RAIL passengers in Hampshire have helped transport group Stagecoach keep profits on track.

Stagecoach, which operates South West Trains (SWT), revealed the financial performance of its rail division would exceed expectations in the year to the end of this month.

The company, which has a 49 per cent stake in Virgin Rail Group, added that it planned to give £250m back to shareholders following a successful restructuring of its overseas businesses.

The trading update from the Perth-based group showed how a five per cent rise in passenger revenues at SWT, coupled with cost controls, meant rail operating profits would "comfortably" beat last year's £38.2 million.

SWT runs services between the south coast and London Waterloo, carrying 362,000 people every day.

Its new Desiro trains are serviced at the £25m state-of-the-art train care depot at Northam, Southampton.

The "pit-stop" facility - the best of its type in the UK - was opened by millionaire Stagecoach boss Brian Souter last July.

His company also expects to record a profit for Virgin Rail Group in the second half of the financial year after continuing to out-perform against the budget set by the Strategic Rail Authority.

A further boost has come from a lower than expected tax charge - helping the group's earnings per share figure to beat expectations.

Recent disposals, including the £52m from the sale of most of its stake in Hong Kong toll road operator Road King Infrastructure, would leave net debt at below £100m.

The "significant reduction" to a level below current market expectations has given room to consider the shareholder payout.

It is likely to provide investors with further details in annual results on June 23.

Stagecoach has been offloading parts of its overseas portfolio to focus on its core bus and rail businesses in the UK, North America and New Zealand. Shares surged 11 per cent following the update.