SHARES in Aberdeen-based transport company FirstGroup accelerated 2.9% after it made another step towards reforming its struggling bus business and paying down debt with the sale of the bulk of its London bus operation.

FirstGroup runs bus services in cities including Glasgow and Aberdeen and has rail franchises including ScotRail.

It has come under pressure after ill-timed price rises and tough economic conditions hit revenues, particularly at its bus operations in northern England and Scotland, and investors fretted about its £2 billion debt load.

Chief executive Tim O'Toole said: "Although there remains significant work still to be done, we are satisfied with the progress made so far. While remaining cautious in respect of continued challenging economic conditions, we are confident the actions we are taking will position the business to generate sustainable growth and improved returns."

FirstGroup is selling eight London bus depots and their associated bus routes for £80 million.

Five are going to existing London bus operator Metroline and three to Australia's Transit Systems Group.

This leaves it with a single depot in the capital, which analysts expect it to sell as well.

FirstGroup said its UK bus business was expected to record a 2.4% rise in like-for-like passenger revenues for the 12 months to the end of March, with the operating margin anticipated to be around 8%.

"We are working through our comprehensive plan to recover performance and equip our UK bus business to achieve sustainable revenue and patronage growth, and are seeing early positive signs in some of our markets."

Performance is stronger in its rail operation, where like-for-like revenue is due to increase by 7.4%.

The company is in the process of negotiating the terms of extensions to First Capital Connect, Great Western and TransPennine Express franchises.

This follows the revamping of the franchising system after FirstGroup was stripped of the West Coast Main Line franchise it was awarded in the summer when failings were discovered in the bidding process.

There remain concerns in the City that FirstGroup will cut its dividend and possibly raise money from investors in order to strengthen its balance sheet.

FirstGroup shares closed up 5.8p at 206.7p.