Kowloon Motor Bus (KMB) is predicting a tough business environment in the second half amid intense competition from other forms of public transport and rising costs caused by high oil prices. 'We expect the ridership of the group's franchised public bus business will continue to be adversely affected by the Kowloon-Canton Railway (KCR) West Rail in the second half of the year,' the company said. 'The scheduled opening of the Ma On Shan Extension and the Tsim Sha Tsui Extension of KCR East Rail by the end of 2004 will be bound to aggravate the adverse impact on our patronage.' And while total bus operating costs for the first six months of this year rose by only 0.11 per cent compared with last year, fuel costs increased 17.9 per cent as a result of rising oil prices. 'Oil prices are expected to stay at a relatively high level in the second half. We will continue to step up our cost-control measures to mitigate the adverse financial impact on the group as far as practicable,' the company said. The comments came after KMB posted 55 per cent growth in first-half net profit to $360.4 million, on the back of a turnover increase of more than $80 million and, more significantly, a dip in taxation of nearly $50 million despite seeing operating profit grow by more than 25 per cent. Although senior management could not be reached for comment last night, a spokeswoman said the improvement was due to differences in deferred tax. The company attributed the growth to the rebound from the impact of Sars on the local economy in the first half of last year, with both fare revenue and passenger numbers recording increases. The group's advertising revenue grew 0.8 per cent to $38.2 million.