shares 
No shares were purchased pursuant to the authority granted to the directors at the Annual General Meeting
held on 20 April 2005. Renewal of this authority will be sought at the Annual General meeting to be held
on 19 April 2006. 
Acquisitions and Disposals
In January 2005 the purchase of the assets of Sovereign Bus and Coach Company Limited was completed
for a consideration of £4.1 million.
In February 2005 the company acquired German bus company Sippel Group for £11.6 million with an
additional maximum consideration of £2.1 million payable against performance targets up to 2008.
An agreement was announced in July to acquire 80 per cent of SADEM, a bus operator in Italy, for 
£9.5 million and an option to acquire the remaining 20 per cent in 2008 for a maximum of £3.2 million.
Completion of the purchase of the initial 80 per cent was announced in October 2005. Arriva plc Annual Report and Accounts 2005  29
www.arriva.co.uk
In July 2005 the company acquired the assets of Blue Bus and Coaches of Bolton, which operated
commercial and tendered services to the north of Manchester, in and around Bolton and to Manchester city
centre, for a cash consideration of £2.8 million. 
The company announced in January 2006 the disposal of its vehicle rental division to Northgate plc for an
estimated consideration of £129 million, representing a surplus over net assets of approximately £23 million.
The disposal was completed on 3 February 2006. 
On 13 February 2006 it was announced that Premier Buses Limited, the holding company of MK Metro
Limited of Milton Keynes had been acquired for a net cash consideration of £5.6 million. 
The consideration consisted of £6.8 million, less inherited cash in the company of £1.2 million.
Charitable and Political Donations
During the year the Group made charitable donations, for a variety of charitable purposes, amounting to 
£201,426 (2004: £157,515). There were no political donations (2004: nil).
Annual General Meeting
The Annual General Meeting will be held on 19 April 2006. Details of business to be considered at the
Meeting can be found in the Notice of Annual General Meeting which has been sent to all shareholders
with the Annual Report and Accounts.
Employees
The Group’s approach to diversity means valuing differences in our staff and customers. Diversity is about
recognising and accepting that all types of people can be successful at work and Arriva positively welcomes
all types of staff and customers. The Board has confirmed its commitment to diversity and its objective is to
achieve a workforce profile to reflect future demographics and create an environment in which differences
are genuinely valued.
The Group continues to give full and fair consideration to applications for employment by disabled persons,
having regard to their respective aptitudes and abilities. The Group’s policy includes, where applicable, the
continued employment of those who may become disabled during their employment. 
A female network event was held during October 2005, to support the development of female leadership
potential and to maximise contribution to business performance. The event was attended by around 50 of
the Group’s female managers from across its UK and mainland European operations. Feedback from this
event will inform future approaches to recruitment, development and retention of female managers. 
An Arriva-wide employee survey was conducted during 2005, feedback from which has been shared with
the Board and management team. During 2006 local feedback will be communicated to every employee
and will include a number of corporate commitments in response to the employee survey feedback. These
are to conduct regular surveys, provide honest feedback and take consistent actions to improve
communications across the business. Each business will also review its employee feedback and commit to
take local actions.
During 2005 certain new employee benefits were introduced, including the Arriva Share Incentive Plan (SIP)
as outlined below, the Arriva Childcare Vouchers scheme and the Arriva Computers@home scheme.
Childcare Vouchers and Home Computing arrangements are Government-led salary sacrifice initiatives. 
The Group has continued its policy of employee involvement, by making information available to employees
on a regular basis regarding recent and probable future developments and business activities. In order to
facilitate this an Arriva plc Information and Consultation Committee was set up in October 2005.
Arriva recognises the value and benefits of employee share ownership, and in 2005 the company
implemented a Share Incentive Plan (SIP), approved by shareholders at the Annual General Meeting in 2004.
The SIP enables eligible UK employees to buy shares in Arriva plc, subject to monthly limits, out of pre-tax
pay. Resolutions approving replacements for the existing discretionary Share Option Scheme and amendments
to the Long Term Incentive Plan will be considered at the Annual General Meeting on 19 April 2006. Further
details can be found in the Notice of Annual General Meeting accompanying this Annual Report and
Accounts.
Policy Regarding Payment of Suppliers 
The Group’s policy regarding the payment of suppliers is either to agree terms of payment at the start of
business with each supplier or to ensure that the supplier is made aware of the payment terms, and in
either case to pay in accordance with its contractual or other legal obligations. At 31 December 2005 the
company’s trade creditors outstanding represented approximately 30 days’ purchases (2004: 49 days). 30 Arriva plc Annual Report and Accounts 2005
DIRECTORS’ REPORT
continued
Substantial Shareholdings
As far as the directors are aware, the notifiable holdings equal to or in excess of 3 per cent of the issued
ordinary capital as at 20 February 2006 are:
%
Barclays PLC 10.91
Legal & General 3.16
Deutsche Bank AG 3.00
Corporate Governance
A review of the company’s application of the principles and provisions of The Combined Code appears on
pages 38 to 42.
Health, Safety and Environment
Details of the company’s approach to health, safety and environmental issues appear within the Corporate
Responsibility review on pages 20 to 25.
Auditors
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors to the company and to authorise the
directors to fix their remuneration will be proposed at the Annual General Meeting.
By order of the Board
D P TURNER
Secretary
1 March 2006
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Company law requires the directors to prepare Group financial statements for each financial year that give 
a true and fair view of the state of affairs of the Group and of its profit or loss for that period.
In preparing those financial statements the directors are required to:
• Select suitable accounting policies and then apply them consistently
• Make judgements and estimates that are reasonable and prudent
• State that the financial statements comply with IFRS
• Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that
the Group will continue in business. 
The directors confirm that they have complied with the above requirements in preparing the financial
statements.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy
at any time the financial position of the Group and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
• The directors are responsible for the maintenance and integrity of the website
• Legislation in the UK concerning the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions. Arriva plc Annual Report and Accounts 2005  31
www.arriva.co.uk
1. Introduction
The Remuneration Committee is responsible for reviewing and making recommendations to the Board on all
matters relating to the remuneration arrangements applying to the executive directors, the management
population occupying roles immediately below those of the Board and to any other employee within the
Group whose salary plus bonus potential exceeds a specified amount, currently £180,000 per annum.
During the year under review the Committee met on six occasions and each Committee member attended
all meetings.
Membership of the Remuneration Committee is limited to the independent non-executive directors and,
following the retirement of Mr M J Allen on 30 June 2005, has been chaired by Mrs A V M Palmer. The
other current members of the Committee are Mr S G Batey and Mr N P Buckles who was appointed to the
Committee on 18 October 2005 following his appointment as a Non-Executive Director on 19 July 2005. 
Sir Richard Broadbent sat as a member of the Committee until May 2005. In his capacity as Senior
Independent Director, Mr S G Williams (appointed to the Board on 1 September 2005 and appointed Senior
Independent Director on 18 October 2005) may attend any meeting of the Committee. During the year
under review Sir Richard Broadbent and Mr R J Davies have attended meetings of the Committee as
invitees.
The Committee’s terms of reference are available on the company’s website www.arriva.co.uk
2. Remuneration Review
The Committee decided in 2005 to undertake a comprehensive review of executive remuneration which
had operated within the same framework since 2000. In addition to ensuring that its remuneration practices
remained competitive, the Committee was asked by the Board to ensure that the remuneration structure
was fully aligned with the company’s business goals. The Committee appointed KPMG LLP (UK) as advisors
to assist in the review. When undertaking the review, the Remuneration Committee has consulted with
certain of the company’s major shareholders, as well as with the Association of British Insurers.
The objective of the Board’s remuneration policy is to ensure that senior management of appropriate calibre
and experience are attracted, motivated and retained to provide the best possible opportunity for the
company to deliver sustained shareholder value. In support of this objective, the remuneration review
confirmed the company’s policy of paying basic salary at the median of the peer comparator group and to
reward outstanding performance with upper quartile total remuneration.
The review based its conclusions on a peer comparator group comprising a representative sample of FTSE 250
companies of a similar size and complexity to that of the company from the transport and other sectors.
The main conclusions of the review were as follows; further details are provided in section 3 below:
• The salary of the Group Managing Director – Finance should be re-aligned by 16 per cent to bring it
in line with the median of the peer group 
• The annual performance-related bonus opportunity should be increased to 100 per cent of salary with
70 per cent dependent on financial performance and 30 per cent on personal targets
• The maximum number of shares conditionally awarded under the Long Term Incentive Plan (LTIP)
should be increased to an amount equivalent to 200 per cent of salary  based on stretching new
performance targets linked to Total Shareholder Return (TSR) performance and earnings per share
(EPS) growth, in line with our strategic ambitions.
• Share retention guidelines for executive directors should be introduced requiring retention of 50 per
cent of any share award until a holding equivalent in value to annual base salary has been achieved.
The effect of these changes is to ensure that compensation opportunity matches the comparator peer group
subject to achieving stretching performance in line with our strategic goals.
For the purposes of this remuneration report, EPS means basic earnings per share before goodwill impairment
and intangible asset amortisation calculated under International Financial Reporting Standards adjusted for
exceptional items.
DIRECTORS’ REMUNERATION REPORT  32 Arriva plc Annual Report and Accounts 2005
DIRECTORS’ REMUNERATION REPORT 
continued
3. Remuneration Structure
3.1 Base Salary
Following its review of remuneration the Committee concluded that the base salary of the Group Managing
Director – Finance was below that of the median of the peer comparator group and that the remaining
executive directors’ base salaries were appropriately positioned. Accordingly the following salaries proposed
by the Committee, effective from 1 January 2006, were approved by the Board.
Salary
£000 p.a.
R J Davies 447
D R Martin 312
S P Lonsdale 290
S J Clayton 260
Mr R J Davies will retire from the Board on 19 April and there are no exceptional arrangements applying to
his retirement. Mr D R Martin will assume the role of Chief Executive on 19 April 2006 and his base salary
will be increased to £447,000 p.a. in line with that of Mr Davies’ final salary.
3.2 Performance-Related Bonus
3.2.1 Year to 31 December 2005
For the year under review each of the executive directors participated in a performance-related bonus
scheme. Mr R J Davies was targeted on group profitability performance against budget, with performance
equal to budget delivering a bonus of 50 per cent of base salary and profit performance up to 10 per cent
in excess of budget delivering bonus pro rata up to a maximum of 70 per cent of basic salary; performance
of 90 per cent–100 per cent of budget delivering pro rata bonus of 25 per cent–50 per cent of base salary.
The bonus arrangements for Messrs Clayton, Lonsdale and Martin are based on both Group profitability and
the achievement of personal objectives and for outstanding performance could deliver a maximum bonus of
60 per cent of basic salary. The financial element was based on a single objective of Group performance by
reference to budgeted earnings per share (EPS) and for the year under review was targeted to deliver 30 per
cent of base salary at EPS of 43 pence and capped at a maximum of 40 per cent of basic salary on the
achievement of EPS of 46 pence; below EPS of 43 pence, linearly from 0 per cent of basic salary at 40
pence, to 30 per cent at 43 pence.
The personal objectives element which was agreed with each director at the beginning of the year had 
the potential to deliver a maximum bonus of 20 per cent of basic salary in the year under review. 
These non-financial objectives set for each director focus on the key themes of strategy, organisational
development, business growth, the establishment and maintenance of effective relationships and leadership.
3.2.2 Arrangements from 1 January 2006
Following the results of the remuneration review the annual bonus opportunity will increase to 100 per 
cent of base salary with 70 per cent being determined by Group financial performance and the balance
reflecting performance against personal objectives agreed with each director at the beginning of the year.
Performance will be measured against budget and personal objectives with ‘on target’ performance delivering
50 per cent of base salary as bonus; profit performance exceeding budget by 10 per cent coupled with
outstanding personal performance will deliver a maximum bonus of 100 per cent of basic salary. 
The performance measure will generally be EPS, although the Remuneration Committee will review the
measure each year to ensure it remains appropriate.
3.3 Long Term Incentive Plan (LTIP)
3.3.1 Year to 31 December 2005
The existing LTIP was introduced in 2000 and provides for the conditional award of shares at the discretion
of the Board as advised by the Remuneration Committee. The market value of any conditional award is
restricted such that it may not exceed 100 per cent of a director’s basic salary as at the date of grant. The
vesting of the conditional share awards will depend upon the performance of the Group’s EPS (before
goodwill impairment, intangible asset amortisation and exceptional items) when compared with the growth
in the Retail Price Index and also of the Total Shareholder Return (TSR) of the Group when compared with
the TSR of the Peer Comparator Group (comprising the constituent companies of the FTSE 250 excluding
the Group and investment companies) over a period of three years.  Arriva plc Annual Report and Accounts 2005  33
www.arriva.co.uk
The degree of vesting is on a sliding scale of 25 per cent to 100 per cent, with no share vesting unless the TSR of the Group is at least equal to
the median TSR of the Peer Comparator Group. However, irrespective of TSR performance, no share shall vest in any event unless the growth in
the Group’s EPS over the three year measurement period exceeds the growth of the Retail Price Index in the same period by at least 6 per cent.
The awards were originally made with performance targets based on accounting standards prevailing at the time and in particular before the
introduction of International Financial Reporting Standards. The Remuneration Committee has made appropriate adjustments to target EPS to
ensure proper comparability.
With regard to the conditional share award made on 6 March 2003 the performance measurement period is the three years ended 31 December
2005; in that period the growth in the Group’s EPS was 28.6 per cent compared with the growth in the Retail Price Index of 9 per cent. The
Group’s TSR for the same period fell between the TSR of the bottom company in the upper quartile and that of the top company in the second
quartile, delivering a conditional award vesting level of 99.75 per cent.
3.3.2 Proposed arrangements post 1 January 2006 (subject to shareholder approval)
• It is proposed that the maximum LTIP award an employee may receive in any year be increased from 100 per cent to 200 per cent of the
participant's annual salary. The Remuneration Committee believes that this amendment is necessary to ensure that participants are
provided with upper quartile reward opportunity for upper quartile performance. To ensure that the performance targets are sufficiently
stretching, and are in line with the company's business strategy, it is also proposed that the performance condition attaching to new LTIP
awards be amended. 
• Currently the performance condition attaching to LTIP awards is based on the total shareholder return (TSR) when compared to the FTSE
250 (excluding investment companies) and earnings per share. Although TSR is an important measure of shareholder value, the
Remuneration Committee also believes there should be a direct link between the efforts of the management team and the delivery of the
business strategy. To achieve this link it is proposed that: 50 per cent of the LTIP award be based on the company's TSR performance
(referred to as the “TSR Element”), and 50 per cent of the LTIP award be based on the company's growth in earnings per share (EPS) over
the performance period (the “EPS Element”).
• The TSR Element will not vest if, when compared to the group of comparator companies, the company's TSR is less than median. 25 per
cent of the TSR Element will vest if, when compared to the group of comparator companies, the company's TSR is at median. 100 per cent
of the TSR Element will vest if, when compared to the group of comparator companies, the company's TSR is in the upper quartile. The
TSR Element will vest on a straight line basis if the company's TSR is between median and upper quartile. Vesting will also be subject to the
Remuneration Committee confirming that there has been a sustained improvement in the underlying financial performance of the
company over the performance period.
As at 31 December 2005 the interests of the directors in conditional share awards made under the LTIP were as follows (audited information):
Movement in Conditionally Awarded Shares
Awards subsisting at Awarded during year Vested during year Lapsed
1 January 2005 in year
No. of Date Share No. of Date Share No. of Date of Value of
shares shares price at shares price at shares vesting shares at
awarded date of date of date of
award (p) award (p) vesting (£)
R J Davies 105,311 30/10/02 300.75 78,467 14/3/05 548.00 105,311 3/3/05 574,998
115,283 6/3/03 283.00
105,140 8/3/04 374.50
Total 325,734 78,467 105,311 298,890
S J Clayton 59,933 30/10/02 300.75 45,620 14/3/05 548.00 59,933 3/3/05 327,234
65,636 6/3/03 283.00
61,682 8/3/04 374.50
Total 187,251 45,620 59,933 172,938
S P Lonsdale 58,221 30/10/02 300.75 45,620 14/3/05 548.00 58,221 3/3/05 317,887
63,781 6/3/03 283.00
60,280 8/3/04 374.50
Total182,282 45,620 58,221 169,681
D R Martin 59,933 30/10/02 300.75 54,744 14/3/05 548.00 59,933 3/3/05 327,234
65,636 6/3/03 283.00
61,682 8/3/04 374.50
Total187,251 54,744 59,933 182,062
A M Saxton 54,796 30/10/02 300.75 Nil - 54,796 3/3/05 299,186
(Retired 2 March 60,071 6/3/03 283.00
2005) 57,4778/3/04374.50 57,477
Total 172,344 54,796 57,477 60,071
Balance at
31 Dec 2005
(or date of
leaving) 34 Arriva plc Annual Report and Accounts 2005
DIRECTORS’ REMUNERATION REPORT 
continued
• The EPS Element will not vest if the compound annual growth rate in EPS over the performance period is less than compound annual
growth in the Retail Prices Index (RPI) plus 4 per cent. 10 per cent of the EPS element will vest if the compound annual growth rate in EPS
over the performance period is equal to the compound annual growth in RPI plus 4 per cent. 100 per cent of the EPS element will vest if
the compound annual growth rate in EPS over the performance period is equal to the compound annual growth in RPI plus 13 per cent or
more. The EPS Element will vest on a straight line basis for compound annual growth in earnings per share over the performance period
which is between (i) compound annual growth in RPI plus 4 per cent and (ii) compound annual growth in RPI plus 13 per cent.
3.4 Share Options (audited information)
Since the introduction of the LTIP in 2000 the executive directors have not participated in any of the company’s share option schemes and it is not
envisaged that there will be any change to this policy in the future.
As at 1 January 2005 Mr R J Davies had residual interests in the company’s share option schemes (which had been awarded to him in 1998) and
were exercised during the year as follows:
The exercise of the share options held by Mr Davies was subject to the achievement of performance targets which require the company’s
earnings per share over a period of three consecutive years prior to exercise to exceed the Retail Prices Index by a minimum of 2 per cent per
annum. The targets are set by the Remuneration Committee and may be varied from time to time. 
No other director held any interest in any of the share option schemes (other than the LTIP) during the course of the year.
3.5 Remuneration Details for year ended 31 December 2005 (audited information)
Emoluments
Performance Benefits in
related kind/ Prior
Fees Salary bonus allowance
†
Total year
££ £££ £
Sir Richard Broadbent (appointed 2 July 2004) 120,000 - - - 120,000 60,000
W G Cooper (retired 31 October 2004) - - - - - 92,083
R J Davies - 423,958 255,000 35,835 714,793 703,818
S J Clayton - 246,833 130,000 22,969 399,802 376,178
S P Lonsdale - 245,958 130,000 21,086 397,044 371,641
D R Martin - 288,500 160,000 24,398 472,898 378,568
A M Saxton* (retired 2 March 2005) - 35,875 - 3,794 39,669 343,928
M J Allen 12,016 - - - 12,016 31,500
S G Batey 38,083 - - - 38,083 31,500
N P Buckles (appointed 19 July 2005) 15,167 - - - 15,167 -
A V M Palmer 34,333 - - - 34,333 31,500
S G Williams (appointed 1 September 2005) 11,333 - - - 11,333 -
Total 230,932 1,241,124 675,000 108,082 2,255,138 2,420,716
A pension of £5,000 (2004: £5,000) was paid to a former director.
†
Benefits in kind comprise a company car/car allowance, fuel/fuel allowance, medical insurance and telephone costs.
* As reported last year a payment of £434,334 was made to Mr Saxton representing the company’s contractual obligations arising from the termination of his service contract on 
2 March 2005.
Options at 1/1/05                                                                                           Market value
Number
exercised Options As at date As at
Date of Exercise during the at of exercise date of
Number grant price (p) year 31/12/05 (p) grant (p)
8,021* 30/12/98 374.00 8,021 Nil 578.50 378.00
212,834
†
30/12/98 374.00 (i) 100,000 547.75 378.00
(ii) 112,834 Nil 578.50
* Executive Share Option Scheme
†
Share Incentive Scheme Arriva plc Annual Report and Accounts 2005  35
www.arriva.co.uk
3.6 Non-Executive Directors’ Fees
The non-executive directors’ fees are currently limited by the Articles of Association to £400,000 per annum in the aggregate and the Articles
permit the directors to increase this cap annually in line with the index of wage inflation. Within the aggregate cap the annual fee for each non-
executive director is determined by the Board, the non-executive directors taking no part in the deliberations. With effect from 1 March 2005, the
fee payable to each of the non-executive directors (excluding the Chairman) was increased by £4,000 to £32,500 per annum; these changes
were made to ensure that the fees remained in line with fees paid by comparable companies. Responsibility for chairing a Board Committee or
occupying the role of Senior Independent Director attracts a further annual fee of £3,000 except for the Audit Committee Chairmanship where
the additional annual fee is £7,500. Since March 2005 there have been no changes to the fees payable to the non-executive directors. The fee
for the Chairman has also remained unchanged.
Each of the non-executive directors is appointed for a fixed term not exceeding three years. The appointments are renewable with the agreement
of both parties again for terms not exceeding three years. 
4. Directors’ Share Interests
The interests of the directors (including their family interests) in the share capital of the company at the beginning and at the end of the year are
shown below:
1/1/05 31/12/05 20/2/06
R J Broadbent 17,702 27,246 27,246
R J Davies 335,210 460,521 460,521
S J Clayton 60,000 70,000 70,000
S P Lonsdale 231,610 289,831 289,831
D R Martin 384,963 420,238 420,238
S G Batey Nil 3,818 3,818
N P Buckles (appointed 19/7/05) n/a Nil Nil
A V M Palmer Nil Nil Nil
S G Williams (appointed 1/9/05) n/a Nil Nil 36 Arriva plc Annual Report and Accounts 2005
DIRECTORS’ REMUNERATION REPORT 
continued
5. Pensions (audited information)
R J Davies S J Clayton S P Lonsdale D R Martin A M Saxton
Retired 
2/3/05
Scheme* 43 1 2 4 1 4
Normal retirement age 65 65 65 65 65 65 65
Director’s contribution Nil Nil Nil Nil Nil Nil Nil
Increase in accrued pension during the 
year (allowing for indexation) (£ pa) 12,786 16,447 32,954 1,761
Gross increase in accrued pension (£ pa) 14,336 19,466 35,881 1,983
Accrued pension at 31/12/2005 (£ pa) 71,716 131,304 156,123 10,200
Accrued pension at 31/12/2004 (£ pa) 57,380 111,838 120,242 8,217
Value of net increase in accrual over period (£) 123,353 138,116 350,196 17,804
Transfer value of accrued pension at 31/12/2004 (£) 474,084 792,958 1,107,357 70,120
Transfer value of accrued pension at 31/12/2005 (£) 692,279 1,104,476 1,690,955 103,096
Total change in value during period (£) 218,195 311,518 583,598 32,976
Company contribution to FURBS and/or 
personal pension during the year (£) 209,084 - - - 3,600 - 5,927
Premium for additional life cover 
paid in the year (£) 6,566 - - - - - 976
*1 Arriva Pension Scheme  2 Arriva Passenger Services Pension Plan  3 Arriva London North and Arriva London South Pension Scheme  4 FURBS and/or Personal Pension Plan
Since 1 January 2000 Messrs Clayton, Lonsdale and Martin have, subject to Inland Revenue limits, been accruing benefits in their respective schemes
at 1/30th of basic annual salary; for service after 31 December 1999 bonus ceased to be taken into account when computing pension benefits. 
With effect from 6 April 2006, the basis on which pension benefits are taxed will change with the introduction of lifetime and annual allowances.
The Remuneration Committee has reviewed the position and, having taken advice from KPMG LLP (UK), has established the following policy:
• Any change to the taxation of pensions benefits remains the responsibility of the individual concerned and the company should not incur
any additional cost as a result of the change
• All future executive director appointees to the board will not be eligible for a final salary based pension, but will receive a cash contribution
equivalent to 25% of their base salary.
6. Service Contracts
Messrs Clayton, Lonsdale and Martin each have rolling service contracts which are subject to 12 months’ notice from the company and six
months’ notice from the director; Mr Lonsdale’s contract is dated 5 September 1997 and the contracts for Messrs Clayton and Martin are dated
19 November 2001. Each of their contracts contains an explicit provision for compensation payment on termination, except in the case of
misconduct, with the severance payment being calculated as the sum of the following:
(i) Basic annual salary at the date of termination
(ii) The amount of bonus estimated to be payable to the director in the year notice is served 
(iii) The amount representing the value of 12 months’ benefit in kind as recorded in the audited accounts of the company for the financial year
immediately preceding the date of termination.
Additionally the company will secure a further 12 months’ service credit in respect of the directors’ pension scheme membership.
Should the director give notice to the company within the period of six months following a change of control of the company to terminate the
contract, one half of the payments referred to above shall be payable by the company.
Mr Davies will retire from the Board on 19 April 2006 following the conclusion of the Annual General Meeting. There are no compensation
payments that will be made to Mr Davies in this regard, Mr Davies receiving salary and pro rata bonus up to the date of retirement. Arriva plc Annual Report and Accounts 2005  37
www.arriva.co.uk
7. External Appointments
The Board is generally happy for executive directors to accept one appointment outside the company. Before
accepting such appointments, the director involved must receive the prior approval of the Board. In
considering such cases the Board will always satisfy itself, as far as is possible, that such appointments will
not detract from the executive directors’ expected contribution to the company or create any conflict of
interest. Any fees earned by an executive director in such a capacity will be assigned to the company as in
the case of Mr R J Davies’ appointment as a non-executive director of Barratt Developments PLC, where the
annual fee of £34,320 (£33,000 to 30 June 2005) is paid directly to the company on a quarterly basis.
8. Total Shareholder Return Graph
In accordance with the provisions of Schedule 7A to the Companies Act 1985, detailed below is a graph
charting the performance of the company’s Total Shareholder Return (share value growth plus re-invested
dividends) over the past five years compared with that of:
a) The FTSE 250 
b) The FTSE 350 Transport Sector.
Total return indices – Arriva, FTSE 250 and FTSE 350 Industrial Transportation
9. Remuneration Report Approval
An Ordinary Resolution to consider and if thought fit approve this Remuneration Report will be proposed at
the Annual General Meeting to be held on 19 April 2006.
For and on behalf of the Board
A V M PALMER
Chairman, Remuneration Committee
300
250
200
150
100
50
31/12/2000 31/12/2001 31/12/2002 31/12/2003 31/12/2004 31/12/2005
Arriva return index FTSE 250 return index FTSE 350 Industrial Transportation return index 38 Arriva plc Annual Report and Accounts 2005
CORPORATE GOVERNANCE 
Arriva plc is listed on the London Stock Exchange and as such is required to comply with the Listing Rules 
of the UK Listing Authority and to make a statement on corporate governance. This includes how the
principles set out in Section 1 of the Combined Code have been applied and whether or not the company
has complied with its provisions.
The directors of Arriva plc consider that the company has substantially complied with the provisions of
Section 1 of the Combined Code. The requirement that at least half the Board, excluding the Chairman,
should comprise non-executive directors determined by the Board to be independent (Code provision A.3.2)
was achieved in September by the appointment of two independent non-executive directors. 
The Board
The Board is responsible for the strategic direction of the company and has a specific schedule of matters
reserved for its decision covering the approval of financial statements, long-term objectives and commercial
strategy, treasury policy, health and safety policy, major capital investment and all matters concerning the
maintenance and development of good corporate governance practice.
The Board is made up of the non-executive Chairman, four independent non-executive directors and four
executive directors. Further details of the directors, including their biographies and committee memberships,
are given on pages 26 to 27.
The Board met 12 times during 2005, including one meeting devoted to a strategy discussion. At each
meeting the Board receives reports from the Chief Executive and from executive directors, as well as reports
from Board Committees. In addition to matters related to the strategy, finances and business of the
company, the Board considers reports on matters relevant to the transport industry and receives updates on
corporate governance, regulatory and other compliance matters.
The Board has a balance of executive and non-executive directors, with the non-executive directors
providing an independent voice and valuable skills and experience. Steve Williams is the Senior Independent
Director and his responsibilities include providing an additional channel of communication for shareholders
should they feel it necessary to express any concerns outside the normal methods of communication with
the company.
The Board has four Committees – Audit, Remuneration, Nomination and Safety. The Audit Committee met
four times during the year, the Remuneration Committee six times and the Nomination Committee and the
Safety Committee each met four times. A table showing attendance at Board meetings and Board
committee meetings is given on pages 40 and 41. A copy of the terms of reference of the Board
Committees is available on request or can be accessed by visiting the company’s website www.arriva.co.uk
The roles of both Chairman and Chief Executive are clearly divided and set out in the Board’s Corporate
Governance manual. The Chairman is responsible for ensuring the smooth and effective operation of the
Board, including the flow of information to the Board, for Board membership and succession and for
facilitating relationships between the company and investors. The Chief Executive is responsible for running
the business and implementing the decisions of the Board. In particular the Chief Executive formulates and
keeps under review proposals for the strategic direction of the business, ensures that appropriate
operational resources are available, promotes the company to the investing community and potential
investors, and accounts to the Board for the financial performance of the company. Bob Davies will retire as
Chief Executive at the conclusion of the Annual General Meeting on 19 April 2006, to be succeeded by
David Martin, currently Group Managing Director – Operations and Deputy Chief Executive.
One third of the directors are required to submit themselves for re-election each year and all directors will
have submitted themselves for re-election every three years. Newly appointed directors will be subject to
election by the shareholders at the first opportunity after their appointment; a resolution to approve the
appointments of Nick Buckles and Steve Williams as directors of the company will be proposed at the
Annual General Meeting to be held on 19 April 2006.
All directors have access to the advice and services of the Company Secretary who administers the Board 
and Board Committee meetings, regularly updates the Board on matters of corporate governance and
ensures that relevant procedures and regulations are adhered to. There is an established procedure for 
any of the directors (both executive and non-executive) to obtain independent professional advice at the
company’s expense. 
An Induction Programme applies for all new appointees to the Board, which incorporates full briefing on
the Arriva approach to corporate governance and a review of the business and Board and corporate issues.
The Induction Programme also includes site visits in the UK and mainland Europe and one-to-one meetings
with key senior managers. Existing directors also receive regular business updates and make site visits as
appropriate. Opportunities to further develop Board skills and knowledge are also considered as part of the
Board evaluation process. Arriva plc Annual Report and Accounts 2005  39
www.arriva.co.uk
Board Evaluation
The Board undertakes an annual evaluation of its own performance. The 2005 evaluation was an internal
process based on confidential questionnaires completed by each director and reviewed by the Chairman.
The primary focus of the 2005 evaluation was on the role of the Board in providing strategic direction,
sound governance and successful senior management succession. As part of the 2005 evaluation process
Steve Williams, consulting other directors of the Board, undertook an evaluation of the performance of 
Sir Richard Broadbent in his role as Chairman.
Audit Committee
The Audit Committee comprises Simon Batey, Veronica Palmer and Steve Williams, all independent non-
executive directors. To assist it in performing its duties the Committee may invite other members of the
Board, the Head of Internal Audit, any member of the company’s senior management team and any
representative of the company’s external auditors to attend its meetings; however no invitee has any right of
attendance. The Committee met four times in 2005. It is the responsibility of the Committee members to
ensure that they are regularly briefed and receive training on matters concerning financial reporting
developments and associated skills.
The Committee is chaired by Simon Batey, a chartered accountant and Group Finance Director of United
Utilities plc.
The Committee’s terms of reference require it to monitor the integrity of all the company’s financial
statements and any other statements which may be issued relating to the company’s financial performance
or financial standing; this review will include an assessment of financial reporting judgments applied. 
It is the responsibility of the Committee to review and report to the Board on the company’s internal
controls and risk management systems, including risk transfer and risk retention. The Committee reviews
reports by Group Internal Audit and reports to the Board on action being taken to address issues arising
from the reports. It also monitors the effectiveness of both the internal and external audit functions and is
required to satisfy itself as to the continuing independence and objectivity of the external auditors.
During 2005 the Committee undertook a review of the objectivity, resources and independence of the
auditors PricewaterhouseCoopers LLP (PwC) and has considered the appointment of the auditors for 2006.
Following this review the Committee believes that PwC continues to deliver a satisfactory service and has
recommended to the Board that PwC’s re-appointment as auditors be proposed at the Annual General
Meeting. The Board has endorsed that recommendation.
As part of its process for ensuring continued audit independence, the Audit Committee reviews and
approves the level and nature of non-audit work performed by the auditors. For the year under review the
value of non-audit work was £0.9 million against an audit fee of £0.7 million. The Committee also
approved policy documents relating to (i) non-audit work performed by the auditors and, (ii) the
employment of ex-employees of the external auditors.
Also during 2005 the Committee conducted an appraisal of the role of Group Internal Audit and how
effectively that role is discharged. The Committee concluded that the Group Internal Audit function was
performing well and represents a significant and effective unit in both the monitoring of the Group’s
internal controls and the quality, reliability and integrity of the Group’s accounting records.
Remuneration Committee
Full details of the work of the Committee appear in the Directors’ Remuneration Report on pages 31 to 37.
Nomination Committee
The Nomination Committee comprises the non-executive directors and is chaired by Sir Richard Broadbent.
It is responsible for keeping under review the structure, size and operation of the Board and its Committees
and for forming an assessment and making appropriate recommendations regarding the resourcing of the
Board. It also monitors and reviews senior management succession planning and during the year a
comprehensive succession exercise covering senior management at and immediately below Board level was
begun and is expected to be completed during 2006. In relation to new Board appointments the
Committee, in consultation with the Chief Executive and relevant external advisors, will consider and approve
the particular skill set, personal attributes and characteristics that are necessary to fulfill the role, review an
appropriate job description and be directly involved in the recruitment process. It is also the responsibility of
the Committee, together with the Chairman of the Board, to ensure the effective application of the Board
evaluation procedure. 40 Arriva plc Annual Report and Accounts 2005
CORPORATE GOVERNANCE 
continued
The Committee met four times in 2005. Areas that the Committee focused on included the succession to
Bob Davies as Chief Executive and the appointments of Nick Buckles and Steve Williams as non-executive
directors where the Committee was assisted in its recruitment process by external recruitment consultants
Spencer Stuart.
Safety Committee
The Board recognises the fundamental importance of safety within the business and the Safety Committee
exists to ensure that the appropriate Board level attention and overview is devoted to this subject.
The Safety Committee is required to identify and address key issues that may impact on the company, 
to review the key safety performance indicators, to advise the Board of Directors on the adequacy and
effectiveness of the overall safety policy of the Group and review and report on the company’s internal
safety management system. The Committee is chaired by Nick Buckles (non-executive director) and its
members are Sir Richard Broadbent, Steve Williams (Senior Independent Director) and the Group Managing
Director – Corporate Affairs, Steve Clayton; the Group Safety and Environment Manager, Sean Forster,
supports the Committee in its work. The Committee met on four occasions during the year.
In December 2005 the Board approved a revised Safety Policy statement, as developed by the Safety
Committee, which reflects the arrangements in place for successful safety management across all Arriva
businesses. The Safety Policy statement can be found on the Arriva website www.arriva.co.uk
Board and Board Committee Attendance
BOARD
Possible Actual
Sir Richard Broadbent 12 12
R J Davies 12 12
D R Martin 12 11
S P Lonsdale 12 12
S J Clayton 12 12
A V M Palmer 12 12
S G Batey 12 12
N P Buckles 6 6
S G Williams 5 5
M J Allen 6 6
A M Saxton 1 1
AUDIT
A V M Palmer 4 4
S G Batey 4 4
S G Williams 1 0
M J Allen 2 2
NOMINATION
Sir Richard Broadbent 4 4
A V M Palmer 4 4
S G Batey 4 4
N P Buckles 2 2
S G Williams 1 1
M J Allen 2 2
REMUNERATION
A V M Palmer 6 6
S G Batey 6 6
N P Buckles 3 3
M J Allen 2 2 Arriva plc Annual Report and Accounts 2005  41
www.arriva.co.uk
SAFETY
Sir Richard Broadbent 4 4
S J Clayton 4 4
N P Buckles 1 1
S G Williams 1 1
M J Allen 2 2
Whistleblowing
The Group operates a ‘Whistleblowing’ policy and procedure whereby employees can in confidence report
on matters where they feel a malpractice is taking place or if health and safety standards are being
compromised. Areas that are addressed by this procedure cover financial malpractice, criminal activities,
dangers to health and safety, improper or unethical behaviour and risks to the environment. 
The procedures allow for employees to raise their concerns with line management or, if this is inappropriate,
to raise them on a confidential basis. A confidential telephone mailbox and confidential e-mail facility are
provided to protect the identity of employees in these circumstances. The complaint will be investigated in 
a confidential manner and, after a decision is made as to what further steps should be taken, feedback is
given to the person making the complaint. An official written record is kept of each stage of the procedure,
and a report of the outcome of all investigations is made to the Board.
The ‘Whistleblowing’ policy and its operation is subject to periodic review by the Audit Committee; the last
review was in February 2006.
Dialogue with Shareholders
The company has an established programme of communication with shareholders and the Corporate
Communications department organises presentations for analysts and investors. It is the Board’s intention 
to ensure that these arrangements, subject to any statutory or regulatory requirements, continue and are
developed in a way designed to provide a helpful and constructive dialogue between the company and the
major investors.
A procedure has been established for the non-executive directors to receive direct feedback from the
company’s stockbrokers of the investing community’s perception of the Board’s performance and strategy.
Annual General Meeting
The Annual General Meeting is an important opportunity for the Board to communicate with shareholders,
particularly private shareholders. A presentation on the progress and performance of the business is made
prior to the formal business of the meeting and the Chairmen of the Audit, Remuneration, Nomination and
Safety Committees are available to answer questions.
Following each resolution, the meeting will be informed of the number of proxy votes submitted in respect
of each resolution; this information will also be published on the company’s website following the meeting.
Accountability and Audit
Companies are required to report to shareholders that they have conducted an annual review of the
effectiveness of the system of internal control. The review required extends beyond financial controls to
encompass operational and compliance control and risk management.
Internal Control
The directors are responsible for the Group’s system of internal control. While no system can provide
absolute guarantees and protection against material loss, the systems are designed to give the directors
reasonable assurance that problems can be identified promptly and remedial action taken as appropriate.
An ongoing process for identifying, evaluating and managing the significant risks facing the Group has been
in place throughout the year under review and continues to remain in place.
The Board has reviewed the effectiveness on an ongoing basis of the system of internal control for the
accounting period under review.
The key features of the internal control system are:
(a) Organisation Structure
The structure of the organisation is so designed to minimise as far as possible the complexity of the
reporting arrangements commensurate with the commercial demands made on the Group. The
structure focuses on the core businesses of the Group and stringent reporting procedures are applied
to ensure that performance is closely monitored so that effective and prompt action can be taken if
the need arises. Certain of the Group’s key functions including company secretarial, legal, taxation,
internal audit, treasury, insurance and health and safety are undertaken centrally. 42 Arriva plc Annual Report and Accounts 2005
CORPORATE GOVERNANCE 
continued
(b) Financial Reporting
The Group operates a comprehensive financial control system with each operating division’s
performance being closely monitored against both budget and prior period performance. Monthly
management accounts are prepared for consideration by the Board as a whole.
(c) Group Internal Audit
The internal control systems are comprehensively supported by the Group Internal Audit department.
Group Internal Audit is responsible for advising all levels of management, and the Board of Directors
through the Audit Committee, on the quality of the operational systems of control for all parts of the
Group. This review and appraisal function does not relieve line management of its responsibility for
effective control.
Group Internal Audit functions by conducting independent appraisals in a professional manner
leading to reports detailing findings and agreed actions. Group Internal Audit undertakes annual
financial reviews of the balance sheets of all of the Group’s material trading subsidiaries and engages
in a cycle of operational and risk reviews both on scheduled and random bases; the Head of Internal
Audit reports directly to the Audit Committee.
The Group Internal Audit department is staffed by appropriately qualified and experienced auditors.
(d) Risk Assessment and Risk Control
An essential element of good internal control is the continual process of risk assessment and the
implementation of appropriate controls designed to eliminate or mitigate the effects of the
crystallisation of identified major risks.
The approach adopted by the Board involves a process which is designed to encourage divisional
operational staff to critically examine their responsibilities and identify those risks which are of such a
nature that their crystallisation would have a material impact on their business. In order for this
process to succeed it is essential that ‘ownership’ of risk awareness, risk identification and risk control
is fully embraced by line management as an essential ingredient of its normal responsibilities.
In implementing its risk assessment programme the Board has devolved to the Audit Committee the
task of implementing and maintaining an appropriate risk assessment and control programme and
works closely with the Head of Internal Audit in engaging in a formal review of the key business risks
to the Group.
In the development of this programme there are a number of fundamental issues that the Board has
identified as being absolutely critical to the success and effectiveness of the risk management and
control programme, and in formulating its approach has structured the programme around the key
areas of:
• Clear leadership from the Board
• The need for risk management to be seen as part of everyday activity and to be embedded in
line management culture
• Clear communication of the principles involved
• Active support and involvement of the Group Internal Audit function
• Regular review of the process and continual assessment of the changing nature of the risks
presenting themselves to the business.
As part of the risk management regime a disaster recovery plan has been developed and tested for the
Group’s key locations and provides for recovery procedures for all the primary business functions. 
Going Concern
The directors confirm that, after having made appropriate enquiries, they have a reasonable expectation that
the Group and the company have adequate resources to continue in operational existence for the foreseeable
future. Accordingly the directors continue to adopt the going concern basis in the preparation of the
Accounts. This approach was endorsed by the Audit Committee at its meeting held on 23 February 2006. Arriva plc Annual Report and Accounts 2005  43
www.arriva.co.uk
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ARRIVA PLC
We have audited the Group financial statements of Arriva plc for the year ended 31 December 2005 which
comprise the Group Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the
Group Statement of Recognised Income and Expense and the related notes. These Group financial
statements have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of Arriva plc for the year ended
31 December 2005 and on the information in the Directors’ Remuneration Report that is described as
having been audited.
Respective responsibilities of directors and auditors 
The directors’ responsibilities for preparing the Group financial statements in accordance with applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the
Statement of Directors’ Responsibilities. In addition, the directors are responsible for preparing the Annual
Report and Directors' Remuneration Report.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion,
has been prepared for and only for the company’s members as a body in accordance with Section 235 of
the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Group financial statements give a true and fair view and
whether the Group financial statements have been properly prepared in accordance with the Companies
Act 1985 and Article 4 of the IAS Regulation. We also report to you if, in our opinion, the Directors’ Report
is not consistent with the Group financial statements, if we have not received all the information and
explanations we require for our audit, or if information specified by law regarding director’s remuneration
and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the company’s compliance with the nine
provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial
Services Authority, and we report if it does not. We are not required to consider whether the board’s
statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the
Group’s corporate governance procedures or its risk and control procedures.
We read other information contained in the Annual Report and consider whether it is consistent with the
audited Group financial statements. The other information comprises only the Highlights of the Year, the
Chairman’s Statement, the Group Development Across Europe, the Chief Executive’s Review, the Financial
Review, the Corporate Responsibility Review, the Directors’ Report, the unaudited part of the Directors’
Remuneration Report, the Corporate Governance Statement, the Five-Year Financial Summary and the
Extract from the Report on Transition to IFRS. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion 
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by
the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the Group financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the Group financial statements, and of
whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and
adequately disclosed. 
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
Group financial statements are free from material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in
the Group financial statements.
Opinion
In our opinion:
• The Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the
European Union, of the state of the Group’s affairs as at 31 December 2005 and of its profit and cash
flows for the year then ended
• The Group financial statements have been properly prepared in accordance with the Companies Act
1985 and Article 4 of the IAS Regulation.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
13 March 2006 44 Arriva plc Annual Report and Accounts 2005
FINANCIAL STATEMENTS
GROUP INCOME STATEMENT
for the year ended 31 December 2005
2005 2004
notes £m £m
Revenue 1 1,626.8 1,759.0
Net operating expenses before exceptional items, goodwill impairment and 
intangible asset amortisation (1,499.4) (1,626.2)
Exceptional items 1 2.3 (3.3)
Goodwill impairment and intangible asset amortisation 1 (6.6) (3.2)
Total net operating expenses 3(a) (1,503.7) (1,632.7)
Group operating profit 123.1 126.3
Finance income 3.4 5.4
Finance costs (18.6) (22.4)
Net finance costs 2 (15.2) (17.0)
Profit on ordinary activities before taxation 3 107.9 109.3
Tax on profit on ordinary activities 5 (21.6) (26.0)
Profit for the year 86.3 83.3
Attributable to:
Equity holders of the parent 85.9 83.2
Minority interests 0.4 0.1
86.3 83.3
Dividends per ordinary share 6 19.84p 18.9p
Basic earnings per share 7(a) 43.7p 42.6p
Diluted earnings per share 7(a) 43.3p 42.1p
Basic earnings per share before goodwill impairment,
intangible asset amortisation and exceptional items 7(b) 45.0p 45.1p Arriva plc Annual Report and Accounts 2005  45
www.arriva.co.uk
GROUP BALANCE SHEET
at 31 December 2005
2005 2004
notes £m £m
Non-current assets
Goodwill 8 277.5 266.7
Other intangible assets 9 40.8 45.6
Property, plant and equipment 10 1,092.8 962.6
Investments 11 7.9 6.2
Derivative financial instruments 19 15.0 -
1,434.0 1,281.1
Current assets
Inventories 12 27.8 26.2
Trade and other receivables 13 209.4 167.4
Cash and cash equivalents 14 94.1 81.7
Derivative financial instruments 19 7.5 -
338.8 275.3
Total assets 1,772.8 1,556.4
Current liabilities
Trade and other payables 15 388.6 360.0
Tax liabilities 16 29.8 30.6
Obligations under finance leases 17 18.2 15.2
Bank overdrafts and loans 17 145.4 131.3
582.0 537.1
Non-current liabilities
Bank loans 17 203.8 82.6
Other loans 17 93.3 155.7
Retirement benefit obligations 20 207.4 193.4
Deferred tax liabilities 21 44.3 37.9
Obligations under finance leases 17 69.3 46.9
Other non-current liabilities 18 69.0 73.0
687.1 589.5
Total liabilities 1,269.1 1,126.6
Net assets 503.7 429.8
Equity
Share capital 22 9.8 9.8
Share premium account 25 19.1 15.3
Other reserves 24 75.0 60.9
Retained earnings 25 383.5 341.6
Total shareholders’ equity 25 487.4 427.6
Minority interest in equity 25 16.3 2.2
Total equity 503.7 429.8
R J Davies
Directors
S P Lonsdale
Approved by the Board on 1 March 2006. 46 Arriva plc Annual Report and Accounts 2005
FINANCIAL STATEMENTS
continued
GROUP CASH FLOW STATEMENT
for the year ended 31 December 2005
2005 2004
notes £m £m
Cash flows from operating activities
Cash generated from operations 26(b) 207.9 254.6
Interest and finance charges paid (15.2) (17.0)
Tax paid (25.8) (15.5)
Net cash generated from operating activities 166.9 222.1
Cash flows from investing activities
Acquisitions of businesses 27(a) (46.3) (63.5)
Net cash assumed on acquisitions 27(a) 7.3 11.9
Disposal of businesses 27(d) 12.0 -
Investment in joint venture - (20.6)
Cash assumed on joint venture - 10.5
Purchase of short-term rental vehicles (65.1) (73.2)
Purchase of other non-current assets (187.4) (113.4)
Disposal of short-term rental vehicles 39.8 43.3
Disposal of other non-current assets 16.8 17.8
Net cash used in investing activities (222.9) (187.2)
Cash flows from financing activities
Proceeds from issuing ordinary share capital 3.8 3.7
Purchase of own shares - (4.4)
(Decrease)/increase in loans due within one year (1.8) 50.0
Increase/(decrease) in loans due after one year 61.4 (1.2)
Increase/(decrease) in finance lease obligations 26.3 (48.5)
Dividends paid to the company’s shareholders (37.7) (35.6)
Net cash generated/(used) in financing activities 52.0 (36.0)
Net decrease in cash, cash equivalents and overdrafts (4.0) (1.1)
Cash, cash equivalents and overdrafts at the beginning of the year 76.6 77.0
Exchange (losses)/gains on cash, cash equivalents and overdrafts (1.0) 0.7
Cash, cash equivalents and overdrafts at the end of the year 26(c) 71.6 76.6 Arriva plc Annual Report and Accounts 2005  47
www.arriva.co.uk
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 December 2005
2005 2004
£m £m
Net foreign exchange adjustments offset in reserves (net of tax) (1.9) 1.8
Cash flow hedges (net of tax) 9.2 -
Actuarial (losses)/gains on defined benefit schemes (net of tax) (4.5) 12.1
Net income recognised directly in equity 2.8 13.9
Profit for the year 86.3 83.3
Total recognised income and expense for the year 89.1 97.2
Adoption of IAS39 (net of tax) 3.7 -
Total recognised income and expense 92.8 97.2
Attributable to:
Equity holders of the parent 92.3 97.1
Minority interests 0.5 0.1
92.8 97.2 48 Arriva plc Annual Report and Accounts 2005
ACCOUNTING POLICIES
Basis of preparation
As an EU listed company, Arriva plc is required to prepare its Group accounts using International Financial
Reporting Standards (IFRS), as adopted by the European Union, with effect from 2005. These financial
statements are the first full year statements to be prepared in accordance with IFRS. The disclosures required
by IFRS1 ‘First-time Adoption of International Financial Reporting Standards’, are set out below. Comparatives
for 2004 are restated to IFRS where applicable.
The financial statements are prepared on the historical cost basis of accounting, other than for certain items
of property, plant and equipment that have been stated at deemed cost under the transitional rules of IFRS,
and share-based payment charges and derivative financial instruments which are measured at fair value.
The principal IFRS accounting policies of the Group are set out below:
First-time adoption of IFRS
In accordance with the requirements of IFRS1 ‘First-time Adoption of International Financial Reporting
Standards’, the Group is subject to a number of voluntary and mandatory exemptions from full restatement
of comparatives to the requirements of IFRS, which have been applied as follows: 
• IAS32 ‘Financial Instruments: Disclosure and Presentation’ and IAS39 ‘Financial Instruments: 
Recognition and Measurement’ were adopted with effect from 1 January 2005
• The Group has elected to use fair value as deemed cost for UK land and buildings at the date of
transition (1 January 2004)
• The Group has not applied IFRS3 ‘Business Combinations’ retrospectively to business combinations that
occurred before the transition date
• The Group has set cumulative translation differences to zero at the transition date for all subsidiaries.
From the date of transition onwards foreign exchange differences on the retranslation of foreign
subsidiaries are recognised in a separate reserve within equity
• IFRS2 ‘Share-based Payment’ has been applied to all grants of equity instruments after 7 November
2002 that had not vested at 1 January 2005. 
The transitional information required to be disclosed by IFRS1 is included on pages 77 to 79 of the Annual
Report and Accounts.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Arriva plc and its subsidiaries
made up to 31 December each year. Subsidiaries are entities over which the Group has the power to govern
the financial and operating policies, generally accompanying a shareholding of more than one half of the
voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and 
de-consolidated from the date control ceases. 
The Group’s interests in jointly controlled entities are accounted for by proportional consolidation, combining
its share of the joint ventures’ profits, assets, liabilities and cash flows on a line-by-line basis with those of
the Group.
Associates are those entities over which the Group can exercise significant influence, but not control or joint
control. Associates are accounted for using the equity method.
All business combinations are accounted for by applying the purchase method. On acquisition, the assets,
liabilities and contingent liabilities are measured at their fair values at the date of acquisition. The excess of
the cost of acquisition over the fair value of the Group’s share of net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary
acquired, the difference is recognised directly in the income statement.
Intercompany transactions, balances, income and expenses are eliminated on consolidation.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised
either on receipt of consideration or, in the case of the provision of contractual services, on a percentage of
completion basis. The percentage of completion method is calculated either with respect to the proportion
of services provided compared with the total contracted service, or to the proportion of costs incurred on a
contract compared with total expected costs. Proceeds from the disposal of property, plant and equipment,
including short-term rental vehicles, are excluded from revenue.
Exceptional items
Exceptional items are those items which, because of their nature and materiality, merit separate presentation
to allow a better understanding of the Group’s financial performance.
Segment reporting
The Group’s primary risks and rates of return are determined by both the business and the geographical
areas in which it operates. Disclosure of results by business segment is used as the basis for primary
segment disclosures, in line with the Group’s internal management reporting structure. Arriva plc Annual Report and Accounts 2005  49
www.arriva.co.uk
Government grants
Government grants relating to capital expenditure are included as deferred income and are credited to the
income statement over the expected useful economic life of the assets concerned. Revenue-related grants
are credited to the income statement when the related expenditure is expensed.
Foreign currency translation
The trading results of overseas subsidiary undertakings are translated into sterling using average rates of
exchange. Foreign currency assets and liabilities are translated into sterling at the rates of exchange ruling at
the balance sheet date.
Differences on exchange arising from the retranslation of the opening investment in subsidiary undertakings
and the associated borrowings or hedging instruments, where hedge accounting is permitted, are taken to
the Statement of Recognised Income and Expense.
Property, plant and equipment
Land and buildings held for use in the delivery of passenger transport services and for administration
purposes are stated in the balance sheet at cost or deemed cost. They are not subject to a valuation.
Depreciation is calculated using the straight-line method to allocate the cost of each asset less its residual
value over its estimated useful life as follows:
Buildings 50 years
Fixtures, fittings, plant and machinery 3–10 years
Motor vehicles – short-term rental vehicles up to 7 years
Motor vehicles – buses and coaches up to 15 years
Rail rolling stock up to 35 years
Major refurbishment work on rail rolling stock is capitalised and depreciated over the interval to the
subsequent related major refurbishment. Interest costs incurred in financing the construction of certain
assets are capitalised where they are considered significant in relation to the asset being constructed and the
asset necessarily takes a substantial period of time to be prepared for its intended use. Rail rolling stock
undergoing post-construction acceptance testing is not depreciated until the commencement of full
operational service.
Goodwill 
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
net identifiable assets, liabilities and contingent liabilities at the date of acquisition. Goodwill on acquisition
of subsidiaries and joint ventures is disclosed separately in non-current assets. Goodwill on acquisition of
associates is included in investments.
Goodwill is not amortised but tested annually for impairment and carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill previously eliminated against reserves has not been reinstated.
Intangible assets
Intangible assets are recognised when acquired as part of business combinations where customer-related
contractual cash flows and obligations exist, and their fair value can be measured reliably. Intangible assets
purchased separately are measured at cost. Intangible assets that have a finite life are amortised annually
over their expected useful lives.
Impairment
At each balance sheet date the Group reviews the carrying amount of its tangible and intangible assets to
determine whether there are any indicators of impairment. If indicators of impairment exist then the
recoverable amount of an asset or cash generating unit is estimated. 
Where individual assets do not generate cash flows independent from other assets, the Group reviews the
carrying value and recoverable amount of a cash generating unit. This is the smallest group of assets where
independent cash flows are produced. 
If the recoverable amount of an asset or cash generating unit is less than its carrying amount, the difference
is recognised in the income statement as an impairment loss. 
Inventories
Inventories are stated at the lower of cost and net realisable value. 50 Arriva plc Annual Report and Accounts 2005
ACCOUNTING POLICIES
continued
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between initial carrying value and the redemption value is recognised
in the income statement over the period of the borrowings using the effective interest method. 
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to
taxation authorities.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss.
Deferred tax is determined using the tax rates (and laws) that have been enacted or substantially enacted by
the balance sheet date and which are expected to apply when the related deferred tax asset is realised or
the deferred tax liability is settled. 
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be
available against which the temporary differences can be utilised. 
Deferred tax is provided on temporary differences associated with investments in subsidiaries and associates,
except where the timing of the reversal of the temporary difference is controlled by the Group and it is
probable that the temporary difference will not reverse in the foreseeable future.
Pensions
The Group operates retirement benefit schemes, both defined benefit and defined contribution schemes.
The Group also participates in a number of multi-employer retirement benefit schemes and a number of
state-managed retirement benefit schemes. 
The liability recognised in the balance sheet in respect of the Group’s defined benefit pension plans is the
present value of the defined benefit obligation at the balance sheet date less the fair value of the plan
assets, together with adjustments for unrecognised past service costs. The defined benefit obligation is
calculated using the projected unit credit method. Formal actuarial valuations are carried out on a triennial
basis, with updated calculations being prepared at each balance sheet date. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be
paid, and that have terms to maturity approximating to the terms of the related pension liability.
The cost of providing future benefits (service cost) is charged to the income statement in net operating
expenses. The return on scheme assets and interest obligation on scheme liabilities comprise a pension
finance adjustment which is included in net operating expenses. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions are charged or credited to equity and shown
in the Statement of Recognised Income and Expense in the period they arise.
Contributions payable under defined contribution schemes, and certain overseas defined benefit schemes
that are accounted for as defined contribution schemes under IAS19, are charged to the income statement
as they arise.
Share-based payments
The Group issues equity settled share-based payments to certain employees, which are measured at fair
value at the date of grant. The fair value is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest. The impact of revising original estimates, if any, is
included in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium when the options are exercised.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and the amount
can be reliably estimated.  Arriva plc Annual Report and Accounts 2005  51
www.arriva.co.uk
Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower
of the fair value of the leased asset and the present value of the minimum lease payments. Each lease
payment is allocated between the liability and finance charges so as to achieve a constant rate on the
finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in
other liabilities. The interest element of the finance cost is charged to the income statement over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of
the asset’s useful life and the lease term. 
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. 
Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term highly liquid
investments with a maturity of less than 90 days that are readily convertible to known amounts of cash and
subject to insignificant risk of changes in value. 
Derivative financial instruments
The Group uses derivative financial instruments to reduce exposures to foreign currency exchange risk,
interest rate risk and changes in fuel prices to acceptable levels. All derivatives are initially recognised at fair
value, and are subsequently remeasured to fair value at each reporting date.
Derivatives designated as hedging instruments are accounted for in line with the nature of the hedging
arrangement. Derivatives are intended to be highly effective in mitigating the above risks, and hedge
accounting is adopted where the relevant test criteria are met. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognised immediately in the income statement.
Foreign currency exchange risk
Derivatives are entered into to hedge exposure to foreign currency exchange risk. The Group also uses
foreign currency debt to hedge foreign currency exposures. Both the derivatives and debt are designated as
hedges of net investments in overseas subsidiaries.
Interest rate and fuel price risk
Derivative instruments are used to manage the Group’s exposure to changes in cash flows arising from
movements in interest rates and fuel prices. The derivatives are designated as cash flow hedges, and hedge
accounting is used where it is demonstrable that the hedge relationship is highly effective.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial
statements in the period in which the dividends are approved by the company’s shareholders. 52 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
1. SEGMENTAL REPORTING
Primary reporting format – business segments
year ended 31 December 2005
Passenger services
Mainland Bus & Vehicle
UK Bus UK Trains Europe Coach Rental Central Group
£m £m £m £m £m £m £m
Revenue 697.5 239.4 621.2 13.1 55.6 - 1,626.8
EBITDA* 116.2 16.3 89.4 5.1 33.7 (16.2) 244.5
Depreciation (48.2) (1.4) (41.4) (2.1) (23.6) (0.4) (117.1)
Operating profit* 68.0 14.9 48.0 3.0 10.1 (16.6) 127.4
Net finance costs (15.2)
Profit on ordinary activities before taxation* 112.2
Goodwill impairment and intangible asset amortisation (6.6)
Exceptional items:
– Profit on the disposal of properties 2.3
Profit on ordinary activities before taxation 107.9
Segment assets 668.2 54.8 805.1 22.8 129.8 (2.0) 1,678.7
Segment liabilities (316.7) (99.7) (279.3) (8.6) (19.8) (15.0) (739.1)
351.5 (44.9) 525.8 14.2 110.0 (17.0) 939.6
Unallocated liabilities:
– Corporate borrowings (435.9)
Total net assets 503.7
Other segment items
Capital expenditure (excluding acquisitions) 78.4 4.0 104.7 3.7 61.6 0.1 252.5
Goodwill impairment and intangible 
asset amortisation - (0.8) (5.8) - - - (6.6)
Profit on the disposal of properties 0.7 - 0.7 - 0.1 0.8 2.3
* Before goodwill impairment, intangible asset amortisation and exceptional items
(a) Included above is £19.0 million of revenue and £2.0 million of operating profit, before goodwill impairment, intangible asset amortisation
and exceptional items, relating to the acquisitions made by the mainland Europe division during the year. There is £7.2 million of revenue and
£0.4 million of operating profit relating to acquisitions made by the UK Bus division.
(b) Operating profit in the above analysis represents operating profit of £123.1 million as disclosed in the income statement plus goodwill
impairment and intangible asset amortisation of £6.6 million less exceptional items credited to operating profit of £2.3 million.
(c) Segment assets in the above analysis of £1,678.7 million represents total assets as disclosed in the balance sheet of £1,772.8 million less cash
of £94.1 million. 
(d) Segment liabilities in the above analysis of £739.1 million represents total liabilities as disclosed in the balance sheet of £1,269.1 million less
£530.0 million of borrowings.
(e) Vehicle Rental revenue includes £52.1 million in relation to rentals receivable under operating leases. Arriva plc Annual Report and Accounts 2005  53
www.arriva.co.uk
1. SEGMENTAL REPORTING (continued)
Primary reporting format – business segments
year ended 31 December 2004
Passenger services
Mainland Bus & Vehicle
UK Bus UK Trains Europe Coach Rental Central Group
£m £m £m £m £m £m £m
Revenue 651.5 509.0 525.6 13.8 59.0 0.1 1,759.0
EBITDA* 108.5 33.8 66.3 5.6 37.7 (13.1) 238.8
Depreciation (44.9) (1.9) (31.2) (2.4) (25.1) (0.5) (106.0)
Operating profit* 63.6 31.9 35.1 3.2 12.6 (13.6) 132.8
Net finance costs (17.0)
Profit on ordinary activities before taxation* 115.8
Goodwill impairment and intangible asset amortisation (3.2)
Exceptional items:
– Profit on the disposal of properties 1.0
– Restructuring costs (4.3)
Profit on ordinary activities before taxation 109.3
Segment assets 598.3 50.1 664.8 22.7 125.2 13.6 1,474.7
Segment liabilities (275.9) (122.8) (219.6) (9.3) (20.1) (47.2) (694.9)
322.4 (72.7) 445.2 13.4 105.1 (33.6) 779.8
Unallocated liabilities:
– Corporate borrowings (350.0)
Total net assets 429.8
Other segment items
Capital expenditure (excluding acquisitions) 61.2 2.4 47.8 3.5 71.5 0.2 186.6
Goodwill impairment and intangible 
asset amortisation - (0.8) (2.4) - - - (3.2)
Profit on the disposal of properties - - 0.9 - - 0.1 1.0
Restructuring costs - - (4.3) - - - (4.3)
* Before goodwill impairment, intangible asset amortisation and exceptional items
(a) Included above is £50.2 million of revenue and £4.0 million of operating profit, before goodwill impairment, intangible asset amortisation
and exceptional items, relating to the acquisitions made by the mainland Europe division during the year. 
(b) Operating profit in the above analysis represents operating profit of £126.3 million as disclosed in the income statement plus goodwill
impairment and intangible asset amortisation of £3.2 million plus exceptional items charged to operating profit of £3.3 million.
(c) Segment assets in the above analysis of £1,474.7 million represents total assets as disclosed in the balance sheet of £1,556.4 million less cash
of £81.7 million. 
(d) Segment liabilities in the above analysis of £694.9 million represents total liabilities as disclosed in the balance sheet of £1,126.6 million less
£431.7 million of borrowings.
(e) Vehicle Rental revenue includes £55.1 million in relation to rentals receivable under operating leases. 54 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
1. SEGMENTAL REPORTING (continued)
Secondary reporting format – geographical segments
The Group’s operations are located in the UK and mainland Europe. The UK is the home country of the parent.
Revenue Segment assets Capital expenditure
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
UK 1,005.6 1,233.4 873.6 809.9 147.8 138.8
Mainland Europe 621.2 525.6 805.1 664.8 104.7 47.8
1,626.8 1,759.0 1,678.7 1,474.7 252.5 186.6
2005 2004
£m £m
Interest expense:
– Interest payable on bank and other borrowings repayable within five years 10.4 6.2 
– Interest payable on bank and other borrowings repayable after five years 0.6 0.5 
Finance lease charges 3.2 6.0 
Hire purchase charges 4.4 5.7 
Charge arising on early settlement of US private placement loan notes - 4.0
Interest payable and similar charges 18.6 22.4 
Interest income:
Net interest receivable on other financing items (3.4) (5.4)
Net finance costs 15.2 17.0
During the year the Group has capitalised interest of £0.3 million (2004: £nil), the rate used for capitalisation purposes was 2.5 per cent.
2. NET FINANCE COSTS  Arriva plc Annual Report and Accounts 2005  55
www.arriva.co.uk
3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2005 2004
(a) Net operating expenses £m £m
Operating costs 1,287.5 1,427.6
Distribution costs 8.5 7.1
Administrative expenses 207.7 198.0
1,503.7 1,632.7
2005 2004
(b) The following items have been included in arriving at operating profit: £m £m
Staff costs (note 4) 825.3 833.7 
Depreciation of property, plant and equipment 117.1 106.0 
Amortisation of intangible assets 5.1 2.6 
Impairment of goodwill 1.5 0.6 
Profit on disposal of properties (2.3) (1.0)
Operating lease rentals payable:
– Plant and machinery 125.3 208.7 
– Property 15.1 24.9 
Restructuring costs - 4.3 
During the year the Group (including its overseas subsidiaries) obtained the 
following services from the Group’s auditors and network firms at costs as detailed below: 2005 2004
£m £m
Audit services – statutory audit 0.7 0.6
Tax services 0.3 0.3
Consultancy 0.4 -
Other services 0.2 0.1
1.6 1.0
Included in the Group’ s audit fees and expenses paid to the auditors is £0.1 million (2004: £0.1 million) in respect of the parent company.
4. EMPLOYEE INFORMATION
2005 2004
(a) Average number of employees by business Number Number
Passenger Services:
– UK Bus 17,717 17,512
– UK Trains 1,930 4,488
– Mainland Europe 11,994 10,371
Total Passenger Services 31,641 32,371
Vehicle Rental 622 661
Bus & Coach 50 54
Central 91 100
Total 32,404 33,186
2005 2004
(b) Staff costs £m £m
Wages and salaries 706.7 712.7
Social security costs 78.9 74.1
Pension costs 39.7 46.9
825.3 833.7 56 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
5. TAXATION
2005 2004
Analysis of charge in the year £m £m
Current tax 21.6 23.8 
Deferred tax - 2.2 
Taxation 21.6 26.0 
2005 2004
Tax on items charged to equity £m £m
Adoption of IAS39 1.6 -
Current tax charge/(credit) on exchange movements offset in reserves 2.7 (0.9)
Deferred tax charge on cross currency swaps 0.8 -
Deferred tax charge on cash flow hedges 4.0 -
Deferred tax (credit)/charge on actuarial (losses)/gains on defined benefit schemes (1.3) 4.7
Total tax on items charged to equity 7.8 3.8
The tax for the year is lower (2004: lower) than the standard rate of corporation tax in the UK of 30 per cent (2004: 30 per cent). 
The differences are explained below:
2005 2004
£m £m
Profit on ordinary activities before tax 107.9 109.3 
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30 per cent (2004: 30 per cent) 32.4 32.8
Effects of:
– Adjustments to tax in respect of prior years (10.3) (6.3)
– Income not subject to tax (1.9) (1.9)
– Expenses not deductible for tax purposes 2.1 2.2 
– Utilisation of previously unrecognised tax losses (4.0) (1.9)
– Tax losses arising where no deferred tax asset has been recognised 1.4 0.8 
– Different tax rates of subsidiaries operating in other jurisdictions 3.0 1.8 
– Other (1.1) (1.5)
Total taxation 21.6 26.0  Arriva plc Annual Report and Accounts 2005  57
www.arriva.co.uk
6. DIVIDENDS
2005 2004
Per share Earnings Shares Per share Earnings Shares
(a) Basic and diluted earnings per share p£m m p£m m
Profit attributable to ordinary shareholders 85.9 83.2
Weighted average number of shares 196.5 195.2
Basic earnings per share 43.7 85.9 196.5 42.6 83.2 195.2
Performance-based share option schemes:
– Additional shares for earnings contingency 2.6 4.1
– Number of shares that would have been issued at fair value (0.8) (1.6)
Diluted earnings per share 43.3 85.9 198.3 42.1 83.2 197.7
(b) Basic earnings per share before goodwill impairment, 2005 2004
intangible asset amortisation and exceptional items p p
Basic earnings per share 43.7 42.6
Earnings per share relating to:
– Goodwill impairment and intangible asset amortisation 2.5 1.3
Exceptional items:
– Profit on the disposal of properties in continuing operations (1.2) (0.8)
– Restructuring costs - 2.0
Basic earnings per share before goodwill impairment, intangible asset amortisation and exceptional items 45.0 45.1
7. EARNINGS PER SHARE
2005 2004
£m £m
Final dividend paid for the year ended 31 December 2004 of 14.07p 
(2004: final dividend paid for the year ended 31 December 2003 of 13.4p) per share 27.7 26.2 
Interim dividend paid for the year ended 31 December 2005 of 5.07p 
(2004: interim dividend paid for the year ended 31 December 2004 of 4.83p) per share 10.0 9.4 
Amounts recognised as distributions to equity holders in the year 37.7 35.6 
In addition, the directors are proposing a final dividend in respect of the financial year ending 31 December 2005 of 14.77p per share which will
absorb an estimated £29.1 million of shareholders’ funds. It will be paid on 2 May 2006 to shareholders who are on the register of members on
31 March 2006. 58 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
8. GOODWILL
2005 2004
£m £m
Cost
At 1 January 316.9 279.6
Additions 20.9 35.6
Hindsight adjustment 1.6 -
Disposals (6.8) -
Currency translation adjustments (5.3) 1.7
At 31 December 327.3 316.9
Impairment
At 1 January 50.2 49.5
Impairment in the year 1.5 0.6
Disposals (1.4) -
Currency translation adjustments (0.5) 0.1
At 31 December 49.8 50.2
Net book amount at 31 December 277.5 266.7
Details of acquisitions and disposals in the year are shown in note 27. During the year, goodwill was reviewed for impairment in accordance with
IAS36. For the purposes of this impairment review goodwill has been valued on the basis of discounted future cash flows arising in each relevant
cash generating unit. 
9. INTANGIBLE ASSETS
2005 2004
£m £m
Cost
At 1 January 48.2 12.0
Additions 1.9 35.2
Hindsight adjustments (0.5) -
Currency translation adjustments (1.1) 1.0
At 31 December 48.5 48.2
Amortisation
At 1 January 2.6 -
Amortisation for the year 5.1 2.6
At 31 December 7.7 2.6
Net book amount at 31 December 40.8 45.6
All amortisation charges in the year have been charged through net operating expenses. Intangible assets relate to identifiable assets purchased
as part of the Group's business combinations, and to the right to operate the Arriva Trains Wales franchise. Intangible assets are amortised on a
straight-line basis over their expected useful economic lives. Arriva plc Annual Report and Accounts 2005  59
www.arriva.co.uk
10. PROPERTY, PLANT AND EQUIPMENT
Plant,
company
vehicles, Railway Short-term
Land & fixtures & Buses & rolling rental
buildings fittings coaches stock vehicles Total
As at 31 December 2005 £m £m £m £m £m £m
Cost
At 1 January 2005 243.1 102.1 940.6 98.8 152.9 1,537.5
Acquisitions 22.7 6.7 58.9 - - 88.3
Additions 8.1 18.6 132.4 28.3 65.1 252.5
Disposals (10.2) (8.8) (72.3) - (67.6) (158.9)
Currency translation adjustments 1.7 1.8 (11.1) (2.6) - (10.2)
At 31 December 2005 265.4 120.4 1,048.5 124.5 150.4 1,709.2
Accumulated depreciation
At 1 January 2005 31.6 61.8 423.0 14.0 44.5 574.9
Acquisitions 2.6 4.3 22.5 - - 29.4
Charge for the year 4.2 11.1 71.8 4.7 25.3 117.1
Disposals (2.3) (6.2) (64.5) - (27.8) (100.8)
Currency translation adjustments (0.1) 0.7 (4.4) (0.4) - (4.2)
At 31 December 2005 36.0 71.7 448.4 18.3 42.0 616.4
Net book amounts
At 31 December 2005 229.4 48.7 600.1 106.2 108.4 1,092.8
The net book amount of assets held under hire purchase and finance lease contracts included in plant, company vehicles, buses and coaches is
£295.8 million (2004: £319.8 million). The depreciation provided in the year in respect of these assets was £34.4 million (2004: £35.1 million).
The gross cost of assets held for the purpose of letting under operating leases amounts to £150.4 million (2004: £152.9 million). The
accumulated depreciation on these assets was £42.0 million (2003: £44.5 million).
Plant,
company
vehicles, Railway Short-term
Land & fixtures & Buses & rolling rental
buildings fittings coaches stock vehicles Total
As at 31 December 2004 £m £m £m £m £m £m
Cost
At 1 January 2004 226.6 96.6 857.4 - 148.8 1,329.4
Acquisitions 21.1 11.3 49.7 93.6 1.6 177.3
Additions 7.2 16.4 87.2 2.6 73.2 186.6
Disposals (13.1) (22.5) (57.5) (0.2) (70.7) (164.0)
Currency translation adjustments 1.3 0.3 3.8 2.8 - 8.2
At 31 December 2004 243.1 102.1 940.6 98.8 152.9 1,537.5
Accumulated depreciation
At 1 January 2004 29.5 65.5 385.6 - 44.4 525.0
Acquisitions 2.6 5.9 22.6 12.6 0.6 44.3
Charge for the year 3.9 10.2 63.8 1.2 26.9 106.0
Disposals (4.5) (20.4) (51.3) (0.1) (27.4) (103.7)
Currency translation adjustments 0.1 0.6 2.3 0.3 - 3.3
At 31 December 2004 31.6 61.8 423.0 14.0 44.5 574.9
Net book amounts
At 31 December 2004 211.5 40.3 517.6 84.8 108.4 962.6 60 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
11. INVESTMENTS
2005 2004
Fixed asset investments (all unquoted) £m £m
Cost
At 1 January 6.2 5.2
Additions 5.8 0.9
Disposals (4.3) -
Currency translation adjustments 0.2 0.1
At 31 December 7.9 6.2
12. INVENTORIES
2005 2004
£m £m
Raw materials, consumables and work in progress 20.9 19.8
Finished goods and goods for resale 6.9 6.4
27.8 26.2
The Group consumed £164.9 million (2004: £146.4 million) of inventories during the year. There was no material write down of inventories
during the current or prior year.
13. TRADE AND OTHER RECEIVABLES
2005 2004
£m £m
Current assets:
Trade debtors 83.5 81.3
Less: Provision for impairment of receivables (3.3) (4.7)
Trade debtors – net 80.2 76.6
Prepayments and accrued income 47.4 34.6
Other debtors 81.8 52.2
Instalment credit agreements - 4.0
209.4 167.4
10. PROPERTY, PLANT AND EQUIPMENT (continued)
2005 2004
£m £m
Net book amount of land and buildings comprises:
– Freehold 226.4 208.0
– Long leasehold 1.2 1.8
– Short leasehold 1.8 1.7
229.4 211.5 Arriva plc Annual Report and Accounts 2005  61
www.arriva.co.uk
14. CASH AND CASH EQUIVALENTS
2005 2004
Cash, cash equivalents and overdrafts in the cashflow statement comprise: £m £m
Cash and cash equivalents 94.1 81.7
Bank overdrafts (note 17) (22.5) (5.1)
71.6 76.6
15. TRADE AND OTHER PAYABLES
2005 2004
£m £m
Current liabilities:
Trade payables 102.1 65.0
Payments received on account 1.6 1.5
Other taxation and social security payable 29.9 28.8
Other creditors 102.4 87.6
Accruals and deferred income 152.6 177.1
388.6 360.0
16. TAX LIABILITIES
2005 2004
£m £m
Current tax liabilities 29.8 30.6
17. FINANCIAL LIABILITIES – BORROWINGS
2005 2004
£m £m
Current liabilities:
– Short-term loans 122.9 126.2
– Bank overdrafts 22.5 5.1
145.4 131.3
– Finance leases 18.2 15.2
163.6 146.5
Non-current liabilities:
– Syndicated loans 203.8 82.6
– Other loans 93.3 155.7
– Finance leases 69.3 46.9
366.4 285.2
2005 2004
£m £m
Loan capital and other borrowings repayment statement:
– Within one year or on demand 163.6 146.5
– Between one and two years 81.7 65.4
– Between two and five years 252.6 191.0
– Over five years 32.1 28.8
530.0 431.7
The total of the loans, any part of which falls due for repayment after 5 years, is £91.7 million (2004: £66.0 million). £42.3 million 
(2004: £56.0 million) represents bank loans in the mainland Europe division, with varying repayment dates and interest rates. £49.4 million
(2004: £10.0 million) represents fixed interest finance lease funding of the mainland Europe bus fleet, with varying repayment dates and interest
rates ranging between 4.1 per cent and 6.6 per cent.
The US private placement of £104.0 million was pre-paid in December 2004 with early settlement costs incurred of £4.0 million. 62 Arriva plc Annual Report and Accounts 2005
Other Other
Finance financial 2005 Finance financial 2004
Debt leases liabilities Total Debt leases liabilities Total
£m £m £m £m £m £m £m £m
In more than one year but 
not more than two years 31.4 34.0 16.3 81.7 36.7 11.5 17.2 65.4
In more than two years but 
not more than five years 220.5 15.2 16.9 252.6 126.8 34.1 30.1 191.0
In more than five years 12.0 20.1 - 32.1 27.5 1.3 - 28.8
263.9 69.3 33.2 366.4 191.0 46.9 47.3 285.2
Maturity of financial liabilities
The maturity profile of the carrying amount of the Group’s non-current liabilities at 31 December was as follows:
NOTES TO THE ACCOUNTS
continued
17. FINANCIAL LIABILITIES – BORROWINGS (continued)
Security and guarantees
Borrowings amounting to £151.5 million (2004: £215.6 million), principally relating to the bus fleet, are secured by charges over the related assets.
As part of the UK rail franchising arrangements the Group has provided guarantees of £13 million (2004: £19 million). The Group has provided
£13 million (2004: £12 million) of bonds in respect of its rail operations in Denmark and the Netherlands.
At 31 December 2005, letters of credit amounting to the value of £29 million (2004: £29 million) are provided by the Group’s bankers,
guaranteed by Arriva plc, in favour of the Group’s insurers.
Syndicated loans are secured by debentures giving fixed and floating charges over the assets of certain subsidiaries of the Group and by
guarantees given by Arriva plc.
2005 2004
The effective interest rates at the balance sheet dates were as follows: % %
Bank overdraft 5.5 5.8
Bank borrowings 3.3 3.7
Finance lease 4.0 4.5
Other financial liabilities 5.6 5.2
2005 2004
The carrying amount of the Group's borrowings are denominated in the following currencies: £m £m
Sterling 182.8 200.9 
Euro 220.2 193.5 
Danish Krone 97.4 10.4 
Swedish Krone 30.8 15.3 
Currency swaps:
– Euro 156.7 181.5 
– Danish Krone 19.3 59.0
– Sterling asset (177.2) (228.9)
530.0 431.7 
Fair value of financial assets and financial liabilities
Due to the short-term nature of financial assets and financial liabilities, or the floating rate nature of non-current financial liabilities, the Group
considers there to be no material difference between the fair value of financial assets and financial liabilities and their carrying amount in the
balance sheet. Arriva plc Annual Report and Accounts 2005  63
www.arriva.co.uk
2005 2004
£m £m
Expiring within one year 19.9 94.3
Expiring in more than two years 107.1 228.8
127.0 323.1
Finance leases
The Group typically enters into finance leases of no more than five years’ duration on an amortising basis. Given the short-term nature of this
funding, the Group considers there to be no material difference between the fair value of finance leases and their carrying amount in the balance
sheet.
Finance lease obligations included in current liabilities amount to £18.2 million (2004: £15.2 million) and in non-current liabilities amount to 
£69.3 million (2004: £46.9 million).
Borrowing facilities
The Group has the following undrawn committed floating rate borrowing facilities available at 31 December in respect of which all conditions
precedent had been met at that date:
18. OTHER NON-CURRENT LIABILITIES
2005 2004
£m £m
Accruals and deferred income 68.2 70.2
Payments received on account 0.8 2.8
69.0 73.0
19. DERIVATIVE FINANCIAL INSTRUMENTS
Financial instruments disclosures are set out below. Additional disclosures are set out in the accounting policies.
2005
£m
Non-current assets:
Interest rate swaps – cash flow hedge 0.7
Fuel derivatives – cash flow hedge 14.2
Cross currency swaps – net investment hedge 0.1
15.0
Current assets:
Interest rate swaps – cash flow hedge 0.1
Forward foreign currency contracts – cash flow hedge 0.1
Fuel derivatives – cash flow hedge 5.0
Cross currency swaps – net investment hedge 2.3
7.5
In accordance with IAS39 ‘Financial instruments: Recognition and Measurement’, Arriva plc has reviewed all contracts for embedded derivatives
that are required to be separately accounted for if they do not meet certain requirements set out in the Standard. All embedded derivatives were
found to be closely related to their host contracts, and therefore no fair value exercise was required to be undertaken. The Group has taken the
exemption from applying IAS39 to comparative information for the year ended 31 December 2004. 64 Arriva plc Annual Report and Accounts 2005
The calculations used to assess the IAS19 liabilities of the retirement benefit schemes are based on the most recent actuarial valuations, updated
to 31 December 2005 by qualified independent actuaries. The schemes' assets are stated at their market value at 31 December 2005. The
principal actuarial assumptions at the balance sheet date are:
2005 2004
% %
Discount rate 4.9 5.4
Inflation rate 2.6 2.6
Increases to deferred benefits during deferment 2.6 2.6
Increases to pensions in payment 2.6 2.6
Salary increases 3.8 3.8
Weighted average expected long-term rate of return at 31 December, after deduction for scheme expenses 7.0 7.3
Weighted average life expectancy for mortality tables to determine benefit obligations: 2005 2004
years years
Member age 65 (current life expectancy) Male 18 18 
Female 21 21 
Member age 45 (life expectancy at age 65) Male 19 19 
Female 22 22 
NOTES TO THE ACCOUNTS
continued
20. RETIREMENT BENEFIT OBLIGATIONS
At 31 December 2005 the Group operated a number of retirement benefit schemes, both defined benefit and defined contribution which are
financed through separate Trustee administered funds managed by independent professional fund managers on behalf of the Trustees.
Contributions to the defined benefit funds are based upon actuarial advice following the most recent of a regular series of valuations of the
funds by their representative independent actuaries. Certain employees of Arriva Merseyside Limited participate in the Local Government Pension
Scheme. This is a defined benefit scheme funded by payments to the Merseyside Pension Fund. The latest formal actuarial valuation of the
Merseyside Pension Fund was carried out as at 31 March 2004.
Certain employees of Arriva Trains Wales Limited, and the former employees of Arriva Trains Northern Limited, participate in funded defined
benefit sections which form part of the overall Railways Pension Scheme (RPS).  
Total pension cost
The total pension cost for the Group was £39.7 million (2004: £46.9 million). The pension costs in respect of the Group’s defined contribution 
schemes was £17.1 million (2004: £22.9 million, including £5.6 million in respect of Arriva Trains Northern Limited).
Defined benefit plans
The directors believe that separate consideration should be given to the RPS under IAS19 as the Group has no rights or obligations in respect of
sections of this scheme following the expiry of the franchises. The amounts relating to the rail schemes are therefore shown separately and relate
to sections in respect of Arriva Trains Wales Limited only.
19. DERIVATIVE FINANCIAL INSTRUMENTS  (continued)
Net fair values of derivative financial instruments
The fair values of derivative financial instruments designated as cash flow hedges were:
31 December 1 January
2005 2005
£m £m
Contracts with positive fair values:
– Interest rate swaps 0.8 -
– Forward foreign currency contracts 0.1 0.1
– Fuel derivatives 19.2 7.0
Contracts with negative fair values:
– Interest rate swaps - (0.2)
The fair values of derivatives have been supplied externally by the respective counterparties to the derivative and by banks using market rates
prevailing at the balance sheet date. Arriva plc Annual Report and Accounts 2005  65
www.arriva.co.uk
Group
Schemes RPS Total Total
2005 2005 2005 2004
The amounts recognised in the balance sheet are determined as follows: £m £m £m £m
Present value of funded obligations (725.7) (130.6) (856.3) (729.8)
Fair value of plan assets 531.5 108.7 640.2 525.3
Deficit (194.2) (21.9) (216.1) (204.5)
Deficit relating to scheme members - 8.7 8.7 8.8
(194.2) (13.2) (207.4) (195.7)
Rail franchise adjustment - - - 2.3
Deficit recognised in the balance sheet (194.2) (13.2) (207.4) (193.4)
No rail franchise adjustment was required in 2005 (2004: £2.3 million).
2005 2004
The amounts recognised in the income statement are as follows: £m £m
Current service costs 20.3 20.8
Interest cost 37.2 34.7
Expected return on assets (34.9) (31.5)
22.6 24.0
2005 2004
Movements in the present value of defined benefit obligations were as follows: £m £m
At 1 January 729.8 680.8
Member contributions paid 11.6 10.8
Current service cost 20.3 20.8
Interest cost* 39.5 36.5
Benefits paid (19.8) (23.4)
Actuarial loss 74.9 4.3
At 31 December 856.3 729.8
Movements in the fair value of plan assets were as follows:
At 1 January 525.3 457.9
Expected return on plan assets* 37.3 33.8
Total contributions 31.9 37.5
Benefits paid (19.8) (23.4)
Actuarial gains 65.5 19.5
At 31 December 640.2 525.3
*Before RPS shared cost adjustment
The movements in the present value of defined benefit obligations and in the fair value of the plan assets do not take into account the shared
cost nature of the RPS. The income statement includes 60 per cent of the relevant RPS amounts. 66 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
20. RETIREMENT BENEFIT OBLIGATIONS (continued)
2005 2004
Plan assets % %
The weighted average asset allocations at the year end were as follows:
Equities 77 76
Bonds 21 22
Other 2 2
History of experience gains and losses 2005 2004
Experience adjustments on scheme liabilities:
– Amounts (£m) (74.9) (4.3)
– Percentage of scheme liabilities 8.7% 0.6%
Experience adjustments on scheme assets:
– Amounts (£m) 65.5 19.5
– Percentage of scheme assets 10.2% 3.7%
21. DEFERRED TAX
2005 2004
The movement on the deferred tax account is as shown below: £m £m
At 1 January 37.9 17.7
Adoption of IAS39 1.6 -
Exchange differences (0.5) -
Acquisition of subsidiaries 1.8 13.3
Income statement charge - 2.2
Tax charged to equity 3.5 4.7
At 31 December 44.3 37.9
Deferred tax assets have not been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets because 
of the uncertainty regarding the recoverability of the resulting deferred tax assets. Deferred tax is not provided on the unremitted earnings of
overseas subsidiaries where the Group has control over the timing of remittance and it is probable that remittance will not take place in the
foreseeable future. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to
settle the balances net. Arriva plc Annual Report and Accounts 2005  67
www.arriva.co.uk
Accelerated 
tax depreciation Revaluation Intangibles Derivatives Other Total
Deferred tax liabilities £m £m £m £m £m £m
At 1 January 2004 66.8 18.3 - - 0.6 85.7
Exchange differences 0.1 - (0.1) - - -
Acquisition of subsidiaries - - 13.3 - - 13.3
Income statement charge 2.4 (0.9) (0.6) - 0.1 1.0
At 31 December 2004 69.3 17.4 12.6 - 0.7 100.0
Adoption of IAS39 - - - 1.6 - 1.6
Exchange differences (0.1) - (0.4) - - (0.5)
Acquisition of subsidiaries - - 0.5 - 1.3 1.8
Income statement charge 3.7 (0.4) (1.6) - 0.5 2.2
Tax charged to equity - - - 4.8 - 4.8
At 31 December 2005 72.9 17.0 11.1 6.4 2.5 109.9
The deferred tax liability due after more than one year is £106.1 million (2004: £98.1 million).
The movements in deferred tax assets and liabilities during the period are shown below:
Retirement
benefit
obligations Provisions Other Total
Deferred tax assets £m £m £m £m
At 1 January 2004 (61.9) (6.0) (0.1) (68.0)
Income statement charge 0.6 1.3 (0.7) 1.2
Tax charged to equity 4.7 - - 4.7
At 31 December 2004 (56.6) (4.7) (0.8) (62.1)
Income statement credit (0.7) (1.5) - (2.2)
Tax credited to equity (1.3) - - (1.3)
At 31 December 2005 (58.6) (6.2) (0.8) (65.6)
The deferred tax asset due after more than one year is £57.6 million (2004: £54.7 million).
Authorised Allotted – fully paid
2005 2004 2005 2004
Ordinary shares of 5p each £14,500,000 £14,500,000 £9,846,118 £9,787,495
Number of shares 290,000,000 290,000,000 196,922,357 195,749,903
Reconciliation of movement in issued share capital:
Shares in issue 1 January 195,749,903 195,035,046
Share allotments on exercise of options 1,172,454 1,849,857
Shares purchased - (1,135,000)
Shares in issue 31 December 196,922,357 195,749,903
Consideration of £3.8 million was received in respect of share allotments in the year ended 31 December 2005. At 31 December 2005 there
were outstanding options to receive allotments of 2,846,467 ordinary shares under the Executive Share Option Scheme, the Share Incentive
Scheme and the Long Term Incentive Plan. The price for the vested share for the Long Term Incentive Plan is nil. The option exercise prices for
the other schemes range from 175.0p to 548.0p. The options are exercisable up to March 2015. At 31 December 2005 the middle market
quotation of the ordinary share, as derived from the Stock Exchange Official List, was 582.4p. The highest price attained by the ordinary share
in 2005 was 598.4p and the lowest level during 2005 was 505.0p.
22. CALLED UP EQUITY SHARE CAPITAL 68 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
23. SHARE-BASED PAYMENTS
The Group operates an Executive Share Option Scheme (ESOS), Share Incentive Scheme (SIS) and Long Term Incentive Plan (LTIP). 
The ESOS is an Inland Revenue approved discretionary employee share option scheme, with options granted to certain senior employees
(excluding directors) and exercisable between three and ten years from date of grant, subject to performance criteria having been satisfied.
The SIS is an unapproved discretionary employee share option scheme, with options granted to certain senior employees (excluding directors) and
exercisable between three and seven years from date of grant, subject to performance criteria having been satisfied.
The LTIP is a discretionary share scheme providing incentives in the form of conditional awards of shares to selected senior employees, including
executive directors. There is a performance period of not less than three years before any of the shares may vest, with vesting of any of the
shares subject to performance criteria having been satisfied. Further details of the LTIP and performance criteria are given in the Directors'
Remuneration Report on pages 31 to 37.
In accordance with the transitional provisions of IFRS, the following disclosures relate only to awards made after 7 November 2002 that have not
vested before 1 January 2005.
The fair value per option granted and the assumptions used in the calculation of fair values are as follows:
Executive Share Option Scheme Share Incentive Scheme Long Term Incentive Plan
March March March March March March March March
2003 2004 2003 2004 2005 2003 2004 2005
Share price at grant date £2.83 £3.73 £2.83 £3.73 £5.48 £3.02 £3.75 £5.48
Exercise price £2.83 £3.73 £2.83 £3.73 £5.48 £0.00 £0.00 £0.00
Number of employees 12 46 44 54 95 34 4 4
Shares under option 73,000 206,162 254,500 197,338 442,500 1,042,308 345,261 224,451
Vesting period (years) 3 3 3 3 3 3 3 3
Expected volatility 32% 24% 32% 24% 24% 32% 24% 24%
Option life (years) 10 10 7 7 7 3 3 3
Expected life (years) 3 3 3 3 3 3 3 3
Risk-free rate 4% 4.5% 4% 4.5% 4% 4% 4.5% 4%
Expected dividends 
expressed as a dividend yield 5.8% 5.1% 5.8% 5.1% 3.6% 5.8% 5.1% 3.6%
Expectations of 
meeting performance criteria 100% 100% 100% 100% 100% 100% 25% 0%
Fair value per option £0.470 £0.504 £0.470 £0.504 £0.835 £2.537 £3.215 £4.919
The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The
risk-free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. A reconciliation of
option movements for each of the above schemes over the year to 31 December follows: Arriva plc Annual Report and Accounts 2005  69
www.arriva.co.uk
2005 2004
Weighted Weighted
average average
Number exercise Number exercise
(‘000) price (£) (‘000) price (£)
Outstanding at 1 January 279 3.49 73 2.83
Granted -- 206 3.73
Forfeited (38) 3.28 --
Exercised (9) 3.24 --
Outstanding at 31 December 232 3.54 279 3.49
Exercisable at 31 December -- --
(a) Executive Share Option Scheme
2005 2004
Weighted Weighted
average average
Number exercise Number exercise
(‘000) price (£) (‘000) price (£)
Outstanding at 1 January 442 3.22 255 2.83
Granted 442 5.48 197 3.73
Forfeited (51) 3.20 --
Exercised (6) 5.25 (10) 3.28
Outstanding at 31 December 827 4.42 442 3.22
Exercisable at 31 December -- --
(b) Share Incentive Scheme
Weighted Weighted
Range average average
of exercise exercise Number of exercise Number of
prices price shares ExpectedContractual price shares Expected Contractual
(£) (£) (‘000) (years) (years) (£) (‘000) (years) (years)
2.83–3.73 3.54 232 1.0 8.0 3.49 279 2.0 9.0
The weighted average share price during the period for options in the ESOS exercised over the year was 573.4p. The total charge for the year
relating to the scheme was £nil (2004: £nil). 
Weighted average
remaining life
Weighted average
remaining life
2005 2004
Weighted Weighted
Range average average
of exercise exercise Number of exercise Number of
prices price shares ExpectedContractual price shares Expected Contractual
(£) (£) (‘000) (years) (years) (£) (‘000) (years) (years)
2.83–5.48 4.42 827 1.5 5.5 3.22 442 1.3 5.3
The weighted average share price during the period for options exercised in the Share Incentive Scheme over the year was 573.4p 
(2004: 521.6p). The total charge for the year relating to the scheme was £0.2 million (2004: £0.1 million), all of which related to equity-settled
share-based payment transactions. After deferred tax, the total charge was £0.1 million (2004: £nil).
Weighted average
remaining life
Weighted average
remaining life
2005 2004 70 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
Capital
redemption Special Hedge Other
reserve reserve reserve reserves
£m £m £m £m
At 1 January 2004 1.7 59.1 - 60.8
Purchase of own shares 0.1 - - 0.1
At 31 December 2004 1.8 59.1 - 60.9
Adoption of IAS39 (net of tax) - - 4.9 4.9
Cash flow hedges (net of tax):
– Fair value gains in the year - - 26.2 26.2
– Transfers to net profit - - (17.0) (17.0)
At 31 December 2005 1.8 59.1 14.1 75.0
24. OTHER RESERVES
2005 2004
Weighted Weighted
average average
Number exercise Number exercise
(‘000) price (£) (‘000) price (£)
Outstanding at 1 January 1,204 - 917 -
Granted 224 - 346 -
Forfeited (90) - --
Exercised -- (59) -
Outstanding at 31 December 1,338 - 1,204 -
Exercisable at 31 December -- --
(c) Long Term Incentive Plan
Weighted Weighted
Range average average
of exercise exercise Number of exercise Number of
prices price shares ExpectedContractual price shares Expected Contractual
(£) (£) (‘000) (years) (years) (£) (‘000) (years) (years)
0.00 0.00 1,338 0.80 0.80 0.00 1,204 2 2
The weighted average share price for the LTIP awards exercised in the year was 452.7p. The total charge for the year relating to the scheme was
£1.2 million (2004: £0.6 million), all of which related to equity-settled share-based payment transactions. After deferred tax, the total charge was
£0.8 million (2004: £0.4 million).
Weighted average
remaining life
Weighted average
remaining life
2005 2004
23. SHARE-BASED PAYMENTS (continued) Arriva plc Annual Report and Accounts 2005  71
www.arriva.co.uk
26. NOTES TO THE GROUP CASH FLOW STATEMENT
2005 2004
(a) Reconciliation of net debt £m £m
At 1 January 338.4 296.7
Decrease in cash, cash equivalents and overdrafts 4.0 1.1
(Decrease)/increase in loans due within one year (1.8) 50.0
Increase/(decrease) in loans due after one year 61.4 (1.2)
Increase/(decrease) in finance lease obligations 26.3 (48.5)
Loans acquired 12.0 46.1
Finance leases acquired 0.8 1.1
Currency translation adjustments (5.2) 4.7
At 31 December 435.9 350.0
On 1 January 2005 net debt was adjusted by £11.6 million on adoption of IAS39.
2005 2004
(b) Reconciliation of operating profit to net cash inflow from operating activities £m £m
Operating profit 123.1 126.3
Depreciation 117.1 106.0
Goodwill impairment and intangible asset amortisation 6.6 3.2
EBITDA (after exceptional items) 246.8 235.5
(Increase)/decrease in stocks, excluding acquisitions (0.8) 3.9
(Increase)/decrease in debtors, excluding acquisitions (30.7) 39.8
Decrease in creditors, excluding acquisitions (7.4) (24.6)
Net cash inflow from operating activities 207.9 254.6
Total
Share Share Other Retained shareholders' Minority Total
capital premium reserves earnings equity interests equity
£m £m £m £m £m £m £m
At 1 January 2004 9.8 9.5 60.8 283.8 363.9 - 363.9
Arising on issue of shares - 5.8 - - 5.8 - 5.8
Share-based payments - - - 0.7 0.7 - 0.7
Purchase of own shares - - 0.1 (4.4) (4.3) - (4.3)
T otal recognised income and expense for the year - - - 97.1 97.1 0.1 97.2
Dividends - - - (35.6) (35.6) - (35.6)
Minority share of acquisition - - - - - 2.1 2.1
At 31 December 2004 9.8 15.3 60.9 341.6 427.6 2.2 429.8
Adoption of IAS39 (net of tax) - - 4.9 (1.2) 3.7 - 3.7
Arising on issue of shares - 3.8 - - 3.8 - 3.8
Share-based payments - - - 1.4 1.4 - 1.4
T otal recognised income and expense for the year - - 9.2 79.4 88.6 0.5 89.1
Dividends - - - (37.7) (37.7) - (37.7)
Minority share of acquisition ---- - 13.6 13.6
At 31 December 2005 9.8 19.1 75.0 383.5 487.4 16.3 503.7
The cumulative goodwill amortised through retained earnings and written off directly to reserves in prior years is £283.3 million (2004: £281.8 million).
25. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 72 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
26. NOTES TO THE GROUP CASH FLOW STATEMENT (continued)
(a) Analysis of the net cash outflow in respect of current year acquisitions £m
Cash consideration (including expenses) 46.3
Cash acquired (7.3)
Net cash outflow in respect of acquisitions 39.0
Provisional
Acquired fair value
book value adjustments Net cost
(b) Current year acquisitions £m £m £m
Intangible assets 3.4 (1.5) 1.9
Property, plant and equipment 53.6 5.5 59.1
Investments 2.9 2.6 5.5
Inventories 1.1 (0.2) 0.9
Trade and other receivables 11.9 (0.5) 11.4
Cash and cash equivalents 7.3 - 7.3
Finance lease obligation (0.8) - (0.8)
Trade and other payables (26.9) (0.3) (27.2)
Loans (12.0) - (12.0)
Deferred tax 0.8 (2.8) (2.0)
Other non-current liabilities (4.4) (0.7) (5.1)
36.9 2.1 39.0
Minority interest (13.6)
Goodwill 16.5
Satisfied by cash 41.9
In February 2005 the Group acquired the German bus company Sippel for £11.6 million, with an additional maximum performance-related
consideration of £2.1 million up to 2008, resulting in goodwill of £6.4 million. During the year the Group also increased its shareholding in RAG,
in Germany, from 89.8 per cent to 96.7 per cent for £3.8 million, resulting in goodwill of £3.6 million. 
In October 2005 the Group acquired 80 per cent of SADEM, for £9.5 million, resulting in goodwill of £3.2 million, with an option to acquire the
remaining 20 per cent in 2008 for a maximum consideration of £3.2 million. 
Following the acquisition of a 49 per cent interest in the Italian bus operator Societa Autoservizi F.V.G. S.p.A. in May 2004, the Group has
increased its shareholding by 11 per cent to 60 per cent in December 2005 for £4.3 million, resulting in goodwill of £0.4 million. In addition, in
February 2005 the Group increased its shareholding in the Italian bus operator SAIA from 51 per cent to 88 per cent for £5.2 million, resulting in
goodwill of £3.0 million, and also paid additional consideration relating to the SAB group in Northern Italy of £4.3 million originally acquired in
July 2002, resulting in goodwill of £4.3 million. 
In addition, smaller acquisitions were made in the year in mainland Europe, the total cost of which was £0.7 million, resulting in goodwill of £0.2 million. 
Smaller acquisitions were made in the UK within the Bus division; the total cost of these acquisitions was £6.9 million resulting in total goodwill
of £1.4 million. 
The fair value adjustments in the table above relate mainly to the alignment to Group accounting policies. The fair value adjustments are
provisional, depending on the final determination of the value of the related assets and liabilities.
27. ACQUISITIONS AND DISPOSALS
Acquisitions
1 January (excluding Exchange 31 December
2005 Cash flow cash & o/ds) differences 2005
(c) Analysis of net debt £m £m £m £m £m
Cash, cash equivalents and overdrafts (76.6) 4.0 - 1.0 (71.6)
Loans due within one year 114.6 (1.8) 12.0 (1.9) 122.9
Loans due after one year 238.3 61.4 - (2.6) 297.1
Finance leases 62.1 26.3 0.8 (1.7) 87.5
338.4 89.9 12.8 (5.2) 435.9 Arriva plc Annual Report and Accounts 2005  73
www.arriva.co.uk
(c) Prior year acquisitions
The total cost in the year relating to acquisitions from prior years was £4.4 million, including the additional consideration of £4.3 million relating
to the SAB Group as noted above. In addition, hindsight fair value adjustments were made in the year resulting from the final determination of
the assets and liabilities, as follows:
£m
Hindsight period adjustments:
Property, plant and equipment 0.2
Intangible assets 0.5
Investments (0.3)
Trade and other receivables (0.5)
Deferred tax (0.2)
Other non-current liabilities 1.9
Decrease in fair values 1.6
Additional consideration paid 4.4
6.0
Goodwill based on provisional values 35.6
Goodwill based on final fair values 41.6
(d) Current year disposals
In June 2005 the Group sold part of its Spanish operation in Galicia, Transportes Finnisterre, for a consideration of £7.7 million, and in December
2005 the 50 per cent shareholding in the Italian bus operator, Autostradale, was sold for £4.3 million. The assets disposed of were:
£m
Goodwill 5.4
Property, plant and equipment 1.5
Investments 4.3
Trade and other receivables 0.4
11.6
Directly attributable costs of disposal 0.4
Profit on disposal -
Satisfied by cash 12.0 74 Arriva plc Annual Report and Accounts 2005
NOTES TO THE ACCOUNTS
continued
28. GROUP UNDERTAKINGS
Detailed below is a list of those subsidiaries which in the opinion of the directors principally affect the amount of the profit or the amount of the
assets of the Group. The Group percentage of equity capital is 100 per cent and the country of registration is England and Wales in each case,
except where indicated. All subsidiaries operate within England and Wales, except where indicated:
Passenger Transport
Arriva Croydon & North Surrey Limited
Arriva Cymru Limited
Arriva Derby Limited
Arriva Durham County Limited
Arriva East Herts & Essex Limited
Arriva Fox County Limited
Arriva International Trains (Leasing) Limited
Arriva Kent & Sussex Limited
Arriva Kent Thameside Limited
Arriva London North Limited
Arriva London North East Limited
Arriva London South Limited 
Arriva Manchester Limited
Arriva Merseyside Limited
Arriva Midlands North Limited
Arriva Noroeste SL
2
Arriva North East Limited
Arriva Northumbria Limited
Arriva North West Limited
APS (Leasing) Limited
Arriva Personenvervoer Nederland B.V.
3
Arriva Portugal Transportes LDA
6
Arriva Scotland West Limited
4
Arriva Skandinavien A/S
1
Arriva Southern Counties Limited
Arriva Sverige AB
5
Arriva Tees & District Limited
Arriva Teesside Limited
Arriva The Shires Limited
Arriva Trains Limited
Arriva Trains Wales/Trenau Arriva Cymru Limited
Arriva Trains Northern Limited
Arriva Yorkshire Limited
Arriva Yorkshire West Limited
Autobus Sippel Gmbh
8
London Pride Sightseeing Limited
Prignitzer Eisenbahn Gmbh
8
Regentalbahn AG
11
SAB Autoservizi S.r.L.
7
Società Autoservizi F.V.G. S.p.A.
9
Sadem S.p.A.
10
Stevensons of Uttoxeter Limited
The Original London Sightseeing Tour Limited
Transportes Sul do Tejo S.A.
6
Wulff Bus A/S
1
Rental and Distribution of Buses and Coaches
Arriva Bus and Coach Rental (1) Limited
Arriva Bus and Coach Rental (2) Limited
Arriva Bus and Coach Rental (3) Limited
Arriva Bus and Coach Rental (4) Limited
Arriva Bus and Coach Limited
Investment
Arriva Findiv Limited*
Arriva Insurance (Gibraltar) Limited
12
*
Arriva International Limited*
Arriva Motor Holdings Limited*
Arriva Passenger Services Limited*
British Bus Group Limited
MTL Services Limited*
Distribution, Repair, Service and Rental of Motor Vehicles
Arriva Vehicle Rental Limited
Property
British Bus (Properties) Limited
Except where marked by * shares are held by a subsidiary company
1
Registered and operates in Denmark
2
Registered and operates in Spain
3
Registered and operates in the Netherlands
4
Registered and operates in Scotland
5
Registered and operates in Sweden
6
Registered and operates in Portugal
7
Registered and operates in Italy
8
Registered and operates in Germany
9
Registered and operates in Italy (60% owned)
10
Registered and operates in Italy (80% owned)
11
Registered and operates in Germany (96.7% owned)
12 
Registered and operates in Gibraltar Arriva plc Annual Report and Accounts 2005  75
www.arriva.co.uk
2005 2004
Land & Land &
buildings Other Total buildings Other Total
£m £m £m £m £m £m
Within one year 0.3 10.8 11.1 0.2 14.0 14.2
Later than one year and less than five years 2.1 7.4 9.5 2.5 11.2 13.7
After five years 16.5 1,527.8 1,544.3 18.2 1,647.8 1,666.0
18.9 1,546.0 1,564.9 20.9 1,673.0 1,693.9
29. COMMITMENTS
Capital amounts contracted for but not provided amount to £25.5 million (2004: £23.2 million) for the Group. At 31 December 2005 the Group
had total commitments under non-cancellable operating leases, including access charges to the rail infrastructure and leases for rail rolling stock,
expiring as follows:
30. POST BALANCE SHEET EVENTS
On 3 February 2006, the Group completed the disposal of Arriva Vehicle Rental Limited (AVR) for a total consideration of £129.3 million,
comprising £53.9 million for the equity in the business, and £75.4 million in reduced debt. £4.2 million of the consideration is deferred to June
2006. The transaction represents a £23 million surplus over the net assets before any adjustments arising from the completion accounts process
and selling expenses. Following the disposal, on a pro-forma basis, the net debt at the year end would have been reduced to £306.6 million. In
accordance with IFRS5 'Non-current Assets Held for Sale and Discontinued Operations' AVR has not been treated as a discontinued operation for
the year ended 31 December 2005, and will be classified as such for the year ending 31 December 2006. 76 Arriva plc Annual Report and Accounts 2005
FIVE-YEAR FINANCIAL SUMMARY
2001* 2002* 2003* 2004 2005
Assets employed £m £m £m £m £m
Goodwill 152.0 198.3 226.2 266.7 277.5
Other intangible assets - - - 45.6 40.8
Property, plant and equipment 691.3 736.7 761.5 962.6 1,092.8
Other net liabilities (30.3) (36.9) (64.6) (381.7) (341.0)
Quoted investments 3.2 - - - -
Unquoted investments - 5.7 5.2 6.2 7.9
816.2 903.8 928.3 899.4 1,078.0
Financed by
Share capital 10.3 10.0 9.8 9.8 9.8
Reserves 412.9 454.6 461.9 417.8 477.6
Minority interests - (6.2) - 2.2 16.3
Bank overdrafts 25.6 43.4 13.7 5.1 22.5
Syndicated loans - - - 82.6 203.8
Other loans 196.4 204.0 198.6 155.7 93.3
Short-term loans 50.1 62.6 66.0 126.2 122.9
Obligations under finance leases 59.6 66.0 109.1 62.1 87.5
Deferred liabilities 61.3 69.4 69.2 37.9 44.3
816.2 903.8 928.3 899.4 1,078.0
Trading
Revenue 1,998.4 2,084.4 1,751.1 1,759.0 1,626.8
Profit before taxation 76.0 80.6 83.8 109.3 107.9
Taxation 27.7 1.6 26.0 26.0 21.6
Profit after taxation 48.3 79.0 57.8 83.3 86.3
Statistics
Funds attributable to shareholders 423.2 464.6 471.7 427.6 487.4
Equity shareholders’ funds per ordinary share 206.0p 232.7p 241.9p 218.4p 247.5p
Basic earnings per share 23.1p 38.0p 28.7p 42.6p 43.7p
Dividends per ordinary share 16.4p 17.2p 18.0p 18.90p 19.84p
* The financial information for 2001, 2002 and 2003 has been prepared under UK generally accepted accounting practice. Details of the 
nature of the adjustments required for International Financial Reporting Standards are included in the report on transition to International
Financial Reporting Standards, extracts of which follow this Five-Year Financial Summary. Arriva plc Annual Report and Accounts 2005  77
www.arriva.co.uk
Summary
The main impacts of IFRS on the Group’s reported results for the year ended 31 December 2004 are shown
below:
• An increase in profit before tax for the year ended 31 December 2004 of £10.9 million, principally the
result of acquired goodwill no longer being amortised
• Basic earnings per share for the same period increases from 36.2 pence to 42.6 pence, principally the
result of not amortising goodwill. Earnings per share, excluding goodwill impairment, intangible asset
amortisation and exceptional items, increases marginally from 44.9 pence to 45.1 pence
• Net assets at 1 January 2004 decreased by £107.8 million, mainly arising from:
– Recognition of obligations in respect of defined benefit pension schemes (decrease £174.8 million),
and a related intangible asset (increase £12.0 million)
– Recognition of fair value of UK land and buildings as deemed cost (increase £24.6 million)
– Elimination from liabilities of 2003 final dividend (increase £26.1 million)
• Net debt decreases by £7.9 million at 30 June 2004 and by £3.4 million at 31 December 2004 due to
the proportional consolidation of joint venture cash.
Impact of key changes
Employee benefits: defined benefit pension schemes (IAS19)
The Group has previously accounted for pensions under UK GAAP using SSAP24. In addition, the Group
has previously made disclosures in its notes to the accounts required by the transitional rules of FRS17. 
The Group will not be adopting FRS17 for measurement purposes, and has moved directly from SSAP24 to
IAS19 for the year ending 31 December 2005 and restated comparatives for 2004. The pension charge for
the year ended 31 December 2004 was £0.1 million lower under IAS19 than SSAP24.
Group defined benefit schemes
IAS19 requires the recognition on the balance sheet of the assets and obligations of the Group’s defined
benefit schemes in accordance with its own requirements and the de-recognition of balances relating to
SSAP24. This represents a significant change in balance sheet treatment and at 1 January 2004 results in 
a reduction in net assets of £162.8 million, net of deferred tax.
Subsequent to the initial recognition above, the pension deficit will be calculated at each year end. The
profit and loss account will be charged with the estimated cost of providing current service benefits,
together with a pension finance charge or credit representing the difference between the expected return
on the schemes’ assets and the interest charged on the schemes’ liabilities. Both the service cost and
pension finance charge/credit will be reported as part of net operating expenses. Movements in the pension
deficit arising from actuarial gains and losses and changes to actuarial assumptions will be charged or
credited in the Statement of Recognised Income and Expense in the period in which they arise.
Railways Pension Scheme
Most employees in our UK Trains business are members of certain sections of the Railways Pension Scheme.
The agreement under which the Group operates the Arriva Trains Wales franchise states that all pension
obligations to the scheme will cease on expiry of the franchise, and therefore the obligations recognised on
the balance sheet under IAS19 should only be those arising during the franchise term. The amended
obligation will be made by way of a ‘franchise adjustment’ to the pension obligation.
The Group’s current franchise commenced operation in December 2003. At the time, the anticipated
contribution levels and investment returns were sufficient to reduce the IAS19 pension deficit to £nil by the
end of the franchise. Accordingly there is no franchise adjustment made on transition at 1 January 2004,
and the full IAS19 liability of £12.0 million is reported in the balance sheet. Also on transition, an associated
intangible asset has been recognised of the same amount. This is considered further under the heading
‘Intangible assets’ below.
At 31 December 2004, the full IAS19 liability is calculated as £13.1 million. The franchise adjustment, which
represents the present value of the IAS19 liability at the end of the current franchise is £2.3 million, resulting
in a reported pension obligation of £10.8 million.
UK properties revaluation (IFRS1)
The Group has elected to use the fair value of the UK land and buildings at 1 January 2004 as deemed cost.
This has resulted in an increase in net assets at transition of £24.6 million, net of deferred tax, and an
increase in depreciation for the year ended 31 December 2004 of £0.4 million. 
No adjustment has been made to the carrying value of non-UK land and buildings.
Dividends proposed (IAS10)
IAS10 ‘Events after the Balance Sheet Date’, does not permit the recognition of a liability for dividends until
they have been approved. On this basis, dividends approved after the year end cannot be recognised as a
liability in those year end accounts.
The final dividend declared for the year ended 31 December 2003 was approved in April 2004, and
therefore requires reversing in the transitional balance sheet at 1 January 2004. Net assets are increased on
transition by £26.1 million, and at 31 December 2004 by a further £1.4 million.
EXTRACTS FROM THE REPORT ON TRANSITION TO IFRS
Press release dated 8 September 2005 78 Arriva plc Annual Report and Accounts 2005
Business combinations (IFRS3)
On transition, the Group has taken the option under the transitional arrangements not to apply IFRS3
‘Business Combinations’ retrospectively to business combinations that occurred prior to the transition date.
Accordingly, except for the adjustment required to negative goodwill noted below, the goodwill carried in
the balance sheet under UK GAAP at 31 December 2003 has become the opening balance of goodwill
under IFRS at 1 January 2004.
IFRS3 does not permit the annual amortisation of goodwill, but does require an annual impairment review
of carrying values. Impairment reviews have been conducted on the carrying value of goodwill arising on
business combinations at the transition date and 31 December 2004. Goodwill amortisation charged to the
income statement in 2004 of £15.3 million is reversed under IFRS.
Negative goodwill arose on an acquisition prior to the transition date. The book value of the negative
goodwill at 31 December 2003 was £3.9 million, and has been fully released in the transitional balance
sheet at 1 January 2004.
Intangible assets (IFRS3, IAS38, IFRS1)
For business combinations made after the transition date, the Group has applied the criteria set out in IAS38
‘Intangible Assets’ in identifying and measuring the value of intangible assets. Customer contracts to provide
bus and rail services have been identified on the 2004 acquisitions of SAF, PEG and Regentalbahn. The 
total value of intangible assets purchased on these business combinations was £34.8 million, and is being
amortised over the lives of the contracts to which they relate, resulting in a charge in 2004 under IFRS of
£1.8 million. To the extent of the identification of these intangible assets, goodwill previously disclosed 
on the acquisitions has been adjusted downwards accordingly. Deferred tax has been provided on the
intangible assets arising from the business combinations, resulting in additional goodwill reported of 
£12.8 million. This additional goodwill was reduced when the annual impairment test was applied to it,
together with an associated release from the deferred tax provision, as the contracts unwound. In the year
ended 31 December 2004 the impairment charged to the income statement was £0.6 million.
As noted earlier, the Group has recognised a pension deficit in respect of the Railways Pension Scheme of
£12.0 million at 1 January 2004. A detailed consultation process has taken place with our peer group in the
UK rail industry as to how to recognise such a deficit whilst also reflecting the position where there is no
obligation to fund pensions beyond the expiry of the franchise. The outcome is the recognition of an
intangible asset on transition of £12.0 million reflecting the right to operate the Arriva Trains Wales
franchise. The Group has followed the initial recognition criteria of IAS38 which requires the retrospective
assessment of the value of the intangible asset as at the date it was created. The intangible asset is being
amortised over the life of the Arriva Trains franchise resulting in a charge of £0.8 million in the year ended
31 December 2004.
Share-based payments (IFRS2)
IFRS2 ‘Share-Based Payments’ requires the Group to charge its income statement with the fair value of
equity settled share-based payments. In accordance with the transitional provisions, IFRS2 has been applied
to all grants of equity instruments after 7 November 2002 that had not vested at 1 January 2005. The
Group has used the Black Scholes model to measure the fair value of options granted. Profit before tax for
the year ended 31 December 2004 is reduced by £0.2 million.
Joint ventures (IAS31)
Under IAS31 ‘Interests in Joint Ventures’, proportional consolidation is the preferred basis for representing
interests, with equity accounting permitted as an alternative.
The Group has used proportional consolidation to account for joint ventures. This has led to the restatement
of 2004 comparatives for SAF and certain other smaller joint venture arrangements. Whilst there is no impact
on net assets or profit before tax, the inclusion of balance sheet items on a line by line basis has reduced net
debt by £3.4 million at 31 December 2004, principally representing the cash balances held in SAF .
Proceeds from the disposal of fixed assets (IAS16)
Under UK GAAP , the reported turnover for the Vehicle Rental and Bus and Coach distribution businesses
included proceeds from the disposals of rental fleet held in fixed assets. IAS16 ‘Property, Plant and
Equipment’ does not permit the recognition of revenue on disposal of non-current assets. Accordingly,
reported revenue for the year ended 31 December 2004 is reduced by £52.0 million.
Financial instruments (IAS32, IAS39)
The Group uses various derivative financial instruments to hedge its exposures to foreign exchange
translation risk, interest rate exposure and fuel prices.
The Group has opted to take advantage of the exemption in IFRS1 not to prepare comparative information
under IAS32 and IAS39. The date of transition for IAS32 and IAS39 is therefore 1 January 2005, with net
assets increasing by £3.7 million, net of deferred tax, reflecting the fair value of the derivatives at that date.
EXTRACTS FROM THE REPORT ON TRANSITION TO IFRS 
Press release dated 8 September 2005 – continued Arriva plc Annual Report and Accounts 2005  79
www.arriva.co.uk
First-time adoption (IFRS1)
In accordance with the requirements of IFRS1 ‘First-time Adoption of International Financial Reporting
Standards’, the Group is subject to a number of voluntary and mandatory exemptions from full restatement
to the requirements of IFRS, which have been applied as follows: 
• IAS32 ‘Financial Instruments: Disclosure and Presentation’, and IAS39 ‘Financial Instruments: 
Recognition and Measurement’ have been adopted with effect from 1 January 2005
• The Group has elected to use fair value as deemed cost for UK land and buildings at the date of
transition
• The Group has not applied IFRS3 ‘Business Combinations’ retrospectively to business combinations that
occurred before the transition date
• The Group has set cumulative translation differences to zero at the transition date for all subsidiaries.
From the date of transition onwards foreign exchange differences on the retranslation of foreign
subsidiaries are recognised in a separate reserve within equity
• IFRS2 ‘Share-Based Payment’ has been applied to all grants of equity instruments after 7 November
2002 that had not vested at 1 January 2005. 
2004 2003
Reconciliation of total equity £m £m
Previously reported at 31 December 510.6 471.7
Employee benefits (151.3) (162.8)
UK land and buildings revaluation 24.3 24.6
Adjustment to dividends proposed 27.5 26.1
Business combinations 17.7 3.9
Share-based payments 1.0 0.4
Restated position at 31 December 429.8 363.9
Financial Instruments at 1 January 2005 3.7
Restated position at 1 January 2005 433.5
2004
Reconciliation of reported profit for the year ended 31 December 2004 £m
Profit on ordinary activities after taxation as previously reported 70.8
Employee benefits (0.6)
UK land and buildings revaluation (0.3)
Business combinations 13.5
Share-based payments (0.1)
Restated profit for the year under IFRS 83.3 80 Arriva plc Annual Report and Accounts 2005
COMPANY BALANCE SHEET at 31 December 2005
PREPARED USING UK GENERALLY ACCEPTED ACCOUNTING PRACTICE (UK GAAP)
2004
2005 As restated
notes £m £m
Fixed assets
Tangible assets 2 8.1 8.4
Investments 3 726.9 724.2
735.0 732.6
Current assets
Debtors 4 93.7 105.3
Cash at bank and in hand 98.5 19.3
192.2 124.6
Creditors
Amounts falling due within one year 6 (18.9) (24.5)
Net current assets 173.3 100.1
Total assets less current liabilities 908.3 832.7
Creditors
Amounts falling due after more than one year 6 (542.7) (469.3)
Provisions for liabilities and charges 5 - (0.3)
Net pension liability 11 (7.1) (10.3)
358.5 352.8
Represented by:
Capital and reserves
Called-up equity share capital 7 9.8 9.8
Share premium account 9 19.1 15.3
Capital redemption reserve 9 1.8 1.8
Special reserve 9 59.1 59.1
Profit and loss account 9 268.7 266.8
Equity shareholders’ funds 10 358.5 352.8
R J Davies
Directors
S P Lonsdale
Approved by the Board on 1 March 2006.
PARENT COMPANY FINANCIAL STATEMENTS Arriva plc Annual Report and Accounts 2005  81
www.arriva.co.uk
Basis of preparation
The separate financial statements of the company are presented as required by the Companies Act 1985. They have been prepared in accordance
with applicable United Kingdom generally accepted accounting practice. The company prepares its financial statements on the historic cost basis
of accounting as modified by the revaluation of certain tangible fixed assets.
Changes in accounting policy
The company has adopted FRS17, ‘Retirement benefits’, FRS20, ‘Share-based payments’, FRS21, ‘Events after the balance sheet date’, FRS25, 
‘Financial instruments: Disclosure and presentation’, and FRS26, ‘Financial instruments: Measurement’. The adoption of each of these standards
represents a change in accounting policy and the comparative figures have been restated accordingly except where the exemption to restate
comparatives has been taken. Details of the effect of the prior year adjustments are given in note 9.
Tangible fixed assets
Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment.
Depreciation is calculated using the straight-line method to allocate the cost or valuation of each asset to its residual value over its estimated useful
life as follows:
Freehold properties 2% per annum on cost or valuation
Plant, company vehicles, fixtures & fittings 3–10 years
Investments
Fixed asset investments in subsidiaries and associates are shown at cost less provision for impairment.
Impairment
At each balance sheet date the company reviews the carrying amount of its tangible assets to determine whether there are any indicators of
impairment. If indicators of impairment exist then the recoverable amount of an asset is estimated. 
If the recoverable amount of an asset is less than its carrying amount, the difference is recognised in the profit and loss account as an impairment loss. 
Pensions
The company operates retirement benefit schemes; both defined benefit and defined contribution schemes. 
The liability recognised in the balance sheet in respect of the company’s defined benefit pension plans is the present value of the defined benefit
obligation at the balance sheet date less the fair value of the plan assets, together with adjustments for unrecognised past service costs. The
defined benefit obligation is calculated using the projected unit credit method. Formal actuarial valuations are carried out on a triennial basis,
with updated calculations being prepared at each balance sheet date. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
The cost of providing future benefits is charged to the profit and loss account as required. The return on scheme assets and interest obligation on
scheme liabilities comprise a pension finance adjustment which is included in interest costs. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to reserves in the period they arise.
Contributions payable under defined contribution schemes are charged to the profit and loss account as they arise.
Share-based payments
The company issues equity settled share-based payments to certain employees, which are measured at fair value at the date of grant. The fair
value is expensed on a straight-line basis over the vesting period, based on the company’s estimate of shares that will eventually vest. The impact
of revising original estimates, if any, is included in the profit and loss account, with a corresponding adjustment to reserves.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the
options are exercised.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements in the period in which the
dividends are approved by the company’s shareholders.
Deferred taxation
The company accounting policy is to provide for deferred tax on all timing differences except those arising on the revaluation of fixed assets for
which there is no binding agreement to sell or on the undistributed profits of overseas subsidiaries. Deferred tax is calculated at the rates at
which it is estimated the tax will arise. The tax rates are those expected to arise based on tax rates and laws that have been enacted or
substantially enacted by the balance sheet date. The deferred tax provision is not discounted to net present value.
PARENT COMPANY ACCOUNTING POLICIES 82 Arriva plc Annual Report and Accounts 2005
NOTES TO THE PARENT COMPANY ACCOUNTS
1. ARRIVA PLC PROFIT AND LOSS ACCOUNT
Arriva plc has not presented its own profit and loss account as permitted by Section 230 of the Companies Act 1985. The profit for the financial
year dealt with in the accounts of Arriva plc is £35.1 million (2004 restated: £26.5 million).
2. TANGIBLE FIXED ASSETS
Plant,
company
Freehold vehicles,
land & fixtures &
buildings fittings Total
£m £m £m
Cost or valuation
At 1 January 2005 9.2 2.4 11.6
Additions - 0.1 0.1
Disposals (0.1) - (0.1)
At 31 December 2005 9.1 2.5 11.6
Comprising:
Cost 8.3 2.5 10.8
Valuation 1997 0.8 - 0.8
9.1 2.5 11.6
Accumulated depreciation
At 1 January 2005 1.2 2.0 3.2
Charge for the year 0.2 0.1 0.3
At 31 December 2005 1.4 2.1 3.5
Net book amounts
At 31 December 2005 7.7 0.4 8.1
At 31 December 2004 8.0 0.4 8.4
3. INVESTMENTS
Shares in
Shares in subsidiaries
subsidiaries net book
at cost Impairment amount
Fixed asset investments £m £m £m
At 1 January 2005 738.9 (14.7) 724.2
Additions 2.7 - 2.7
At 31 December 2005 741.6 (14.7) 726.9
Particulars of fixed asset investments are detailed in note 28 to the Group financial statements. Arriva plc Annual Report and Accounts 2005  83
www.arriva.co.uk
4. DEBTORS
As restated
2005 2004
£m £m
Amounts falling due within one year:
Trade debtors 0.4 0.4
Deferred tax (note 5) 0.2 -
Prepayments and accrued income 0.2 0.5
Other debtors 40.7 11.5
41.5 12.4
Amounts falling due after more than one year:
Amounts owed by group undertakings 52.2 92.9
93.7 105.3
5. DEFERRED TAXATION
As restated
2005 2004
£m £m
Accelerated capital allowances 1.8 1.8
Other timing differences (2.0) (1.5)
Deferred tax excluding that relating to pension liability (0.2) 0.3
Deferred tax on pension liability (3.1) (4.4)
Deferred tax (3.3) (4.1)
At 1 January 2005 (as previously reported) 1.8
Prior year adjustments:
FRS17 (5.6)
FRS20 (0.3)
At 1 January 2005 (as restated) (4.1)
Deferred tax credited in profit and loss account (0.5)
Deferred tax charges taken to reserves 1.3
At 31 December 2005 (3.3)
Deferred tax excluding deferred tax on pension liability:
At 1 January 2005 (as previously reported) 0.6
Prior year adjustment:
FRS20 (0.3)
At 1 January 2005 (as restated) 0.3
Deferred tax credited in profit and loss account (0.5)
At 31 December 2005 (0.2)
Factors that may affect future tax charges 
No deferred tax asset is provided in respect of the unremitted earnings of overseas subsidiaries unless a binding agreement exists at the balance
sheet date to remit such earnings in the future. No assets have been recognised in respect of tax losses carried forward because of uncertainty
regarding the recoverability of the resulting deferred tax assets.  84 Arriva plc Annual Report and Accounts 2005
NOTES TO THE PARENT COMPANY ACCOUNTS
continued
6. CREDITORS
As restated
2005 2004
£m £m
Amounts falling due within one year:
Short-term loans - 0.2
Trade creditors 0.5 0.9
Creditors for taxation and social security 2.9 6.7
Other creditors 7.4 9.8
Accruals and deferred income 8.1 6.9
18.9 24.5
Amounts falling due after more than one year:
Other loans 60.0 -
Amounts due to group companies 446.1 427.3
Accruals and deferred income 36.6 42.0
542.7 469.3
2005 2004
Loans are repayable as follows: £m £m
In one year or less, or on demand - 0.2
In more than two years, but not more than five years 60.0 -
60.0 0.2
The company provides cross guarantees in respect of the bank borrowings of a number of the Group's subsidiaries. Syndicated loans are secured
by debentures giving fixed and floating charges over the assets of certain subsidiaries of the company and by guarantees given by the company.
Fair value of non-current liabilities
The company considers there to be no material difference between the fair value of non-current liabilities and their carrying amount in the
balance sheet.
Borrowing facilities
The company has the following undrawn committed floating rate borrowing facilities available at 31 December in respect of which all conditions
precedent had been met at that date:
2005 2004
£m £m
Expiring within one year 19.9 94.3
Expiring in more than two years 107.1 228.8
127.0 323.1
6. CREDITORS Arriva plc Annual Report and Accounts 2005  85
www.arriva.co.uk
Capital Share Profit
redemption premium Special and loss
reserve account reserve account Total
£m £m £m £m £m
At 31 December 2004 (as previously stated) 1.8 15.3 59.1 252.0 328.2
Prior year adjustments:
FRS17 - - - (13.1) (13.1)
FRS20 - - - 0.4 0.4
FRS21 - - - 27.5 27.5
At 1 January 2005 (as restated) 1.8 15.3 59.1 266.8 343.0
Arising on issue of shares - 3.8 - - 3.8
Profit for the year - - - 35.1 35.1
Dividends - - - (37.7) (37.7)
Actuarial gain on pension deficit - - - 4.4 4.4
Movement on deferred tax relating to pension - - - (1.3) (1.3)
Share-based payments - - - 1.4 1.4
At 31 December 2005 1.8 19.1 59.1 268.7 348.7
8. SHARE-BASED PAYMENTS
The grants and related accounting treatment adopted by Arriva plc under FRS20 'Share-based payment', are identical to that adopted by the
Group under IFRS2 ‘Share-based Payment’. For details please refer to note 23 in the Group financial statements.
9. RESERVES
Authorised Allotted – fully paid
2005 2004 2005 2004
Ordinary shares of 5p each £14,500,000 £14,500,000 £9,846,118 £9,787,495
Number of shares 290,000,000 290,000,000 196,922,357 195,749,903
Reconciliation of movement in issued share capital:
Shares in issue 1 January 2005 195,749,903 195,035,046
Share allotments on exercise of options 1,172,454 1,849,857
Shares purchased – (1,135,000)
Shares in issue 31 December 196,922,357 195,749,903
Consideration of £3.8 million was received in respect of the above issues. At 31 December 2005 there were outstanding options to receive
allotments of 2,846,467 ordinary shares under the Executive Share Option Scheme, the Share Incentive Scheme and the Long Term Incentive
Plan. The price for the vested share for the Long Term Incentive Plan is nil. The option exercise prices for all of the other schemes range from
175.0p to 548.0p. The options are exercisable up to March 2015. At 31 December 2005 the middle market quotation of the ordinary share, as
derived from the Stock Exchange Official List, was 582.4p. The highest price attained by the ordinary share in 2005 was 598.4p and the lowest
level during 2005 was 505.0p.
7. CALLED UP EQUITY SHARE CAPITAL  86 Arriva plc Annual Report and Accounts 2005
NOTES TO THE PARENT COMPANY ACCOUNTS
continued
2004
2005 As restated
£m £m
Profit for the year 35.1 26.5
Dividends (37.7) (35.6)
(2.6) (9.1)
New share capital subscribed 3.8 5.8
Purchase of own shares - (4.3)
Actuarial gain on pension deficit 4.4 0.3
Movement on deferred tax relating to pension deficit (1.3) (0.1)
Share-based payments 1.4 0.7
Net addition to/(reduction in) shareholders’ funds 5.7 (6.7)
Opening shareholders’ funds (as previously reported) 338.0
Prior year adjustments:
FRS17 (13.1)
FRS20 0.4
FRS21 27.5
Opening shareholders’ funds (as restated) 352.8
Closing shareholders’ funds 358.5
10. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
11. PENSIONS
At 31 December 2005 the company operated a number of retirement benefit schemes, both defined benefit and defined contribution which 
are financed through separate Trustee administered funds managed by independent professional fund managers on behalf of the Trustees.
Contributions to the defined benefit funds are based upon actuarial advice following the most recent of a regular series of valuations of the
funds by their representative independent actuaries. 
For the purpose of arriving at the pension cost charged in the accounts the defined benefit funds were last assessed on 5 April 2003 by their
respective actuaries, using the Projected Unit Method. The principal actuarial assumptions were that: (i) the annual rate of return on investment
would be 2.75 per cent higher than the annual increase in total pensionable remuneration of 3.75 per cent and, where relevant, (ii) there would
be no variation from a scheme’s rules to pensions in payment. On the basis of these assumptions the actuarial value of the funds at 5 April 2003
was sufficient to cover 85 per cent of the benefits then accrued to members.
Total pension cost
The total pension cost for the company was £0.4 million (2004 restated: £0.6 million). The pension costs in respect of the company’s defined
contribution scheme was £0.2 million (2004: £0.2 million).
FRS17 ‘Retirement Benefits’
The calculations used to assess the FRS17 liabilities of the retirement benefit schemes are based on the most recent actuarial valuations,
updated by WM Mercers to 31 December 2005. The schemes’ assets are stated at their market value at 31 December 2005. The following
financial assumptions have been used for each of the schemes: Arriva plc Annual Report and Accounts 2005  87
www.arriva.co.uk
2005 2004 2003
% %%
Valuation method Projected Unit Projected Unit Projected Unit
Discount rate 4.9 5.4 5.4
Inflation rate 2.6 2.6 2.5
Increases to deferred benefits during deferment 2.6 2.6 2.5
Increases to pensions in payment 2.6 2.6 2.5
Salary increases 3.8 3.8 3.75
Expected long-term rate of return at 31 December, before deduction for scheme expenses: 
Equities 7.55 7.85 7.4
Bonds 4.2 4.55 4.6
Other 3.8 4.1 4.4
Weighted average expected long-term rate of return by scheme at 31 December 6.7 7.0 6.6
2005 2004
The amounts recognised in the balance sheet are determined as follows: £m £m
Equities 35.4 30.7
Bonds 12.6 11.9
Other 0.1 0.1
Total market value of assets 48.1 42.7
Present value of liabilities (58.3) (57.4)
Deficit (10.2) (14.7)
Related deferred tax asset 3.1 4.4
Net pension liability (7.1) (10.3)
2005 2004
The costs of the scheme for the year ended 31 December were as follows: £m £m
Analysis of the charge to operating profit:
– Current service costs 0.3 0.3
Total operating charge 0.3 0.3
Analysis of the finance (credit)/charge:
– Expected return on assets (2.9) (2.9)
– Interest on liabilities 2.8 3.0
Total finance (credit)/charge (0.1) 0.1
Total charge before tax 0.2 0.4
2005 2004
Analysis of movement in deficit in the scheme for the year ended 31 December: £m £m
Gross deficit in the scheme at 1 January (14.7) (15.0)
Contributions paid 0.3 0.4
Current service cost (0.3) (0.3)
Total finance credit/(charge) 0.1 (0.1)
Actuarial gain 4.4 0.3
Gross deficit in the scheme at 31 December (10.2) (14.7) 88 Arriva plc Annual Report and Accounts 2005
NOTES TO THE PARENT COMPANY ACCOUNTS
continued
2005 2004
Analysis of amounts recognised in reserves: £m £m
Difference between expected and actual return on assets 4.0 0.7
Experience gains arising on the scheme liabilities 5.8 0.4
Effect of changing the financial assumptions (5.4) (0.8)
Actuarial gain recognised in reserves 4.4 0.3
2005 2004
Actuarial gain as a percentage of scheme assets and liabilities at 31 December: % %
Difference between expected and actual return on assets as a percentage of scheme assets 8.3 1.6
Experience gains arising on the scheme liabilities as a 
percentage of the present value of scheme liabilities 9.9 0.7
Total actuarial gain recognised in reserves as a percentage of 
the present value of scheme liabilities 7.5 0.5
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of
the company and of the profit or loss of the company for that period. The directors are required to prepare the financial statements on the going
concern basis, unless it is inappropriate to presume that the company will continue in business.
The directors confirm that suitable accounting policies have been used and applied consistently with the exception of the changes arising on the
adoption of new accounting standards in the year as explained in the company accounting policies on page 81. They also confirm that
reasonable and prudent judgements and estimates have been made in preparing the financial statements for the year ended 31 December 2005
and that applicable accounting standards have been followed.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of
the company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
• The directors are responsible for the maintenance and integrity of the website
• Legislation in the UK concerning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
11. PENSIONS (continued) Arriva plc Annual Report and Accounts 2005  89
www.arriva.co.uk
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ARRIVA PLC
We have audited the parent company financial statements of Arriva plc for the year ended 31 December
2005 which comprise the Company Balance Sheet and related notes. These parent company financial
statements have been prepared under the accounting policies set out therein. We have also audited the
information in the Directors’ Remuneration Report that is described as having been audited.
We have reported separately on the group financial statements of Arriva plc for the year ended 31 December 2005.
Respective responsibilities of directors and auditors 
The directors’ responsibilities for preparing the parent company financial statements in accordance with
applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice) are set out in the Statement of Directors’ Responsibilities. In addition, the directors are responsible
for preparing the Annual Report and Directors' Remuneration Report.
Our responsibility is to audit the parent company financial statements and the part of the Directors’
Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared
for and only for the company’s members as a body in accordance with Section 235 of the Companies Act
1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the parent company financial statements give a true and fair
view and whether the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited have been properly prepared in accordance with the Companies Act 1985. We also
report to you if, in our opinion, the Directors’ Report is not consistent with the parent company financial
statements, if the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the
audited parent company financial statements. The other information comprises only the Highlights of the
year, the Chairman’s Statement, the Group Development Across Europe, the Chief Executive’s Review, the
Financial Review, the Corporate Responsibility Review, the Directors’ Report, the unaudited part of the
Directors’ Remuneration Report, the Corporate Governance Statement, the Five-Year Financial Summary and
the Extracts from the Report on the Transition to IFRS. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the parent company financial
statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by
the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the parent company financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the parent company financial statements, and of
whether the accounting policies are appropriate to the company’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
parent company financial statements and the part of the Directors’ Remuneration Report to be audited are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of information in the parent company
financial statements and the part of the Directors’ Remuneration Report to be audited.
Opinion
In our opinion:
• The parent company financial statements give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the company’s affairs as at 31 December 2005
• The parent company financial statements and the part of the Directors’ Remuneration Report to be
audited have been properly prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
13 March 2006 90 Arriva plc Annual Report and Accounts 2005
FINANCIAL CALENDAR 2006/07
Annual General Meeting
Meeting date 19 April 2006
Final ordinary dividend
Record date 31 March 2006
Payment date 2 May 2006
Results for 6 months to 30 June 2006
Announcement date 7 September 2006
Interim ordinary dividend
Record date 15 September 2006
Payment date 2 October 2006
Results for the year ended 31 December 2006
Announcement date 8 March 2007 – subject to confirmation
REGISTERED OFFICE AND REGISTRAR DETAILS
Secretary & Registered Office
David Turner BA, FCIS
Arriva plc
Admiral Way
Doxford International Business Park
Sunderland
SR3 3XP 
Tel: 0191 520 4000
www.arriva.co.uk
Company no: 347103
Registrar and Shareholder Information
Computershare Investor Services PLC
PO Box 82 
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Tel: 08707 020 000
www.computershare.co.uk
Auditors
PricewaterhouseCoopers LLP
89 Sandyford Road
Newcastle upon Tyne
NE1 8HW
Solicitors
Dickinson Dees
St Ann’s Wharf
112 Quayside
Newcastle upon Tyne
NE99 1SB
Field Fisher Waterhouse
35 Vine Street
London
EC3N 2AA
Herbert Smith
Exchange House
Primrose Street
London
EC2A 2HS
Stockbrokers
ABN Amro Hoare Govett
250 Bishopsgate
London
EC2M 4AA
Citigroup Global Markets
Citigroup Centre
33 Canada Square
Canary Wharf
London
E14 5LB
Merchant Bankers
N M Rothschild & Sons Limited
New Court
St Swithin’s Lane
London
EC4P 4DU
Financial Public Relations
Tulchan Communications
Sixth Floor
Kildare House
3 Dorset Rise
London
EC4Y 8EN
ADVISORS www.arriva.co.uk
NOTES NOTES  Arriva plc
Registered Office:
Admiral Way
Doxford International Business Park
Sunderland
SR3 3XP
United Kingdom
Tel +44 (0)191 520 4000
Fax +44 (0)191 520 4001
www.arriva.co.uk
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