The rise in train profits comes despite criticism of its service from rail regulators, after numerous customer complaints about punctuality.

However the group pledged to improve the performance of its train operations and try and avoid late running services.

Stagecoach also brushed off the slowdown in the UK economy, and claimed that it had plenty of scope to grow profits further. Chairman Brian Souter said despite the prevailing economic turbulence the group is still seeing "some" passenger growth in its UK bus and rail businesses.

"Margin improvements have been made across all of our UK and overseas operations and I am confident that further improvements can be achieved," said chief executive Mike Kinski.

Still motoring

The company announced a jump in profits from £70.5m to £96.1m for the six months to 31 October. Turnover was up to £722.7m from £681.5m.

Stagecoach is now on the look out for more acquisitions after mounting an acquisition spree over the past few years.

It recently acquired at 49% stake in Virgin Rail, and has purchased Glasgow Prestwick airport and ferry operating businesses in Australia and New Zealand

Mr Souter said the company was continuing to investigate other expansion opportunities overseas.

New buses

Stagecoach said it would order 500 new buses in 1999 and 2000 to keep its fleet young. The group has also invested £90m in new electric trains which will start operating next year.

Stagecoach's joint venture business with Virgin Rail is one of the largest train operators in the UK and contributed £2.6m to Stagecoach's operating profits.

Shareholders will receive an interim dividend of 1p, up from 0.75p last year.

Allegations

Stagecoach has recently courted controversy when it was accused of operating a cartel with 12 other bus companies.

Last month the Office of Fair Trading (OFT) accused the cartel of rigging the price of contracts to operate school buses.

John Bridgeman, director general of the OFT, said representatives of the companies met secretly in a hotel and agreed on minimum prices at which they would tender to supply school bus services to Kingston Upon Hull city council.