Surprise sale of Stagecoach's Hong Kong arm

The company, two-thirds of the way through selling off chunks of its Coach USA subsidiary, said the decision was not triggered by the SARS outbreak, which has hit revenues during the past three months.

Stagecoach finance director Martin Griffiths cited longer-term considerations for the 176 million sale to Chow Tai Fook Enterprises, the controlling shareholder of New World Development, which operates a rival service.

Griffiths said: "We hadn’t specified that it was for sale but we had been evaluating options for the business over a period of time."

He said the company, Hong Kong’s second largest franchise operator, had enjoyed good returns on the asset since it was bought for 276m four years ago. But investment in a new fleet and new depot would be required before its two franchises came up for renewal in 2006 and 2013.

Hong Kong authorities have also been pressing bus operators to trim fares and install environmentally-friendly measure such as catalytic converters on buses.

But analysts said the disposal raised exactly the same question about Stagecoach’s remaining businesses. Shares in the company fell as much as 7.6 per cent on the news, but closed the day down 4.6 per cent, or 2.75p, at 56.75p.

Dominic Edridge, a transport analyst at Commerzbank, said: "I think there might be a little concern about where growth is going to come from."

Citybus has 1,200 buses across 113 routes on Hong Kong Island and 22 services to the airport. It made an operating profit before goodwill amortisation of 19m in the year to April on turnover of 133m, the lion’s share of its overseas bus division. The sale will net Stagecoach 132m after third-party debt.

Year-on-year revenues at Citybus were down 25 per cent in April and 20 per cent in May. Stagecoach’s sole remaining interest in Asia is a 32 per cent stake in Road King, a builder of toll roads in China, which the company has declared is non-core.