Member Info for rob295

"In 5 yrs first group share price has gone from 40p to 220p , company worth 1.2b"

Wasn't the First Group share price £6.64 at the close of 2007 - and didn't it then drop to 34p in 2020 (there was one smal stock split that isn't material but I can't see any others)? If so what we are looking for is a share with a big drop capable of a strong recovery? That said, I'd be happier with Mobico over First Group in any case as First Group has some serious nationalisation risk on the train side. They have tried open access, but there are limited routes opened up. That's why you'd almost think they'd be a good fit to buy National Express coach to diversify. I can't really see what they are going to do long term. I looked to invest but couldn't see the long-term story.

On the other hand FlixBus is really interesting, and genuinely problematic because it is basically a classic PE play in the coach space. It's goal is growth and it seems to have no requirements to earn a true profit. The latest data for the group is 2bn EUR revenues in 2023, with it's first decent adjusted EBITDA coming in that year at 104m EUR. That is roughly comparable revenue with ALSA and UK coach in 2023 but they probably had about 250m EUR EBITDA in 2023 (group was about 340m for the year) - ie 2.5 times the EBITDA for the same revenues. Given what they charge per ride I suspect the depreciation is additionally going to be a big overhang relative to revenue as you will get less recovery on a lower far on a proportional basis. According to PitchBook though, Flix bus has raised $2.19bn and AI says it is worth about $3bn (which feels about right as a PE play in that space). This is because it is an ESG PE play, and that adds many noughts. The result is FlixBus is worth $3bn while Mobico is worth £176m. In reality revenue growth rather than profitability is what matter to PE and I'd expect FlixBus to keep pushing revenues at the expense of profits - and that is a problematic competitor.

There are 2024 accounts for FlixBus UK and their UK business is actually much better on the surface with a £1.16m profit in 2024 on revenues of £31.69m. That is until you see the £1.4m gross profit vs £8.1m administrative expenses - which suggests a £6.7m loss without whatever Other Operating Income/Charges are. These turn out to be mostly positive License Payments from somewhere. I'm not sure what those License Payments are but it doesn't strike me as likely to be profitable on a real basis. That fits in with the general FlixBus position imo.

https://find-and-update.company-information.service.gov.uk/company/11941533/filing-history

Tbh if firepower isn't calling everyone a bunch of clowns you shouldn't be buying - it is an incredibly reliable indicator of a local low. Makes me nervous whenever he goes quiet as that presumably means we should be selling, but feels like we're back in the 30-40p range until some sort of positive update comes along. Can't see anyone buying to push it higher, because I can't really see the need to.

Still lots of work going on and planned in Germany. It is split into numbered sections of work and status seems to be (it doesn't change much)

2017 - 1.1 DONE

2019 - 4.0 DONE

2023 - 1.2, 1.3 DONE

2025 - 5B IN WORK

PREPARATION - 2.1, 3.0, 3.0a, 5A

PLANNING - 2.0, 3.1, 3.2, 3.2a, 3.3

https://www.rheinruhrexpress.de/uebersicht.html

To see impact you go here https://nationalexpress.de/de/ and 'Baumaßnahmen' gives you current work impact (over 3 pages) - you can also see a snapshot of staff shortage issues at the time of looking.

39p average here. Imo we're worth 85p once FY25 is through and should rise to £2 in the next years if things stay on the current track since you ask. Obviously someone might independently come up with different numbers based upon the same analysis, but that's the investing game. Obviously we could also pretend that it is still the 1990s and convince ourselves that the share price is the true value of a share, not just the price available on a given day - but that idea can be hard to believe if you have any level of skill at number crunching :).

@LorenzoLynch - Tbh in some of those respects I don't think the company does itself any favours. In three weeks the key summer period is over and where other companies would get out a quick financial update, last year the Q3 update was released in November with a very light market update that if accounting is on it should really be possible closer to quarter end. On top of that the accounts are often overly complex and hard to decipher without pulling up old accounts alongside, and the Q1s and Q3s extremely short of detail - some of that isn't their fault as it is just the regulations they have to follow, but others they could be much clearer about. What it does create is a weak sentiment and a heavy reliance on being able to navigate complex accounts with confidence - where any analysis will carry a high level of uncertainty and rely on immense patience and confidence even if correct. For me personally I felt the last CFO helped as she gave a lot more detail in the webinars, but I don't think any ramping or deramping has any major effect except on a few smaller holders, most who sell would sell anyway - it's a mugs game imo. Tbh I wouldn't object to a drop to 20p while we are down in the 20s though :).

Have just been through the report and webinar and was a little surprised by the overall tone of the webinar - felt a bit like performative self-flagellation. Main notes I have are :

ALSA :

- Revenue growth still very solid throughout H1 y-o-y

- H1 25 operating costs look flat vs H2 24 but uplift from H1 24 means no operating profit growth in H1

- But, if revenues ratio between H1+H2 for 24 can hold ALSA looks very solid for FY, allowing for another H2 uplift in operating costs

- Feels like if normal H2 activity in ALSA is achieved then adjusting operating profit target low point is hit

Germany :

- No increase in provisions, but total cash burn figure past, current and future is still a very big number

- PTA talks sound like they are in negotiations phase to try and recover as much of the big number of possible - which seems to be driving the optimism of getting something in the coming months

- Probably won't hear anything more about it till they reach an agreement or decide one can't be reached

UK :

- Apparently UK bus is doing better but can't see any evidence

- UK Coach is still officially a dog - but now ALSA's problem - sounds like costs will be the initial focus, but the presentation later in the year might add something more constructive - hopefully they don't lose focus on ALSA

North America :

- WeDriveU needs better contract risk control

- Operating profit should bounce back but not fully in H2 - hopefully FY25 can be more normal if they don't mess up again

Financials :

- Depreciation looks surprisingly high given the change in plant, property, equipment values

- Exceptionals look better going forwards so long as you ignore the hidden Germany cash burn being taken out of the provisions

Feels like it will be a rough couple of months ahead though. Might see some of the bigger holders unload reading into the info shared on the Chairman's chat with investors

I'm delighted to be back to my average after getting the mine built, the contracts done and the export sorted. That's what we all dream of as investors... breakeven. Just off for a quick cry. Hopefully Lithium will bounce back to settle in the 900s for a bit.

"The shorters seem to be viewing this company as existing to service its debt, and such a company is always one step away from insolvency. But look what the Company said in the last RNS: - It feels comfortable, plenty of room for contingencies - its no house of cards. Are they lying ??"

To me after the disposal of School Bus the debt looks very affordable - especially given the revenue growth so far in Q1. But I think in terms of sentiment any loss on disposal will be a massive negative. Just imagine two scenarios :

Scenario 1 - £40m net profit for FY25 after exceptionals with no loss on disposal. £20m profit in H1. Organic cash at zero due to paying historic capex as a one off

Scenario 2 - £0m net profit for FY25 after exceptionals including a £40m loss on disposal. £20m loss in H1 (with disposal hitting fully in H1). Organic cash at zero due to paying historic capex as a one off

Cheers... don't bother with broker recommendations myself, but obviously there are folks who cba to do analysis and just take what brokers say. I'm with you on broker forecasts being garbage - its the equivalent of a weather forecast that just tells you what happened yesterday.

If it can get over 1000 and stay there, we just need the export permit and all should be good. That level looks enough for the profits to feed back into building out phase two.

What have I missed? No news I can see but up 9%?

@JG68 - "Do you think its fair to say that although the figure is unknown, that it shouldn't really provide any nasty surprises?"

I don't think the gain/loss on its own is particularly material in any case as a lot is accounting detail and doesn't affect cash received etc - normally it would just get ignored as an accounting item and get no real attention. But on the negative side there are expected to be other exceptionals and given the high exceptionals in previous years this brings back the focus imo. My best guess is £90m of exceptionals for full FY25, which probably means broadly pre-tax breakeven - but with H1 results that can be firmed up as it is hard to estimate with no quarterly full accounts. The risk is definitely for more exceptionals and for that to get revised down - upwards revision seems extremely unlikely - for starters I assume no new Germany issues.

The dream is still 2026 with more like £30m in exceptionals (or nothing too far from this figure) which would all of a sudden show a very valuable business and a much bigger market cap (£200 adjusted op minus £100m net finance on less debt but higher hybrid costs and £30m exceptionals, is £70m pre-tax or a market cap of £350-700m on 5x to 10x) - then drop the debt costs over time and it becomes even better. And if not in 2026, then in 2027, or 2028, or 2029, and so on (after all the clean year has already been 2024 and 2025 without success). Might be a while yet even in the scenario where this one plays out, but its a good outcome it works out great - which leaves plenty of room for everyone to take both sides of the trade.

Net assets for School bus at 2024 year end were £364m (April 2025 RNS). Value from sale should be £273m plus a £52m asset on the books for the earn-out (which may be subject to future losses if not achieved, but the value gained seems fair as a market value imo). That gives £325m - £364m which is a £39m loss - which you would expect to vary based upon hedges and anything else being wound up.

Normally the final calculation is different from the estimate from what you have so I'd personally allow for a range of £10-70m in the loss in the accounts around that £40m figure. Predicting these is near impossible, but gives a ball park idea of where it might sit. Hedges you would hope are slightly favorable as £273m sits below the original £275-290m range expected and they said it was hedged against currency movements.

It doesn't like the 40s. Might be a struggle to get over that threshold

I may be wrong but I am of the belief that the hybrid doesn't affect the covenants, but does affect the credit rating - so the half would impact the credit rating only. My belief is that the credit rating will be affected by extension of the hybrid, but covenant debt will not. Main reason being net debt is about £1200m without the hybrid ,and so is covenant net debt. My belief is that the covenant ratio would be 4.0 with the hybrid converted to normal debt - next year it could be possible that covenant net debt as is drops towards 2.0 and that would drop it with the full hybrid towards 3.2 - moving the hybrid as debt into "you can pay it off" territory. Long-term they can definitely pay it off, but February 2026 would be too soon if all the above is correct. They could retain it partially.

I could never properly validate all these assumptions, but it adds up in terms of what they are doing. If half the hybrid is in the covenant ratio they have head room to pay it off at 2.5, as each half of the hybrid is 0.65.

I work on the basis of four more years of the hybrid at doubled interest costs and then pay off at the end as normal debt. The numbers work for this as an investment scenario and then anything better is upside.

"Abellio seems to have walked away in 2021"

They did walk away, but in quite a drastic way. Their whole German arm went bankrupt, because the Dutch government wouldn't cover the covid losses and their routes were either transferred to state ownership or re-tendered. The NRW was taken away from Abellio from the end of January 2021 as part of that bankruptcy, which triggered the re-tender to continue the service once their operations ceased.

"Problem for Mobico is, how long will it take and can we keep taking the pain!"

It looks like the costs are mostly in the past. The driver training program looks massive and the bulk of the infrastructure program will come to an end eventually. You could see more impairments, but from 26/27 forwards it does seem likely to be more positive. At every turn Mobico seem to have taken the hit to make the service work - which is largely the problem.

Walking away from the contract could reasonably get close to bankrupting, or would bankrupt, the company in penalties and legal costs. At the same time they carried what should be the peak of the costs in 2024 and cash generation was +£20m before acquisitions and +£70m before acquisitions and restructuring. Then they have NA money in the bank. German rail continuing won't bankrupt them. It is just a dip in a share price that will be forgotten in a few years except by those who bought in the 20s.

But on any legal maters the starting point is always how strong is your position - if it came down to it, Mobicos looks good, the PTAs looks weak. The only concern would be how good that contract is, as all the money expected back rides on that. But if good, everything except market sentiment says they will get a deal.

So to me if they should try and get the audited amounts in the provisions. If the contract is as they say it is those provisions in total are the impact of the issues.

Walking away from the German Rail contracts would be commercially naive in the extreme. So long as the contract is as explained, Mobico has an strong case to claim back all the losses that result from infrastructure works - and much of the losses from driver shortages. Mobico have been very clear about the large scale of their driver training program, and about doing all their best endeavors to deliver a reliable service. I don't think this isn't a random quote:

"We are doing everything we can to maintain reliable mobility – but the structural problems lie deeper."

The reality is that Mobico should be in a strong position and should have a high probability of payout at some point - either through agreement or through legal action. For me it does make sense to avoid legal action as that carries more cost and risk, but should be a stick to get an agreement plus a last resort if negotiations stop moving.

From the German report... discussing the Abellio Rail and Keolis exits :

"Experts believe that, in addition to poor business decisions, systemic problems are also responsible for the financial difficulties (for an overview, see Finke, 2023). According to the Federal Network Agency, due to the introduction of the Deutschlandticket, railway undertakings in regional rail transport generated a good two percent less revenue per passenger kilometre in 2023 than in 2019. The revenue risk is due to the increased" (Google translated hence it is a bit odd in places)

"More significant for the railway undertakings are the increased penalties levied against transport authorities in the event of delays, train cancellations, and diversions, as well as the costs of rail replacement services. These costs are caused by the massive increase in construction site activities at DB InfraGO AG (Monopoly Commission, 2023). It is therefore all the more important to carefully examine each case and investigate whether the market exit is the result of structural market failures or a market-driven development" (Google translate)

So why would you give that up by given up a contract and go from having a strong case for full repayment of the provisions, to having a questionable case for getting that money, plus legal and penalty costs associated with exiting a contract. Commercially that would be a terrible decision.

For reference Abellio went into bankruptcy and had the contracts stripped from it. Keolis had their contract stripped because they had insufficent drivers and took the German authority to court and got an out-of-court settlement. Actually the German report implies they might both have a case for compensation.

They could have paid a special dividend of £273m (45p/share) and only kept the earn out to pay down some of the debt. I'm glad they didn't though because we would be worth -8p right now.

Good2bhere - no one ever properly likes RIO. It always tends to sit at a good yield. A good buy for the patient, bad for the impatient