PERTH-based transport group Stagecoach has demanded that the Government restart its troubled rail franchising process by the summer as its joint venture, Virgin Rail, hammers out the final details of an extension of the West Coast Main Line contract.

Stagecoach, whose chief executive is Sir Brian Souter, reported a 39% rise in first half pre-tax profit to £123.7 million on sales up 8.5% at £1.4 billion as its East Midlands franchise entered Government revenue protection to prevent it from subdued demand.

Fifteen rail franchise contracts are due to expire over the next six years, but the system has been thrown into disarray after the Government found "significant flaws" in the awarding of the West Coast franchise, initially given to FirstGroup in a 13-year deal.

The process has since been suspended and Eurostar chairman Richard Brown is leading an investigation into the franchising system while Centrica boss Sam Laidlaw looks into the West Coast problems.

Stagecoach finance director Martin Griffiths and Tim O'Toole, chief executive of FirstGroup, met Transport Secretary Patrick McLoughlin last week to outline operators' views.

Mr Paterson said: "We do not think the whole thing needs to be ripped up. We think there needs to be some changes as to how the Department for Transport governs the process."

Mr Brown is expected to report in December with a Government statement anticipated in January.

"We think by next summer it (the franchising process) could be restarted," Mr Paterson said.

Virgin's contract to run the West Coast Line from Scotland to London expires this weekend, but Mr Paterson said it hopes to sign an extended deal.

"We are a bit disappointed we do not have something to announce. We are close to agreement," he said. "Our key objective has always been to stay the incumbent operator until a new long-term franchise is ready to commence.

"The idea that we might change operator for a short period of time then potentially change it again doesn't make sense."

Virgin Rail is still waiting to be refunded the £15m it spent on bidding for the West Coast franchise.

Stagecoach's rail business reported a 6.6% rise in growth in the six months to October 31.

All three rail franchises it is involved in are now receiving state support after the economic downturn knocked revenues, although Stagecoach said that premium payments meant it contributed a net £140m to Government coffers over the six months.

Stagecoach's UK regional bus division reported an 8.3% year-on-year rise in sales but its London bus business posted revenues down 0.6%.

As debt-laden FirstGroup restructures, Stagecoach has bought several of its bus businesses and Mr Paterson said it could snap up more.

Stagecoach announced an interim dividend of 2.6p per share, an 8% rise on last year, to be paid on March 6.

The group said it is well placed to deliver growth in full year profit.

Its shares closed up 17.1p, or 5.9%, at a 52-week high of 308.7p.