STAGECOACH, the bus and train operator, hailed a revival in the fortunes of the UK’s privatised bus and rail systems yesterday, as the company confirmed that it would return £250 million to shareholders and said that it was confident about its future.

The capital return to shareholders comes after the group was pulled back from the brink of collapse by Brian Souter, the founder, after the turmoil in its US business.

Mr Souter will be the largest beneficiary of the payback after he returned from retirement to lead the group two years ago.

Mr Souter and Ann Gloag, his sister, together own about 26 per cent of the Perth-based group through family trusts.

The transformation was made possible after Stagecoach sold about 60 per cent of its North American business, disposed of its Citybus operation in Hong Kong and also sold its investments in Road King Infrastructure and Trainline Holdings, an internet train booking service.

The group had borrowed heavily to expand in the US, where it bought the Coach USA business for £1.2 billion in 1999.

Two years ago the group was forced to make a £575 million writedown on the group after September 11 badly hurt its airport and tourism related activities.

With Mr Souter back in the driving seat, Stagecoach has stepped up investment in its UK bus operations and concentrated on cost control and bidding for new franchises in its rail division.

Mr Souter said that these were “very interesting times” for companies operating public transport.

Two weeks before the conclusions of yet another review of the rail industry, which is likely to hand more influence to Network Rail, Mr Souter said that Stagecoach had experienced a “much improved” performance from the track operator in the last year.

Passenger numbers at South West Trains have improved by 3.2 per cent year-on-year and operating profits on Stagecoach’s wholly owned rail subsidiaries improved by 15.4 per cent to £44.1 million.

Graham Eccles, head of Stagecoach’s rail business, said that Network Rail was probably performing better than Railtrack, its publicly quoted predecessor, had ever done.

“The culture that is coming out of Network Rail is far better than anything that had come out of Railtrack for many years,” Mr Eccles said.

Operating profits in the UK bus division were up 11.6 per cent to £74.8 million, boosted by a 19.1 per cent increase in turnover on London buses.

The increased profits at Stagecoach will be shared with the Exchequer through a £27 million payment to the Strategic Rail Authority.

News of the windfall for investors was accompanied by a strong set of results. Pre-tax profits increased 6.2 per cent to £120 million, ahead of analysts’ expectations of £111 million.

Stagecoach cut its net debt by 88 per cent, or £492 million, to £68 million during the year. The shares, which have outperformed their sector by 6 per cent this year and give the company a market capitalisation of £1.15 billion, edged up slightly to close at 87¼p.