STAGECOACH chief executive Martin Griffiths has said he expects the UK Government to reduce the risk for companies taking on rail franchises, as talks on fresh terms for the East Coast line it operates continue.

Mr Griffith’s comments came as the transport giant’s shares climbed five per cent on an upbeat set of interim results which showed an eight per cent lift in pre-tax profit to £96.7 million for the six months to October 28.

This comes one week after the Government agreed to end Stagecoach’s loss-making east coast rail franchise three years early, in 2020.

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Stagecoach has signalled it could bid again for the franchise when it becomes available, with a spokesman saying: “Like any rail opportunity we would assess the application when we see further details.”

Last Wednesday Transport Secretary Chris Grayling announced an overhaul of the railways, including plans to integrate track and train operations, and alter the franchising system to rebalance the revenue risk shared by Government and operators.

Under the current system operators must commit to definitive payments to the Government regardless of how much revenue is generated from the line.

“We are encouraged by indications of an improving risk-reward balance in new franchise competitions,” said Mr Griffiths. “While the train operating company will still bear some revenue risk on most new franchises awarded by the department, we anticipate that its exposure to revenue risk will be significantly less than on franchises awarded in the last few years, such as the Virgin Trains East Coast franchise.”

Stagecoach wrote down £84 million in June because of “anticipated losses” on the line it operates with Virgin over the next two years.

The group admitted that it overpaid on its £3.3bn deal for the east coast franchise. Since then it has been locked in talks with the Department of Transport to renegotiate terms.

From 2020 a new East Coast Partnership will take on responsibility for both intercity trains and track operations on the route between London and Edinburgh.

Shares in Stagecoach jumped 13 per cent upon Mr Grayling’s announcement and climbed five per cent yesterday before dropping back to close up 0.91 per cent, as the group reported interim results in line with expectations.

Revenue at the Perth-based transport giant came in at £1.8 billion for the period, down ten per cent on the restated £2bn for the first half of 2017.

This was largely because of the end of its operation of the South West Trains franchise, which led UK rail revenue to fall 17 per cent to £905m. The group is currently involved in the bidding for three UK rail franchises. Stagecoach also said it was open to bidding for more rail contracts overseas.

Revenue for UK bus operations outside of London were flat at £512m with London services down 2.4 per cent to £128m. North American revenue was down 1.3 per cent to £340m.

Stagecoach maintained the interim dividend at 3.8p and indicated that any growth in the final dividend would be modest.