BUS and train group Arriva's continued expansion into the European transport market has seen its operating profit jump 9.4 per cent to £36.1m in the first half of the year.

But the decision by the Sunderland-based company to sell its car leasing business caused the group's profits to stall in the last six months.

Pre-tax profits for the six months to June 30 came in at £35.5m, down from £51.6m at the same point last year.

The company, which two weeks ago resolved a month-long dispute with its bus drivers across the region over pay and conditions, saw total operating profit maintained at £45m, with turnover of £875.3m up from £833.8m in 1999.

Any financial effect of the series of one day strikes and overtime ban was not included in yesterday's figures.

Arriva passenger services is one of the UK's three major bus operators with around 20 per cent of the market, and the figures are seen as a result the "repositioning" of the group over the last two years.

Chief executive Bob Davies said: "We are confident that the profitable development of the Group will be reflected by further progress throughout 2000.

"Arriva is well positioned to benefit from the rail re-franchising process in the UK and if successful in the bids it has currently committed to, the Group would be one of the UK's largest rail operators."

The acquisition of MTL rail group this year gave Arriva two rail franchises, Northern Spirit and Merseyrail Electrics.

Last month Arriva made a bid to rail regulator the shadow Strategic Rail Authority to run the trans-Pennine express service alongside its existing franchises.

A decision is expected in the next few weeks which, if successful, would make Arriva one of the largest rail operators in the country.

The group has also reached an agreement for a joint venture with German transport operator, Deutche Bahn to bid for Dutch HSL-Zuid high speed rail project