ARRIVA'S growing love affair with continental European public transport looks likely to continue after glowing preliminary results for last year.

The transportation group said pre-tax profits were up 11 per cent, to £102.1m, and earnings per share had risen 23 per cent, to 36.8 pence.

Share buy-backs returned £17.2m to shareholders during the year, partly as a result of Arriva's continued disposal of its motor retailing division.

Bob Davies, Arriva chief executive, said: "The results are slightly ahead of expectations with strong earnings per share growth."

Arriva announced a formal process for the disposal of the 35 motor retailing dealerships last October. To date the company has realised £33m from the disposal of 14 dealerships.

Congestion charging in London is expected to help the group's cash generating operation in the city, while there was a significant turnaround on trains in Merseyside and Arriva Trains Northern.

Mr Davies welcomed the end of a year-long conductors dispute, saying: "Everything now is about rebuilding relationships because you cannot have a strike running for a year without creating a lot of issues and problems."

But it is in Europe that the real growth potential for the business exists. The group has quietly expanded its operations abroad and is realising the benefit of its efforts.

Anthony Platts, assistant director of Wise Speke, said: "There remain significant opportunities for Arriva as the EU bus market, estimated to be worth £35bn, increasingly opens to competitive tendering."

The trading statement was warmly greeted on the London Stock Exchange with Arriva's share price jumping 19p, or seven per cent, to 302p.