Transport group Stagecoach should have a stronger second half as its East Midlands rail unit returns to profitability, after a loss at the franchise weighed on first-half profit.

The bus and rail operator said on Wednesday its British rail business swung to a first-half loss following weak trading at the East Midlands franchise, leading to an 18 percent drop in group profit.

Pretax profit in the six months to October fell to 88.7 million pounds, compared with a forecast for 96 million in a Thomson Reuters I/B/E/S forecast and in line with a poll supplied by the company.

UK Rail swung to an operating loss of 6.9 million pounds from a profit of 22.9 million a year ago.

This is old news and should not impact sentiment, said analysts at Deutsche Bank. The loss has been driven by rising DfT premiums at East Midlands but the franchise is now in revenue support and we expect small profits going forwards.

The focus ought to be on excellent regional UK Bus performance where commercial revenues are up 6.5 percent.

Shares in the Scotland-based company were up 2.2 percent at 254 pence at 8:50 a.m.

(Editing by Dan Lalor)