THE major transport company familiar to local bus and rail passengers has reported a group operating profit of £94.2 million -- up 29 per cent -- over the last six months.

FirstGroup plc has suffered from strikes on its local bus network and complaints about rush-hour overcrowding on First North Western trains between Bolton and Manchester.

But the message to shareholders is upbeat as the company reports overall rail passenger volumes up 7.5 per cent and UK bus volumes up by 0.5 per cent.

Mr Moir Lockhead, Chief Executive of FirstGroup plc, told shareholders: "The outlook for the Group remains very positive with excellent prospects for growth across our operations.

"This is in spite of specific cost pressures in certain areas of our businesses and recent disruption on the UK rail network.

"The Group's strong cashflow ensures we are well placed to continue our strategy of enhancing shareholder value by growing our core businesses, reducing debt and buying back equity as the opportunities arise."

The company's £987 million turnover is up 30 per cent on last year's figure.

BUS DIVISION: Mr Lockhead reported that operating profit fell to £47.4 million (£50.8 million) "primarily due to the cost of industrial action, which has now been settled, together with wage increases and inflationary pressures not fully passed on through the fare box."

He went on: "The Group has endeavoured to keep fare increases in line with the general level of inflation during the period and is fully hedged against fuel price increases until March, 2001.

"Following the recent sharp rise in world oil prices we are reviewing all options carefully in order that we can maintain operating profit whilst minimising the impact on fares.

"However, if costs in the key areas of drivers' wages and fuel continue to rise in the future, such increases will be passed on through fares."

RAIL DIVISION: Mr Lochhead said "excellent" rail revenues reflected further growth in passenger volumes and tight control of costs.

He said new class 175 trains were entering service on First North Western.

But train services on First Great Western and First Great Eastern were severely disrupted by emergency engineering work carried out by Railtrack after the Hatfield derailment.

He added: "At this stage we believe we will be able to recover short term revenue losses caused by the disruption, but are still assessing the longer term impact of the disruption."