Booming demand for rail travel has allowed National Express to commit to raising its dividend by 10 per cent for the next three years.

The bus and transport group, which today reported pre-tax profits up 44 per cent to £149 million, has seen passenger growth of 6 per cent in 2007, despite high-profile problems on the railway network and above-inflation increases in ticket prices.

Shares in National Express climbed almost 4 per cent in early trading to £11.60, on the back of the results, which were slightly ahead of market expectations.

The transport group, which has operated the high-profile long-distance East Coast business from London to Scotland since December, said that its confidence over the group's prospects, in particular its rail business, meant that it could commit to a 10 per cent a year increase in the dividend.

"The rail franchising picture is pretty stable now. In 2007 we knew that there would be franchises exiting the group but now we are confident of the group's future," Richard Bowker, the chief executive of National Express, said.

In a reshuffle of rail franchises, National Express lost Midland Mainline, Silverlink and Central Trains in November, but gained East Coast Main Line, formerly run by GNER, in December.

The bus and rail group will hand back its loss-making Gatwick Express franchise in May but plans to bid for a reconfigured Southern franchise, which will include Gatwick to London trains, when it comes up for competition this year.

News of National Express's strong rail performance came on the day that the Office of Rail Regulation (ORR) fined Network Rail £14 million for letting critical engineering projects overrun, disrupting the new year travel of hundreds of thousands of passengers.

East Anglia passengers were caught up in new year travel chaos in January when Liverpool Street station failed to open on January 2 for the City's return to work.

Mr Bowker said of the ORR's action: "The most important thing is that it has been made clear that January's problems were not acceptable and specific action is being taken to make sure that this does not happen again."

Mr Bowker said that it had been talking to Network Rail about its Easter engineering works so that the train operator could minimise the disruption for its passengers.

Pre-tax profits at the company increased by 44 per cent to £149 million, on the back of revenues up 4 per cent at £2.6 billion.

The company, which also operates coaches in Spain and school buses in North America, said that it had seen no sign of any slowdown in demand, despite the current economic backdrop.

The company also believes that growing concern over the environment, which is encouraging travellers to favour rail and bus over car and aircraft, will help it to withstand any consumer spending slowdown.

Revenue at the group’s Spanish bus and coach operations grew by 19 per cent, after it became Spain's largest private operator with the acquisition of Continental Auto.

National Express beat off competition from private equity companies to acquire Continental Auto for £450 million, its biggest acquisition to date.

UK coach revenue was 6 per cent ahead, UK bus revenue was up 7 per cent and UK train revenue rose 11 per cent.

The final dividend was 26.4p, giving a total dividend for the year of 37.96p, up 9 per cent.

Mr Bowker said that 2008 would be a year of consolidation as the company concentrated on bedding in the businesses that it had bought or taken over in 2007.

The company also began a rebranding exercise that sees the same National Express name rolled out nationally across all its bus, coach and train businesses.

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