Transport group Stagecoach reported a bigger-than-expected drop in first-half profit hurt by losses at its East Midlands rail franchise.

The bus and rail operator said pretax profit fell 18 percent to 88.7 million pounds, coming in below a Thomson Reuters I/B/E/S forecast of about 96 million pounds.

Sales in the six months to end-October rose 14 percent to 1.29 billion pounds, also below estimates of 1.37 billion pounds.

The results were hurt by a weak performance at the company's UK Rail division, which swung to an operating loss of 6.9 million pounds from a profit of 22.9 million pounds last year.

This was due to losses incurred at East Midlands Trains where revenue remains below the level forecast when the contract was originally awarded, Stagecoach said on Wednesday.

However, the company expects a stronger second-half, with East Midlands seen returning to profitability.

Shares in the Scotland-based company closed at 248.6 pence on Tuesday, valuing the business at about 1.4 billion pounds.

(Reporting by Adveith Nair)