FirstGroup's rail business is improving after the London attacks

Pre-tax profits for the six months to 30 September fell to �55.3m from �64.3m at the same time last year.

Despite putting in what the firm said was a "solid performance", the high cost of fuel added �13m to its bills.

FirstGroup also said its rail division had fared well, despite the London bomb attacks which had had a "significant adverse impact on our rail franchises".

Passenger numbers at its First Great Western services - between South Wales, the South West and London - were starting to recover since the attacks in July, it added.

Bids in

Meanwhile, operating profits at its rail arm - which, with four franchises operates almost a sixth of the UK rail network - rose to �34.3m during the six months from �32.7m last year.

"This is a particularly strong performance, given the effect of the terrorist attacks on London which had a significant adverse impact on our rail franchises during the second quarter," said the chief executive, Moir Lockhead.

Looking ahead, the firm said it had submitted bids for the enlarged Integrated Kent, Thameslink/Great Northern and Greater Western rail franchises.

On the bus front, FirstGroup said the congestion charge had given its London bus business a fillip.

Overall revenues at the division rose to �493.6m from �473m last time, however rising costs - in particular petrol prices - meant profits slipped �8.7m to �40.7m.

The company is the UK's largest bus operator, running more than one in five local services and carrying 2.8 million passengers a day.