ONE of the UK's biggest bus companies, Arriva, has signalled plans to bring more European business on board.

The Sunderland group said it was also on course to increase the number of buses on London's streets by 200 next year.

Two deals this summer saw Arriva consolidate its position in Portugal and buy its first bus company in Italy.

Chief executive Bob Davies said the group's European arm was fast becoming a significant part of its portfolio.

He said strong cash flow across the business since the start of the year meant Arriva could exploit opportunities to build the operation.

"The strategy for mainland Europe is to deliver profitable growth through successful tendering and acquisitions," he said.

Pre-tax profits rose 17 per cent to £41m in the first-half to June 30 as a fall in interest charges made up for a drop in turnover.

Turnover eased to £1.01bn from £1.02bn as Arriva counted the cost of strike action on its Arriva Northern trains franchise.

Operating profits in Arriva's UK Trains division fell £500,000 to £5m as strike action by conductors affected revenues.

In April, the company delivered its £275m vision for transforming its transpennine service to the Strategic Rail Authority. It plans to introduce 55 new high-speed trains and create 250 jobs.

However, it is being tipped to lose the franchise to a rival consortium made up of bus and train operator First Group and French transport operator Keolis.

First Group and a third bidder, Connex, are promising a multi-million pound investment in new trains and a reduction in journey times.

Arriva's bus arm suffered a slide in operating profits, of £3m to £28m, after the sale of a Liverpool depot and higher wages.

It said a marketing campaign designed to boost passenger volumes in the North-East has been extended to the West Midlands and North- West.

Arriva said passenger volumes were on the increase in London, where the group is the largest bus operator.

Arriva expects its fleet to expand to 1,400 buses by next year, up from the 1,200 it contracted to operate last year.

Mr Davies said plans for congestion charging in the capital could lead to "increased patronage over the coming years".

The group took out three per cent of its share capital through buybacks last year, costing £21m, and said it would continue with the programme.

Shareholders will receive an interim dividend of 4.4p - up five per cent.