Bus and rail firm Go-Ahead, which has extensive interests in the West Midlands, yesterday reported better-than-expected half-year profits of £58.3 million - an increase of 14.5 per cent on a year earlier.
Bus profits increased 15.4 per cent to £33.7 million although the company was hit by a one-off charge of £8.2 million as a result of a review conducted into its loss-making Go West Midlands operation.
The service operates under the Diamond Bus brand and covers West Bromwich, Dudley and Walsall, together with the north and west of Birmingham.
Finance director Nick Swift yesterday said all options were being looked at with a view to making the service more efficient. However, he declined to say whether the deregulated services would be disposed of. In a statement, the company said: "Our Go West Midlands bus operations reported a loss for the period and we are reviewing options for this business.
"Pending the outcome of this review, we have assessed the carrying value of the assets and have recognised any onerous lease obligations. This has resulted in an exceptional cost of £8.2 million in the income statement."
However, the company, whose shares closed down 395p to 1840p, said it was encouraged by the performance of its London Midland rail franchise.
"It is early days yet but we are very encouraged by the response," said Mr Swift.
The service contributed £49 million to revenue and £300,000 to operating profit, compared to a net bidding cost of £800,000 incurred in the first half of last year.
"We have a strong management team running this franchise, passenger numbers are encouraging and we are confident that it will make a good contribution to the group's results," said the company yesterday.
The continued expansion of Birmingham International Airport was also likely to improve the showing of the group's baggage handling operation.
"We didn't have a very happy year last year but things have picked up and the regions look promising for the future," Mr Swift added.
Across the group, the high cost of fuel remained a concern, said Mr Swift.
The company said it had had a hike of £1.5 million in its fuel bill for the six months to December 29, with a further increase likely in the current half-year.
"Unfortunately there is little we can do about this but we are by no means the only ones to suffer. In some ways it may be good for the business because it may force people to abandon their cars and opt for public transport instead," he said.
The company also said that it had seen declining growth rates on its Southern and Southeastern rail franchises, as well as a fall in passenger numbers on buses in Brighton and Oxford in December.
It repeated earlier warnings that reduced subsidies and increased profit share due to be paid to the Department for Transport would cause its rail profits to be lower across the whole financial year.
Despite these factors, profits for the six months in rail increased £5.8 million to £31.4 million, with passenger revenues up by 12.9 per cent on Southern and 13.4 per cent on Southeastern.
The aviation arm, which is responsible for cargo and baggage handling and passenger check-in, saw operating losses of £600,000. These were below profits of £400,000 last year, but still better than the £4.2 million deficit seen in the second half of the last financial year.
Investec Securities said: "Trading is robust for now, but we are increasingly cautious on the prospects for the transport operators if the London economy slows."