Fuelled by double-digit growth in rail revenues, Stagecoach is on track to deliver a second-half performance at the top end of expections.

Shares in the bus and rail group, based in Perth, Scotland, surged 4 per cent to 233p after this morning's trading update.

Its UK Rail division has produced a like-for-like revenue increase of 14 per cent in the three months to February 3, while Virgin Rail, which is 49 per cent owned by Stagecoach, was up 12.4 per cent.

There has also been strong growth in its bus operations, up 7.4 per cent in the UK, while its North American coach division has risen 4.2 per cent.

"Trading in the period since 31 October 2007 has remained strong and the Group's overall financial performance has been at the top end of management expectations," Stagecoach said in the update.

However, the group said that, as expected, revenue growth in the UK was below the growth rates experienced earlier in the financial year because of the impact of new concessionary bus fare schemes and other initiatives.

The UK Rail revenue growth does not include its East Midlands Trains business, which started operating under the company's ownership in November.

Stagecoach reported that the business has so far been producing revenues 8.1 per cent higher than the previous year while it was owned by National Express.

The group controls about one quarter of the national rail market through its ownership of South West Trains and East Midlands, which runs services from London to Derby, Nottingham and Sheffield, as well as its stake in Virgin Rail.

Stagecoach management remained upbeat about its outlook despite concerns about the UK economy and higher costs.

"Whilst we are mindful of macroeconomic developments, and of continuing cost pressures, such as increased fuel prices, the outlook remains positive," it said.

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