ARRIVA has crowned a "difficult but good year" with profits of £83.8m.

The bus and rail operator enjoyed growth in its core divisions, with the ongoing push to get workers in London on to public transport continuing to benefit the Sunderland group.

Predictions that the capital is braced for a population boom - an estimated 500,000 more people will be living there by 2010 - has created further confidence in Arriva's future.

About one in five buses operated in London is run by Arriva, and the group plans to capitalise on forecasts by Transport for London of an 11 per cent rise in passenger numbers this year.

Transport for London is the organisation given the task of implementing Mayor Ken Livingstone's transport strategy and managing the transport services for which the mayor has responsibility.

Bob Davies, Arriva chief executive, outlined the company's intention of making further progress on the Continent, saying he wanted to make at least one major acquisition in Europe this year.

He said: "Europe is very important for us. It is a critical market, but one that is moving very much in the direction we want it to, with increasing amounts of competitive tendering."

In the UK, Arriva is hoping to win the ScotRail franchise, for which it is shortlisted, although Mr Davies refused to make a prediction on his company's chances of success.

Arriva pledged to continue focusing on organic growth, targeted acquisitions and share buy-backs this year.

Pre-tax profits increased four per cent during the year to December 31, while turnover from continuing operations climbed 15 per cent to £1.6bn.

Mr Davies said the repositioning of the group to focus on its bus and rail services was complete following the sale of its three remaining motor dealership sites in the West Country in July.

The group's rail division was lifted by franchise wins for services operating in Wales and the Borders.

Revenues from the 15-year franchise, which operates a network that stretches from Liverpool and Manchester to Bristol and Penzance, are estimated at about £200m a year.

The franchise wins compensated for the loss of the Merseyrail network and the Northern franchise, which Arriva had held since 2000.

Shareholders are in line to receive a total dividend of 18p.