Transport group Stagecoach yesterday said it planned to spend £71 million on new vehicles as it looks to attract more passengers to its bus division.
The orders for 584 new buses will be the biggest ever placed by the Perth-based company, which reported pre-tax profits of £84.6 million in the six months to October 31 - an increase of nine per cent on a year earlier.
Stagecoach said increasing car congestion, inward migration and a growing focus on environmental issues had attracted more passengers to its services, including those run under its South Western trains franchise.
It also operates 7,000 buses covering around 100 towns and cities in the UK, including Warwickshire-based Midland Red (Southern).
Stagecoach said it had invested heavily in marketing bus travel, with an "encouraging" success rate in converting non-users to public transport.
Estimated passenger volumes in the six months were 3.9 per cent higher than the same year period a year earlier, with full fare passenger growth at 2.4 per cent and the remainder coming from concessionary travel schemes.
Revenues from bus operations rose by 8.1 per cent to £367.1 million, while operating profits were 54 per cent up at £52.5 million as the company also benefited from stable year-on-year fuel prices and a continued focus on cost control.
Customers in both metropolitan and shire areas will benefit from the investment in new buses, which will take place in the 2008/09 financial year.
Stagecoach said it also made a strong start to its new ten-year South Western rail franchise, which includes the running of about 1,600 trains a day in South-east England out of London Waterloo.
Like-for-like revenues jumped 15.2 per cent after a number of initiatives, such as 100 additional ticket officers and new vending machines, were introduced earlier than expected.
The competitive bidding environment for new franchises knocked the company's margins, although not by as much as initially feared.
Operating profits declined to £25.3 million from £31.4 million a year earlier, while Stagecoach also warned that the subsidy it receives from the Department of Transport will reduce by more than £100 million over the next two financial years, resulting in some variability in profits over the franchise period.
Stagecoach recently took on the East Midlands rail franchise, with services running to London St Pancras and around the regional network.
The company's share of profits at Virgin Rail Group (VRG), in which it has a 49 per cent holding, improved to £12.9 million, from £9.2 million a year earlier.
VRG runs the West Coast Trains franchise and operated Cross-Country trains until last month.
Stagecoach finance director Martin Griffiths said the group did not plan any company-transforming acquisitions, but would continue to look for bolt-ons at the right price, particularly in the United States.
Analysts at Credit Suisse said: "Of particular note in UK Bus was the passenger volume growth rate of 3.9 per cent, and we were especially encouraged by the fact that most of this growth rate - 2.4 per cent - came from passengers paying full fares, rather than from concessionary fares schemes.
"We remain convinced that this is evidence of the group's superior skill in marketing and other volume stimulating initiatives," they added.
However, Stagecoach chief executive Brian Souter is not unhappy as some analysts had forecast a 50 per cent fall in rail earnings.
"We had anticipated that the (profit) margin would decrease following the commencement of the new franchise reflecting the competitive bidding environment for rail franchises," he said.