The main bus company for Scotland’s capital city continues to make good profits for major shareholder Edinburgh Council, while the new Edinburgh Trams service has made a stronger start than expected, according to annual accounts.

A record 118 million journeys were taken on Lothian Buses in 2014, increasing revenue by £3 million to £135.3 million and helping produce a dividend for the firm’s public sector owners of £5.5 million.

Lothian Buses said it generated profit after tax of £8.24 million for 2014, just below the £8.58 million it made in 2103. The £5.5 million dividend for its local authority shareholders — mainly Edinburgh Council — compared to £3.3 million the previous year.

The bus company paid out about £77.3 million in wages and pension costs in 2104 to its 2,175 employees — making the average salary and benefits package roughly £35,000.

Lothian Buses has invested heavily in its fleet and has an average bus age of just 4.9 years — one of the youngest in the country.

“Lothian Buses, and now Edinburgh Trams too, sit at the heart of life in Edinburgh, moving people to where they need to be in their millions each week, and driving our economy,” said councillor Lesley Hinds, chair of Transport for Edinburgh.

“Innovations and improvements have been introduced such as new websites, customer mobile apps and refurbished Travelshops,” said Hinds. Both Lothian Buses and Edinburgh Trams have free WiFi.

The new Edinburgh Trams service is on schedule to exceed expectations — 4.92 million passengers travelled on the trams in their first full year of service, about 370,000 ahead of target.

Edinburgh Trams currently operates one line between the east end of the city centre and the fast-expanding Edinburgh Airport on the western edge of the capital, but the system could be extended beyond the city centre to Leith on Edinburgh’s northern edge in future.

Edinburgh Council has agreed a budget to support the initial years of the new tram service. This budget was expected to be £600,000 in 2014 but was only £450,000 due to the trams’ stronger-than-expected performance.

The new tram service generated £6.4 million of revenue in its first seven months of operation in 2014, around 3% higher than projected.

“In the financial year 2014, the service carried nearly three million passengers and during the full first year of service 4.92 million travelled on the trams, around 370,000 ahead of the target set before launch,” said Edinburgh Trams.

The trams business has been shortlisted in the Rail Operator of the Year category at the 2015 National Transport Awards.