Transport group Go-Ahead today hailed an “exceptional” year for its bus business as it took another step on the road to profits of £100million.

The company, which has a UK-wide fleet of 4,600 vehicles and is the largest operator in London with a 24% market share, said record passenger levels helped bus profits improve 11% to £78.2m in the year to June 29.

This offset weakness in its rail division, which accounts for nearly a third of all passenger rail journeys through its Govia joint venture, operator of the Southeastern, London Midland and Southern franchises.

While revenues have risen, the rail arm has been affected by assumptions set out in franchise bids that no longer reflect economic conditions.

This has meant payments to the Government in the year increased by £85.9m, while its rail profits fell by £15.7m to £24.3m.

Overall, Go-Ahead said an 8% decline in group pre-tax profits to £86.2m was slightly ahead of management expectations.

Chief executive David Brown said the bus division had traded “exceptionally well” as it looks to meet a target set last year to grow bus profits from £70 million to £100 million by 2015/16.

He said: “Increasing our profits ensures that we can continue to invest in the business and improve service quality for our passengers.”

Go-Ahead spent £45.3m on 251 new buses in the year in a move which has improved customer satisfaction and driven growth in passenger numbers.

It has also seen strong take up of its smartcard, “the key”, with more than 400,000 cards now in issue and mobile-ticketing also helping to grow the business.

Newcastle-based Go-Ahead carries nearly two million passengers every day, focusing on busy commuter markets in the South and South East as well as Oxford, East Anglia and North East England.

Its businesses in East Anglia, following a acquisition spree in the first half of 2012, include Hedingham and District, based in Colchester, H C Chambers & Son based in Bures and Anglian Bus, based in Beccles.

Rail profitability is expected to remain under pressure in the new financial year but Mr Brown said there were significant opportunities available to the group as it bids for the Thameslink and Crossrail franchises in London.

He added: “The UK railway system is in good health and makes a net contribution to the Government. Franchising works for both the customer and the taxpayer.”