Stagecoach ups forecasts as more take buses and trains

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The company was last week confirmed as one of four on the shortlist for the new South Central rail franchise, combining the former Southern Railway routes with the Gatwick Express operations.

The eventual winner will operate trains in south London and parts of Kent, Sussex, Surrey and Hampshire.

Passenger volumes on buses since May have grown about 5% on last year, lifting revenue by 11.6%, while turnover on rail services is up 9%.

"The cost pressures from increased fuel costs and higher UK inflation are being more than compensated for by continued strong revenue growth," the company said. "People are continuing to switch from travelling by other modes of transport to travelling by bus."

Stagecoach last provided an update on trading as part of its preliminary results announcement in June when it said profits were ahead of expectations.

It will tell shareholders at the annual meeting tomorrow that the trend has continued and earnings are higher than previously forecast "principally because of better-than-expected revenue growth in the UK bus division".

A company spokesman said: "There is a modal shift by passengers going on. This is driven by a variety of factors including fuel costs, and there's no reason to see that it won't continue."

Stagecoach said it would be little affected by the credit crunch as it has surplus cash, and undrawn bank facilities that run to 2012.

South Central is the only rail franchise up for grabs this year, but is an attractive prize. Last year, the Gatwick Express and Southern franchises accounted for more than 140 million passenger journeys. The winning bidder is likely to be named next summer.