Birmingham-based transport group National Express accelerated to a £160.5 million profit thanks to growth in its UK bus and rail businesses.

The company, which operates bus services across the West Midlands, said today its recovery meant it would be resuming dividend payouts to shareholders after suspending them in 2009.

The 38 per cent rise in pre tax profits for 2010 came despite a 22 per cent fall in overall revenue, to £2.13 billion, because profit margins nearly doubled.

National Express chief executive Dean Finch, who took over the then-struggling group 12 months ago, said today: “This is a renewed company.

“Our much improved financial performance provides a platform to drive further growth, continue targeted investment and restore a dividend.

“With a clear focus on our strategy we are confident in the year ahead.”

But he warned of “tough economic and fiscal conditions” and said increased fuel duty and cuts in concessionary fares funded by the Government would cost it £10 million a year.

The group, based in Mill Lane, Digbeth, employs around 5,500 people across the West Midlands, most of them working for its National Express West Midlands bus service — part of its UK Bus arm.

As part of a turnaround plan at UK Bus, National Express announced inflation-busting fare increases last year. But Mr Finch said UK Bus had now turned “from one of the worst performing operations in the industry to one of the best performing within the space of 12 months.”

Profit had increased 48 per cent to £28.3m, and the group was now investing in 600 new buses over the next five years.

National Express also cut costs in its bus arm, reducing the number of depots, restructuring pay grades and improving efficiency.

The company has also seen a turnaround in its rail business and has now won extensions to its East Anglia and c2c franchises.

National Express shares opened at 249.5p today, valuing the business at £1.27 billion.