The bus and rail group Stagecoach yesterday announced the shock departure of its chief executive, Keith Cochrane, and warned that it may be forced to sell its troubled North America business Coach USA.
Mr Cochrane's resignation was accompanied by a one-third cut in the dividend and a fresh profits warning, which wiped 27 per cent off the Stagecoach share price.
Brian Souter, the founder and chairman of Stagecoach, said he was "deeply saddened" at the departure of Mr Cochrane, which has been prompted by a further deterioration in the performance of Coach USA in the first two months of the current financial year.
Mr Cochrane resigned at a board meeting last Friday after refusing to lead a wide-ranging review of the American company. He was on a one-year contract and is in line for a pay-off of at least £500,000.
Mr Souter has agreed to become acting chief executive until a full-time replacement is found while the job of chairman has gone temporarily to the group's senior independent director, Robert Speirs. Mr Souter said the review would look at all options including the sale of all or parts of Coach USA, which Stagecoach bought for £1.2bn three years ago.
The American business has been a running sore for Stagecoach since it was acquired in 1999. Last year Stagecoach sacked Coach USA's chief executive, Randy West, axed 550 staff including 40 per cent of its head office and took 330 buses out of service. It also announced a £375m write-down in the value of the business. At the time, Mr Cochrane pledged that shareholders would begin to see an improvement in the performance of the business this year but that has failed to materialise. His fate appears to have been sealed by a further deterioration in Coach USA's performance in May and June when revenues were down by 8 per cent. Stagecoach said it expected operating profits from the division to be flat this year.
Coach USA's operating profits last year fell by 39 per cent to £41.2m on turnover down slightly at £682m.
Mr Souter said Coach USA had been hit badly by 11 September, the general American economic downturn and the decline in leisure spending. But this was not enough to explain the deterioration in performance in recent weeks particularly in its charter, tour, airport, taxi and sightsee- ing businesses.
Mr Souter said that "everything is up for grabs" in the review. However, he added: "My intuition is that it is unlikely we will come out of North America completely because it is not a good time now to sell the business."
The decline in Coach USA's performance contributed to a 13 per cent fall in group profits to £107m in the year to April 30. The final dividend has been cut from 2.5p to 1.3p, giving a total for the year of 2.6p, down from 3.8p.