Member Info for rob295

Every silver lining has a cloud, eh John?

Interestingly, First Group are now buying up the type of private hire coaches that Mobico just exited with fairly heavy losses https://www.route-one.net/news/wilfreda-beehive-joins-rapidly-growing-firstgroup-coach-business/

Looks part of their strategy to move away from rail

John33 - you can't just call in a loan because you feel like it. The detail of what can and can't be done is in the contracts https://www.mobicogroup.com/investors/debt-investors/

There has to be cause to call it in, and even then it would usually be contested if deemed against the agreement. The risk would be if a company makes a mistake, and leaves themselves open to be exposed. If done right you will have consulted advisors and not done this. There is some risk, but it shouldn't be exaggerated

Firpower1 - the reason that people put stock in the new management is that from an operational standpoint, the 'new management' is effectively the ALSA guys, who have now been given the keys to the entire kingdom. And those guys have double digit revenue growth, 14.0% net margins, revenue growth from £825m in 2019 to £1.47bn in 2025, geographic and new sector expansion success, and a strong bounce back from covid to point to. And as impressive as Paco seems, it is unlikely ALSA did that as a one man team. If I could buy ALSA on it's own at the value currently being assigned to it, I'd be exceptionally happy (even with it's fair share of the debt).

If you believe that can be replicated across the group you invest. In doing so, you are investing on a belief of good management - in the same way if you employ someone, you do so on a belief that they will be good (usually based upon track record). Sometimes you'll get that wrong, and some investors will make better judgement than others. If the belief is right then the Investor Chronicle article was right, investing is like buying a winning lottery ticket. If it is wrong, then with the debt levels it might get toasty.

The majority of investors will be more prudent than those here, and will wait for some level of certainty - ie indications in financial accounts that guarantee that belief. If these are strong enough, people will invest - but at a much higher price than that today - that is the price they pay for that certainty. This causes a level of share price drift in the near-term, but if you want a big win on the horses you can't just bet on the favorites. And most investors in a company like this, will balance risk across a portfolio - and will allow for some level of failure individually across investments. We have already seen a favorable reaction by the market to the 2025 results, but it seems it needs to be stronger to sustain a higher share price.

If they are indeed good management, it would be fair to expect to start to see a general trend of improvement through 2026-27, although we should allow for the fact that Paco has been CEO for 9 days, and UK coach part of ALSA for 3 months, so it will come progressively. But for now the belief among some of us is that we are seeing and hearing enough to be content. Fortunately there are many investments out there, many of which are more mature in their journey. These are available for investors who are uncomfortable carrying loss risk (which most are tbf).

They will definitely be looking at refinancing because of this :

"We have an ongoing project to look at managing our tax burden, as one of the problems we have is that our debt is sitting in the UK, most of our profits are in Spain, and therefore, we don’t have an offset for interest" - H2 call

The challenge will come from this snippet in the Q&A :

"On the covenant, it’s a little bit complicated because of the German settlement, because that’s going to influence the ratios very significantly. In fact, the accounting is quite complicated. In fact, even KPMG are getting technical advice as to how it’s treated.

It will be without Germany, it will be low, obviously, the covenant, the covenant ratio, but probably in the threes. You know, I’m probably getting stared at now, I’m not supposed to say this so much. It will be in the threes."

Q1 will probably be the heaviest cash burn quarter as far as I can tell - but if they are saying "by the year-end, it will be below 3" and "positive net cash in 2026", that would suggest to me that the German rail settlement will shift the calculation of the covenant by +0.3 (maybe even +0.5?) before any material changes in the net cash/debt position.

So there definitely is a lack of headroom, but with a slightly strange situation where with no convenants and helpful lenders it should be reasonably achievable to move debt to be more efficient - and to replace the hybrid with something less expensive.

With a high share price an equity raise would certainly be the most straight-forward fix, but obviously problematic.

That I think is a better assessment of the situation than a lot of other commentary - because it's not really about affordability. We know that because they are content to let the hybrid charges double. The issue is the conflict between running the business in an efficient manner, and in a manner that best satisfies the conventants (and that seems to be getting more complex as they make more progress towards restructuring the operational approach).

No more buying lads, I want my Bed & ISA to clear below 20p

Analysts don’t assume a German deal etc

“ Alongside other cash drains, such as the Washington, DC transit contract and a lossmaking German rail division that analysts refuse to treat as fixed until legally binding restructuring contracts are signed”

It’s a choice to do that. They could factor it in or have two scenarios. Imo the analysts are salty because they predicted high values in previous years and were massively wrong. As we know two wrongs make a right

John - I’m pretty sure the analysis assumes no Germany deal, no bus disposal and fairly weak performance. This is a reflection of the management not factoring in the Germany deal yet, not setting expectations for bus disposal and essentially setting flat growth expectations. You can agree on that or go your own way

Looks like some sort of funding deal between now and franchising is on it’s way to being put in place

https://www.gov.uk/cma-cases/referral-of-the-proposed-bus-network-support-grant-subsidy-scheme-by-west-midlands-combined-authority

Ghengis - It’s a test now of how good the ALSA team is. Maybe they have been lucky in Spain, maybe they can finesse UK and break new markets. I would be very surprised if they can’t do some level of gain vs the old team in UK though.

It’s impossible to know how much for sure, but it’s the new management that gives me confidence. I’ve pushed it as far as I dare in terms of holding size, and we’ll see soon enough how good they are.

It's a fairly long one, but search 'Mobico Group' on a search engine, click 'News', and you'll get through without the paywall coming up

Article from Investor's Chronicle :

https://www.investorschronicle.co.uk/content/18f16493-8e5b-44b0-be1f-0875d1cee110

It is a decent summary of the downside risk elements, and of the steps being taken to try and handle the debt - fundamentally a pretty good article, highlighting high-risk but high-reward, but beneath fairly sensationalist wording

But feels like pressure is going to be kept on the share price until that German deal is signed and delivered - so good news for bedding in the new financial year, and for firepower's general levels of happiness - on the flip side with nothing positive being taken into account, there will be a bit of a flip if the positives do materialise and force a change in the assumptions and it should stay pretty cheap to mop a few shares up. Might shake a few more investors out

There is an earn out of $70m on NASB based upon EBTIDA, revenue and cash-flow (in my head it is over 3 years but I'm not sure if that is true or just an assumption I made). But there was a contestment of the figures in the acquisition (with a $46m liability, to be determined in 2026, but it sounds like they expect some level of outgoing below $46m and above $0) and there is the insurance liability (£38m). So overall I think we would probably be happy to be net zero for NASB from the point of sale. Realistically there is as likely to be outflow as inflow (based upon the size of claims on each side).

Here is your daily reminder that fuel rises don’t directly matter. I think fuel is 4% of revenue and heavily hedged (it’s in the annual report). The debt is almost entirely fixed, so that won’t move yet. This isn’t like using your private car - the costs are people and capex. That is why Covid was so devastating. If the main cost was fuel, covid would have been fine

The primary issue is that employment costs will go up, and higher debt costs in a few years

Great news, but not exactly unexpected. Essentially we are now investing in ALSA

"Share price just rebounded , think laralara1 has just sold the house."

You might find it helps if you read the news

found this document on franchising (a 2024 cost assessment) :

https://governance.wmca.org.uk/documents/s21028/appendix%203%20-%20updated%20full%20franchising%20assessment.pdf

expectations on depots in the cost assessment were :

a****s green (135 vehicles) - £4.4m acquisition cost estimated in 2024 (sold for £5.6m at 2025 end)

birmingham central (202 vehicles) - nil, lease could hand over

cox street (162 vehicles) - nil, lease could hand over

pensett (97 vehicles) - nil, lease could hand over

perry barr (164 vehicles) - £15m acquisition cost estimated in 2024

walsall (189 vehicles) - had already been sold by national express by then (looks to me for about £10m from 2024 accounts)

west bromwich (189 vehicles) - not mentioned in 2024 (sold for £1.125m at 2025 end)

wolverhampton (169 vehicles) - £4.4m acquisition cost estimated in 2024

yardley wood (121 vehicles) - nil, lease could hand over

vehicles

600 leccies - nil, lease could hand over

895 diesels - to be acquired for £77m (£86k per vehicle vs £230k new on basis of age profile) - 20% cash expected in fy25/26 (best guess summer 2026), 60% one month ahead of go live, and 20% on final inspection (go live autumn 2027)

if the 2024 cost estimates hold and there is no payments made for the leases or right-of-use, that would be £22.1m in 2026 as cash (depots just sold plus 20% of diesel fee) and £81.0m in 2027 as cash (depots not sold plus 80% of diesel fee). that looks like the base case outcome on the wmca disposal, and the nearest i've seen in all the docs for some actual figures

the £77m figure is seemingly referenced again in the more recent docs (https://governance.wmca.org.uk/documents/s30800/report.pdf) with 'grant funding of £77m to enable acquisition of current fleet'

"You clown's need to watch Dragons Den"

All these years, and I never knew that the secret I'd been missing, was not watching Dragon's Den. Top stuff.

Would it be worth watching The Apprentice and The Office too?

Doesn’t really matter, same with hedging on prices. Some investing is company specific, others is just metric based. Anything quantitative only feeds in so much detail

I’m pretty sure the drop is based upon an assumption of higher interest rates going forward plus the market wide shift. Every company with high debt will be getting pushed down, but just increases that need for patience again