EAST Coast Main Line operator National Express yesterday warned profits would dip below expectations as revenues continued to slow.

The debt-laden firm, which remains at the centre of takeover speculation, warned annual pre-tax profits will be slightly below previous forecasts due to higher interest payments and rising costs in the US.

The group – which is still in talks with the Government over the future of its lossmaking £1.4bn East Coast Main Line franchise, and is looking at plans for a right issue to help ease its £1bn debt pile – said that despite the tough economic climate, its core UK and Spain operations continued to perform resiliently, although revenues for the quarter to September 30 fell one per cent.

Earlier in the year, it revealed it has slumped into the red during the first half of 2009, as it lost more than £20m on its East Coast Main Line franchise, which could be nationalised.

It saw pre-tax losses of £48.1m against profits of £52.4m a year earlier.

Yesterday’s statement from National Express came after the recent collapse of a planned £765m takeover by a consortium led by its largest shareholder, the Spanish Cosmen family, and in the wake of two other approaches for the firm.

South West Trains owner Stagecoach had been working with the consortium, but is now in talks with National Express about a separate merger proposal. Stagecoach also submitted a letter last Friday outlining aims for a deal that would see National Express take up to 40 per cent of the merged group, worth £1.7bn.

National Express has suffered from the £1.4bn agreement it made for the East Coast Main Line franchise, which was sealed in 2007 before the recession.

However, elsewhere in the group, the outlook seemed more positive yesterday, with National Express revealing revenues on its East Anglia franchise grew one per cent in the quarter, while London commuter service c2c delivered a solid performance amid increased Olympic site traffic.

In its statement yesterday, National Express concluded: “Trading conditions have remained difficult during the third quarter with revenue slowing in a challenging economic environment.”