Stagecoach, the bus and rail group, tumbled into the red after taking a £575 million hit to reflect the dramatic downturn at its Coach USA arm.

Chief executive Brian Souter said the group would be closing or selling a host of its North American operations as it reshaped the business.

Stagecoach wants to concentrate on scheduled and commuter bus services in the United States and get out of the volatile tour and charter markets.

The group warned two months ago its US coach business was still suffering from the slide in the American economy and September 11.

It bought Coach USA in 1999 for £1.2 billion but is now writing-down the value of the division by £575 million.

The charge means Stagecoach ran up pre-tax losses of £524.1 million in the six months to October 31, against profits of £35.5 million last year.

Stagecoach, which runs bus services across Sussex, warned little over a month ago of a further slump at its US arm.

The half-year results showed operating profits at the US division fell to £15.8 million in the six-month period from £35.1 million last year.

Stagecoach insisted that despite its problems, it had £250 million of available cash and was still operating within all its banking covenants.

Before one-off charges, underlying group pre-tax profits in the half-year were flat at £75.2 million.

Group turnover dipped to £1.07 billion from £1.09 billion but Stagecoach said there was good revenue growth in its UK bus operations.

Passenger volumes on South West Trains had nudged ahead by 0.6 per cent, despite lower peak sales because of the fall in employment levels in London. Stagecoach's 49 per cent stake in Virgin Rail generated revenues of £140.6 million, up 11 per cent on a year ago.