Stagecoach is to place a £71 million order for 584 new buses, the Perth-based transport operator's biggest bus order to date.

The company is looking to capitalise on steady growth in the number of people choosing to take the bus across the country. Stagecoach has been using telemarketing techniques to persuade householders living on bus routes to abandon their cars for public transport.

Inner city and shire areas will benefit from the proposed investment in services, which is being made on the back of increased profits in the UK's bus business. Stagecoach has seen bus passenger volumes increase by 3.9 per cent year on year.

"We believe increasing car congestion, inward migration and a growing focus on environmental issues will provide more opportunities to attract passengers to our public transport services in the years ahead," Brian Souter, chief executive of Stagecoach, said.

Stagecoach has called more than 600,000 people in the past two years, in an attempt to convert non-users to the bus. The company is also testing a series of television commercials in the South of England, which emphasise the economic, social and environmental advantages of bus travel. It plans to roll the ad campaign out to further regions in the UK.

The company also hopes to benefit from proposals to introduce congestion charging schemes in Manchester and Cambridge, where discussions are being held with the local authorities.

Details of the investment in buses emerged as Stagecoach reported forecast-beating interim results for the six months to October 31.

Revenue at the business grew by 8.1 per cent to £820.8 million, with operating profit up 54 per cent. At the pre-tax line, the company reported profits of £84.6 million, compared with £77.4 million the previous year.

Stagecoach said that its expectations for the full year remained in line with an announcement in November, in which it said that its profit expectations had increased.

Despite increasing fuel prices, Stagecoach is confident that demand for bus and rail services will continue to grow and that the company can increase revenue organically at a faster rate than the industry average.

The transport company also said it had made a strong start to its new ten-year South Western rail franchise, which includes the running of around 1,600 trains a day in South East England, out of London Waterloo.

Like-for-like revenues jumped 15.2 per cent after the company bought in 100 additional ticket officers to catch fare dodgers and installed nearly 200 extra ticket vending machines.

However, the company gave warning that profits from South West Trains could be volatile over the life of the franchise as the subsidy from the Department for Transport will reduce steeply, by £100 million, over the next two financial years.

The margin on the South West Trains franchise has fallen from 11.3 per cent last year to 7.8 per cent this year, as Stagecoach's operating profits on the commuter services into Waterloo fell from £31.4 million to £25.3 million. This reflected the punchy bid that Stagecoach made to secure the franchise in last year's competition, although Stagecoach said that the achieved margin was better than it originally forecast.

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 CrossCountry trains until last month.

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