Stagecoach is planning to ramp up the expansion of its low-cost Megabus unit in Europe with a particular focus on expanding its footprint further France.

That came as the transport operator reported solid revenue growth in its UK rail and bus divisions in the first half of its financial year.

However there was a 5.6 per cent drop in North America where low fuel prices have led to more people using cars for longer trips and fewer bus journeys.

UK bus operations outside of London saw like-for-like revenue growth of one per cent in the 24 weeks to October 17.

Stagecoach said growth continues to come from fare paying passengers rather than concessionary travellers.

It said: “Revenue from tendered and school services provided under contract has continued to decline, as a result of local authorities reducing spending on supported services due to budget constraints.”

Overall passenger numbers were 0.3 per cent lower than the previous year.

In London bus revenue grew 1.4 per cent but was said to have been impacted by congestion from road works in the city.

Stagecoach said any lengthy delays can negatively affect the revenue it receives from Transport for London for operating services under a quality incentive scheme which rewards punctuality and reliability.

The Perth company remains bullish on the prospects to expand the Megabus service in mainland Europe.

It has launched a number of services in France, including in Paris, Marseille, Strasbourg, Lyon and Lille, since government backed changes in August which opened up inter-city bus routes of at least 100 kilometres.

A spokesman for the company said further announcements on the expansion of Megabus would be made in the “very near future”.

The network also has a number of stops in Italy, Germany, Belgium, Luxembourg and the Netherlands.

Stagecoach, headed by Martin Griffiths, said that because it has accelerated plans for the European network it expects start-up losses of £15m in the year to April 30, 2016. That is £5m higher than previously noted.

Profit forecasts for the UK rail division were revised upwards as it saw a 5.8 per cent rise in revenue in the period.

Stagecoach said the profit upgrade reflected “good cost control” along with greater clarity on the East Midlands Trains franchise which started last month and is scheduled to run through to March, 2018.

The company, co-founded by Sir Brian Souter and Ann Gloag, expects to learn in December if it has been successful in its bid for a new Trasnpennine Express franchise.

A joint venture with Abellio has also been shortlisted for the East Anglia franchise, the winner of which will be announced in the middle of next year.

The Virgin Rail Group West Coast service, which Stagecoach is a joint venture partner is, was said to have performed strongly in the trading period with revenue up 8.7 per cent.

Stagecoach said: “Overall current trading is satisfactory and we remain on course to meet our expectations for the year.”

In a note to clients Gert Zonneveld from Panmure Gordon kept a buy rating on the stock with a target price of 450p.

He said: “There are significant opportunities in the coming years for Stagecoach to win new rail franchises (and/or retain existing ones) and excellent prospects in UK bus, particularly on a multi-year view.”