Stagecoach said it was on track to hit full-year forecasts today as it reported signs of an upturn in passengers on its South West Trains franchise.

The operator said it had seen the first small signs of improvement in underlying passenger trends on South West routes in recent weeks.

Passenger volumes on the franchise were down by 2.4 per cent in the 48 weeks to March 31 as the impact of speed restrictions on the network was compounded by strike action called by the RMT union earlier this year.

Stagecoach said the industrial action had dented profits by around £9 million in the second half of its current financial year.

Stagecoach runs bus services throughout Sussex and its South West Trains and Virgin rail franchises also serve parts of the county.

Virgin rail returned to profitability with passenger numbers up 9.9 per cent and revenues ahead 11.7 per cent in the 48 weeks but the franchise was still being affected by ongoing engineering works.

The group said the Virgin Group, which owns 51 per cent of the business, was still seeking compensation for delays to the first phase of the West Coast main line upgrade, now unlikely to be completed until summer next year.

Stagecoach said the recovery at its Coach USA subsidiary had continued with revenues down five per cent in the 48-week period although the international tour and charter market remained weak.

Revenues in the Edinburgh-based group's UK Bus division were up six per cent with strong growth in London and other urban centres offsetting a 1.2 per cent fall in passenger volumes across the division.

Analysts forecast full-year profits for the group of £108 million.