December 6, 2017 / 8:37 AM / in 11 days

UPDATE 1-UK's Stagecoach keeps 2018 earnings forecast despite revenue drop

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Dec 6 (Reuters) - British transport company Stagecoach said on Wednesday its 2018 earnings forecast was unchanged despite lower bus revenue and passenger volumes, adding that it expected modest growth in its final dividend for the year.

The company maintained its interim dividend at 3.8 pence per share.

“As usual, we will consider the final dividend for the year in June and, while we currently have no plans to reduce the rate of dividend, we anticipate that any dividend growth at that time will be modest,” it said in a statement.

Pretax profit, on an adjusted basis, fell marginally to 96.7 million pounds ($129.70 million), while revenue fell 10 percent to 1.80 billion pounds for the six months ended Oct. 28.

Shares were up 5 percent at 0823 GMT, the second highest gains on the FTSE midcap index.

Stagecoach said in September it continued to anticipate an increase in the rate of revenue decline later in the year in its London bus operations, reflecting the expiry of contracts with Transport for London.

Stagecoach, which runs bus and train services in different parts of Britain, said revenue for the London operations of its UK bus division, fell 2.4 percent to 131.5 million pounds.

It had said it September the market remained challenging due to previously highlighted effects of sustained lower fuel prices, which have increased car and airline competition.

Stagecoach reported a 15.3 percent drop in full-year pretax profit in June and took a 84 million pound charge against its unprofitable East Coast rail franchise, sending its shares to a seven-year low.

The East Coast line is the main rail link between London and Edinburgh, serving more than 20 million customers a year.

The company also lost the franchise to run South West Trains to a consortium of FirstGroup and Hong Kong’s MTR .

However, Britain last month set out plans to replace the East Coast franchise early, in 2020, and to negotiate revised terms to cover the period until then. ($1 = 0.7455 pounds) (Reporting by Noor Zainab Hussain and Justin George Varghese in Bengaluru, editing by Louise Heavens and David Evans)

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