Coach USA up for sale after write-down drives Stagecoach into £524m loss

Stagecoach, the UK bus and rail group, yesterday crashed to a £524m loss as it took a massive write-down in the value of its Coach USA division and announced plans to sell large parts of the ailing business.

The widely expected write-off at Coach USA was accompanied by a warning that the group's core UK rail franchise, South West Trains, has been badly hit by the slowdown in the London jobs market, particularly among City workers.

Stagecoach is taking a further £575m write-down in the value of Coach USA, which was bought for £1.2bn three and a half years ago. The business is now valued in Stagecoach's books at £378m, meaning that nearly 70 per cent of the original investment has been written off.

Despite the heavy write-down, a 19 per cent decline in underlying operating profits to £87m for the six months to the end of October and a 38 per cent dividend cut, Stagecoach shares rallied strongly on relief that it had drawn a line under its ill-fated US expansion. The shares rose 44 per cent to 27p, valuing Stagecoach at £357m.

Stagecoach also quashed rumours that its founder and chief executive, Brian Souter, was lining up a bid to take the company private again. Mr Souter, who took over the reins at Stagecoach after the ousting of Keith Cochrane in July, has decided to remain as chief executive on a permanent basis.

The company intends to dispose of at least 50 per cent of Coach USA and possibly as much as 75 per cent by selling its charter, taxi and leisure-related divisions and concentrating instead on its scheduled and contract bus operations, which are based mainly in the north-east of America.

Bob Speirs, the Stagecoach chairman, defended the original purchase of Coach USA, saying the only regrets he had were with the benefit of hindsight. "When we bought Coach USA the market was completely different," he said. "It appeared to be the right business at the right price. But what happened is that America went into recession and stayed there."

Mr Speirs confirmed that Mr Souter had been approached recently by a private equity group to sound him out about a takeover of Stagecoach. But he said: "The board never received any offer and Brian has assured me that he has no intention of making an offer to take the company private. That is the end of the story."

Underlying profits at South West Trains, the country's biggest commuter network, fell by almost a half to £11.7m, excluding a one-off compensation payment of £7.2m because of problems with a fleet of new Class 458 trains.

Martin Griffiths, the finance director, said that SWT, which carries 350,000 passengers a day and 142 million a year, had seen a 1.9 per cent decline in peak period revenues because of the decline in central London employment.

Stagecoach has agreed a new four-year franchise for SWT under which subsidy payments are expected to rise substantially to help pay for the new £1.5bn fleet of trains being introduced.