STAGECOACH has sold the retail operations of its megabus Europe business and reported a £187 million profit, as chief executive Martin Griffiths said the business was managing its challenges but “the [EU] referendum result may lead to continuing economic, consumer and political uncertainty”.

The sale to German coach operator FlixMobility was announced as group revenue climbed 20 per cent to £3.9 billion.

The Virgin Trains East Coast, which began operating the East Coast rail franchise in March 2015, helped the rail division to a 148 per cent profit boost as growth in the company’s bus operations slowed.

However Stagecoach said the outlook for the UK rail industry has become more challenging.

Reported pre-tax profits were down by more than a third because of exceptional costs relating to the cost of bond refinancing and a write-down on its Twin America investment.

“It’s been a challenging year, but the results against the background are good,” said Mr Griffiths. Amidst further uncertainty he added that the team was focused and would “get on with it”.

“We’re working hard to stimulate organic growth through a combination of continued investment, improving our digital offering and keeping fare increases to the minimum,” he said.

In the post-Brexit era, Mr Griffin said Stagecoach has limited exposure in Europe – particularly in light of the megabus retail sale – so it was more a case of how the wider economy was impacted.

“The buses will still run, the trains will still roll, and people will still have to take journeys,” he said. “We have to make sure what we’re offering people persuades them to take public transport. I do think the next 12 to 18 months will be more uncertain but the outlook in the medium to long term is good.”

The transaction with FlixMobility had “no relationship to the referendum” said finance director Ross Paterson. He explained it was a young service, launched in 2014 and quickly expanded to 104 coaches. It made operating losses of £24.1m on revenues of £18.4m last year and Mr Paterson said Stagecoach had been in discussions with FlixMobility for a number of months.

The sale, in the form of a loan note to be settled by the end of 2017, sees FlixMobility gain the retail operations of MegaBus Europe, while Stagecoach retains the coach operating activities, which it will fulfil as a contractor to FlixBus.

“That’s interesting to us,” said Mr Paterson. “We know a lot about running buses, but we’re interested in their insights into technology and customer relationships.”

Stagecoach operates similar deals in the UK with National Express and CityLink in Scotland.

The group, which operates around 8,500 buses and coaches in the UK, is currently working with other bus companies to explore the introduction of smart ticketing across Scotland’s largest cities during the current financial year. The project in Scotland is expected to extend to rail, ferries and the Glasgow Underground.

Stagecoach’s rail division – which includes a 49 per cent of east coast operator Virgin Rail Group, and a 90 per cent holding in Virgin Trains East Coast, in addition to the South West and East Midlands franchises – saw revenue hit £2.1bn.

Mr Griffith said the group’s bid for the South West Trains franchise was “very competitive” but was up against a strong consortium in First Group and MRT. “That said, we’ve run the railway for 20 years and we’ve a lot to offer in its future development,” he added.

“Stagecoach has always bid through the economic cycle on rail franchises and I can’t see why that won’t continue unless there’s a fundamental change in Government policy or the commercial proposition.”

The North American business, where 2,300 megabus vehicles link 130 cities, saw operating profits drop 19.5 per cent to £28.4m but the company said it had taken steps to match its inter-city coach services to changing patterns of demand. “We are well placed to expand our networks as conditions improve,” said Mr Griffiths.

The group also announced former National Express chief operating officer Ray O’Toole has taken a non-executive director position.