Travellers switching from cars to bus and rail due to environmental concerns helped Britain's Stagecoach boost its full-year profit by 38%, beating forecasts, as it reported a strong start to its new financial year.
"Environmental issues had a major impact on both bus and rail," Chief Executive Brian Souter told reporters. "In the south, particularly the cathedral cities, we're seeing a modal shift onto the bus."
Underlying pretax profit was 162 million pounds ($324 million) in the year to April 30, up from 117.1 million a year earlier.
"We consider this to be a very strong set of figures," said analysts at Deutsche Bank, adding that clean earnings per share of 11.7 pence was 7.8% ahead of their forecast.
Stagecoach shares rose 5.7% to 181 pence, valuing the group at around 1.3 billion pounds.
"I am pleased to report that we have made a strong start to trading in the new financial year in line with our expectations, and we are excited by the potential for future growth," said Souter.
Stagecoach's rail division, which recently won deals to run the East Midlands rail franchise and Manchester's Metrolink trams, said it was seeing strong performance from its existing South West Trains business and its joint venture, Virgin Rail.
Souter picked out Cambridge, Oxford, Exeter, Gloucester, Winchester and Canterbury as cities where people were increasingly switching to public transport due to traffic congestion, inconvenience and environmental concerns.
And he picked out routes to and from Manchester and Liverpool as areas where trains were starting to take passengers away from the domestic airlines.
"It's particularly on trips of up to 300 miles, but even on the longer trips to Scotland, we're beginning to see some modal shift," he added.
U.K. rail revenues increased by 13% to 571.5 million pounds, and U.K. bus revenues increased 10% to 608 million pounds.
"U.K. Bus in particular is very strong," said Deutsche analysts.
"Stagecoach 'lost' 20 million pounds of profit with a sale of its bus business early last year, made two acquisitions of break-even/loss-making businesses, absorbed 20 million-odd of fuel costs and yet still managed to make a similar amount of profit in bus versus 2006.
"Once the new rail franchises bed down, we would see a similar story of profits growth developing once again in rail," they added.
It raised its full-year dividend 10.8% to 4.1 pence.