Bus and rail operator Stagecoach has wiped �575m off the value of its struggling American bus business, Coach USA, as it revealed a sharp fall in profits.

The company also unveiled plans to sell or close parts of its North American operation deemed "non-core" in an attempt to stem further losses.

Stagecoach reported a 21% fall in profits for the first half of the year and cut its dividend payment from 1.3p per share to 0.8p.

However, this was above analysts' forecasts and the company's shares jumped by more than 40% on the news.

US cuts

Coach USA is made up of more than 100 businesses, including tourist coaches, school buses and taxis.

But the business has been hit by the global economic slowdown and Stagecoach said it now plans to exit the less reliable divisions to make Coach USA "a smaller but more robust business".

"We will however continue to invest in and develop the strong and more stable businesses within the Coach USA portfolio, particularly in the North Eastern regions of the United States," said chairman Robert Speirs.

In the UK, Stagecoach runs bus services, operates South West Trains and has a 49% stake in Virgin Rail.

The company reported operating profits of �86.9m for the six months to 31 October, against �106.7m in the same period a year ago.

Revenue fell from �1.09bn to �1.07bn.

However, investors were relieved by the group's performance, and Stagecoach shares closed up 8.25p, or 44%, at 27p.

The shares topped 290p in 1998.