The firm, which now has a presence in ten European countries, has also taken a 49% stake in an Italian bus firm.

Sunderland-based Arriva added that it was seeing strong passenger growth in its UK bus business.

On Tuesday, rival Stagecoach unveiled a profits jump which it said was helped by people switching to buses and trains because of environmental concerns.

Progress

The three-year deal to run trains in north-west Poland with local operator PCC is expected to generate revenues of about £20m, Arriva said.

The firm's Italian business, SAB Autoservizi, is paying 6.8m euros (£4.6m; $9.1m) to buy into a joint venture with SPT Linea, running 317 buses in the Lombardy region.

"This strengthens our position as the largest private bus operator in the Italian transport market," said Arriva chief executive David Martin.

Deutsche Bank analysts said that although these two deals were "relatively small in the context of the group", they showed "progress to develop Europe is continuing".

See also:

Arriva Continues Its European Expansion

Sky News: June 28, 2007

Arriva has bolstered its position in Italian buses and entered the Polish rail market for the first time. 

This takes the number of countries in which it operates to 10 as, along with other UK firms, it vies for position in mainland Europe.

Firm vying with UK competitors

Arriva's Italian business has formed a new joint venture to buy 49% of SPT Linea for £4.7m.

SPT runs 317 buses in the Lombardy region of northern Italy.

Chief Executive David Martin said the deal "...strengthens our position as the largest private bus operator in the Italian transport market."

Arriva also announced that it had jointly won a deal to run trains in northwest Poland.

That agreement is expected to generate total revenues of some £20m.

Analysts say the two moves, while small, show that Arriva's progress in Europe is continuing.

The group generated around £750m in revenues there last year - it typically buys up smaller companies before expanding them organically.

Arriva is valued at about £1.3bn, based on its current share price.

Its Brirish rivals in Europe include Northgate and National Express, which in April bought Spain's Continental Auto, giving it the country's top two bus operators ahead of liberalisation of the transport sector there.

See also:

Arriva expands in Polish rail, Italian buses

Reuters: Jun 28, 2007
By Pete Harrison

LONDON, June 28 (Reuters) - British bus and train operator Arriva said on Thursday it was trading in line with expectations as it enters the Polish rail market and bolsters its position in Italian buses.

The moves take the number of countries in which it operates to ten as UK transport companies vie for position on mainland Europe.

"We... are evaluating investment and acquisition opportunities in our existing operating areas and in new territories," Arriva added.

Arriva said its Italian business, SAB Autoservizi, had formed a new joint venture to buy 49 percent of SPT Linea, which runs 317 buses in the Lombardy region of northern Italy. "The joint venture complements our existing operations in the Lombardy region and strengthens our position as the largest private bus operator in the Italian transport market," Chief Executive David Martin said of the 4.7 million pounds ($9.41 million) deal.

Arriva shares rose 1.9 percent to 669 pence by 0803 GMT, valuing the group at around 1.3 billion pounds.

The group, which first entered Italy in 2002, generated 752 million pounds of revenues last year from its businesses in mainland Europe, where it typically buys small companies before growing them organically.

The group is eyeing expansion into Europe's new member states, and on Thursday it also announced it had jointly won a 3-year contract to run trains in northwest Poland -- a deal that is expected to generate total revenues of around 20 million pounds.

"Although contract size of these two deals may be relatively small in the context of the group, we believe that it shows progress to develop Europe is continuing," said analysts at Deutsche Bank.

Other UK transport groups expanding in Europe include Northgate and National Express, which in April bought Spain's Continental Auto, giving it the country's top two bus operators ahead of liberalisation of the transport market.

Arriva said in its trading statement its first half 2007 results would be released on Sept. 6.