Member Info for rob295

Personally I do think its good to get all views, however heavily repeated day in day out. I find you learn more from negative posts than positive ones so I think its all pretty useful. The idea of 20p next week probably more accurately reflects the near term reality than 45p next week and tracking that mood helps assess decisions as well as helping feed into your investment approach more generally. Opposition to Jorge Cosmen probably falls into the same category - I can't see why you wouldn't want his input though as there is experience there that the CEO is entirely free to ignore - so I think the iis reflect the same mood. Him being there or not has no change on them having a big stake (and probably enough support from other investors to block a takeover - mostly because they wouldn't need that much support). Only thing I can think of there is if he had a role in ditching the CEO but I can't see everyone showing love for the CEO at the expense of Jorge.

But in the current market the prices go a lot lower than you would expect. The negativity isn't deramping in my mind - its a fair reflection of the mood, and you see the same repeat more mildly probably in the majority view. It's just the market these days. From an investment perspective you hope its just noise driven by the share price and people's position on paper - but sometimes it can be that you missed something. Ultimately its on every investor to do their own analysis and to make sure they haven't missed anything.

"you get cash generation in 2024 on an adjusted basis of £160m" - this is wrong. I meant to put £106m. Everything else unchanged, just typed the wrong number and its a lot higher than it should be as obviously 6+46=106 not 160. Unfortunately I can't edit the post

I do think the trading out scenario is feasible. I've said this before, but the cash movement was negative £88m but that shifts up to negative £26m when you adjust for movements in borrowings. It's not great to have that drop but adjust for acquisitions and restructuring costs and the disappointing year that was 2024 is a positive cash flow in of £60m. The auditors report also goes through in detail what they will do about cash management under different scenarios.

What I haven't said before and what you only really get a feel for if you really go through the annual report in real detail is a bit more of a feel around Germany because in the auditors report they set out how they have gone to town on calculating the onerous provisions for German rail (including talking to the PTAs and other rail operators etc to test the assumptions - and unfortunately having to do corrections due to errors in the models). But its interesting because the provisions should be (as far as I can tell) the impact of the industry wide losses on Mobico which (as far as I can see) is exactly what should be made whole by the PTAs under the contract - ie if the total provision amounts to £250m between book value and allocated provisions in each year, I can't see why there isn't contractually an effective £250m IOU to Mobico. You'll get a better feel for why I think that if you just read the auditors section of the report I think. Anything else (as far as I can see) would seem to be breach of contract or misleading reporting on the terms of the contract in the report - its better to not have losses but if you are going to have them ones that need to be made whole at a later date are the perfect sort of losses.

The impact of that is key, because if you add back in the £45.7m cash impact from the German onerous provision, you get cash generation in 2024 on an adjusted basis of £160m and you rapidly realise that the Adjusted Operating Profit of £185m might actually be a pretty genuine number - the auditors report does seem to be challenging everything that is adjusted to ensure it is 100% genuine. That is of course pre-debt costs which is part of the issue, but maybe not quite bankrupcy level figures.

I stil doubt new holders will buy in right now and I'm hoping a for a drop to 25p (I'm pretty confident sharing occasional analysis doesn't actually have any impact stopping this as the volumes traded are massive) - so great work guys on the deramping - we'll get that 25p in the end! Also still cannot see any chance of 40p though near-term as none of this will feed through very fast and that means it won't affect any market pricing - German rail discussions feel like they will take as long as - if not longer than - the NA sale process in my mind.

But apologies for the bambosaling figures - I'm sure we'll get to 25p soon enough.

GenghisInvestor - some of the cash goes directly to paying off debt. Other debt should transfer with NA business (although this looks to be a very small amount) so some of the deduction in cash is in the 83.5 - hence a lower figure of 220. What transfers with NA business isn't that clear - along with the details of the coventants etc. There's quite a lot of extra info that could be in the accounts that would make life a million times easier and possibly help the share price - ie exact coventant breakdowns and exact info of what transfers with NA business.

If it's the full hybrid then it clearly cannot be paid off in February (which is what I have always assumed). Hence the curiosity about the 50% as in my mind they should just pay it off and it would work in that case so long as earnings hold their current growth.

If its half the hybrid the maths is fine IF they hit about 350m EBTIDA (which is roughly in line with Q1 growth (bit under)). 350 * 3.5 = 1225m max net debt. End of 2024 Net Debt was £1,193.36m. Minus 225 from NA sale minus 83.5m of debt from NA division debt clearing out you get £884.86m. Plus half the hybrid = 1134.86. Which implies headroom of £90m of debt or £25m of EBTIDA. Slightly tight but you'd probably know by February how it was all looking. Assuming no cash generation in 2025. If they could generate some cash by the end of 2026 it would look comfortable if they can also achieve some level or reasonable EBITDA growth.

Thanks for the link on the Fitch downgrade John.

Does anyone know if the x2.8 covenant includes 50% of the hybrid? If so that +0.7x net leverage means without the hybrid is x3.5 EBTIDA covenant coverage (ie exactly on the limit) at that 3% revenue growth. Which would seem to imply that if Q1 growth holds for 2025 they should just about have the headroom to ditch the hybrid and refinance as debt and/or partially pay it off with NA cash even without any organic cash increase (something they would have a better view on in February)? Pushes the limits a bit - but nothing else to refinance for a few years the ratings don't matter too much so long as long as net debt goes down by the next big refinancing?

It feels like Li probably should go up back to around 1000 over the next 2 years. But it also feels like it could end up around 650 (or lower) for the same time period. Really it makes this share a trade on the Li price. If you're smart you just don't bet the farm on an investment like this with clear risks - equally it might be a healthy profit if the Li price moves in line with the EV rollout (which feels pretty inevitable now given the price of EVs vs equivalent petrol and strong market share for EVs or hybrids). I think you have to allow for both outcomes potentially happening but 20s isn't a bad price and not have too many like this in your portfolio

The share price is definitely going down in line with the lithium price, but presumably it would go up with it too. I would presume it is best to produce at a loss and keep everything as you'll have sunk costs but do need some money over the next years to fund the next phases and to make it all worthwhile.

There's a fairly balanced Reuters article on the Li price here https://www.reuters.com/markets/commodities/rio-tinto-bets-lithium-will-retain-its-battery-metal-crown-andy-home-2025-06-03/

The volume of trading is at the upper end of the range since the start of May but not massively so and its way below the volumes during the late April sell off. So not sure if this is heavy buying or if it is just a case of the level of sellers at these levels starting to drop off, meaning that to buy you have to buy a bit higher. If this was being driving up by heavy buying you'd expect more of a local volume spike. To keep the price flat the volume of buying needs to pull back a bit.

IMO Cosmens are not interested in a takeover - they have never shown any interest in a takeover. To me they are just adding to their stake because given their valuation it makes sense to do so. If they wanted a takeover they could have bought up more by now and been done with it as the volumes have been high enough - instead this is light buying without shifting the price. For those wanting a takeover at 60p, I'd expect the Cosmens to block it below much higher values so that seems unlikely to me as they've indicated they wouldn't want a takeover at levels above 60p already. They are really just another long-term holder adding shares at these levels in my eyes. I would be surprised if they agonised too much about the share price or the net book based upon intangible assets. I would however be surprised if they are happy with UK business and the fact that the non-ALSA business doesn't really pull its weight. But I have never got the impression they are in it for a quick buck, more a long-term believe in the value opportunity.

First Group should surely be interested in the UK business. Heavily reliant on DfT contracts (£3.6bn) of £3.7bn revenue (£233.2m open access and additional services revenue). If you were the sort of person who has nothing better to do but spend their days posting angry negative comments on share boards you would have a gold mine of things to say about First Group with nationalisation risk. But they are debt free and UK bus and coach would probably slot right into their business aided by their fairly favourable market valuation (given much of their business is set to be nationalised). Open access trains, coaches and UK bus in whatever form that is left in probably gives them enough of a business to crack on with and our UK assets probably would hold more value for them through the diversification it would give.

Schmoky - I don't see that there can be much solvency risk. The cash flows look okay underneath and if ALSA keeps going then - 2025 aside with +£60m in deferred capex - the cash will come. I think they are okay up to £120m in interest payments before you start to worry and the debt looks set to come down from 2026 onwards. The one thing about the solvency / debt that may be an issue is the hybrid which is the big thing in the near term to be dealt with.

It looks like they are on track to drop below the 3.5 gearing ratio including the hybrid but only in 2026/2027 ie after the 5 year point this November. At year end I'd expect 2.5 gearing ratio without the hybrid or 4.0 with (£356m EBTIDA, £900m debt or £1410m plus hybrid, £196m adjusted operating profit (£7m UK, -£14m Germany, £205m ALSA, £32m WeDriveU, -£34m group items). (900/356=2.5, 1410/356 = 4.0). The debt figures were a bit tricky as some debt goes with School Bus and some doesn't so allow for a bit of error there (but not enough to completely change the story).

If ALSA etc can push it to £220m in Adjusted OP in 2026 that's £380m EBITDA and probably enough cash generation in 2026 to get it just under the 3.5x level by year end - not enough to have headroom to remove the hybrid but that would probably follow in 2027 in that scenario. But ALSA is key as Mobico Operating Profit = ALSA Operating Profit (with WeDriveU, UK, Germany and core costs essentially cancelling).

So if ALSA doesn't drop off (which is pretty vital and a potential solvency risk) I can't really see any other solvency risk. There is a short term hybrid issue to add to all the other short term issues though. To refinance the hybrid as bonds in November would break the covenants.

Polishcap - figures suggest to me that they will be cashflow neutral in 2025 - mostly because of the £60m one-off late payment of capex owed (my numbers say it should be around £60m prior to making that adjustment). Then in subsequent years if the business holds steady, the £60m comes back in and grows partly with the business and partly as you start chipping away a bit at the interest payments (cash from the NA sale helps a bit) - although fluctuating depending on capex (more growth will mean lower cash to fund buses etc). So 2025 probably isn't going to be that good for cash but in 2026 it looks like a 30-40% cash return on current market cap with that figure growing. Net profit looks like it will run slightly above cash flow from 2026 due to provisions having already absorbed some German losses. Net profit 2025 doesn't care about the deferred capex so that is more favourable for 2025.

Can't see much of a rise off the results. Nice solid results. WeDriveU has a solid return on capital from all the contracts disclosed so that and ALSA are both positive but were both positive. I can't see them selling WeDriveU as the target should be areas where the business can grow without big capital wherever in the world they might be.

We can probably copy paste the update for Germany and UK into the next few quarters already.

So good news is we know largely how the year should look - just need some detail in the H1 to flesh that out. Only real scenarios are Germany resolved or Germany unresolved imo.

Look forward to the drop to 10p on continued underlying performance in key business segments whilst retaining hope for solving the most problematic in Germany.

Although they said there was a meeting and update, they also said though that these things generally take years (I think referencing some similar events in Alsa) and the vibe I got was that they were expecting to get somewhere eventually but were expecting it to be long and drawn out. So with the positive cap on there are reasons why there should be a resolution and they seem confident there will be a resolution, with the negative cap on the cash exodus continues in the meantime which continues to drive up the debt position offsetting any inflows from elsewhere which is expensive in terms of interest payments but also a drag on share price and ability to invest.

Can't fit it in one with the pasted content but the main issue is that they seem to imply that the German rail resolution will take an age. So might be a very, very long time before that. So 30-40p range for prolonged future seems likely. Business performance shouldn't move anything up, with that delayed capex net debt won't move as it otherwise would. Germany will definitely continue to bleed cash until they sort a resolution based upon the scale of engineering. German resolution, FY25 or FY26 seem the next things that can really change the share price big picture.

The move up will be from Germany if they can agree a resolution. Impact will definitely be big in 2025. From here you get an overview of the projects :

https://db-engineering-consulting.com/en/projects/the-rhein-ruhr-express-rrx-project-in-north-rhine-westphalia-germany/

"The line between Cologne-Mülheim and Düsseldorf-Benrath will be upgraded four tracks along the entire route. From Düsseldorf-Benrath to Düsseldorf Central Station, and from Düsseldorf Airport to Duisburg, the line will even be expanded to six tracks. In Mülheim, Essen and Bochum, no additional tracks are required due to adjustments to the infrastructure. The expansion will enable freight trains that previously ran on long distance tracks to run on S-Bahn tracks in the future. In the six-track sections, separate track pairs are even being built for S-Bahn, long distance and regional transport. Numerous new switch connections will provide the necessary flexibility in operations.

In addition, a number of construction measures in the stations along the line are also planned, including building necessary additional platforms at Düsseldorf Central Station and Düsseldorf Airport. Active and passive noise protection measures, such as 23 km of noise barriers, are also planned. 37 railway overpasses have to be newly built, modernized or expanded to include additional tracks. The entire rail route equipment must also be modified to meet the new requirements. This includes the construction of two integrated subcenters of the electronic interlocking system in Düsseldorf with a control area of 43 km and over 2000 controlled elements."

And an out of date summary here https://en.wikipedia.org/wiki/Rhein_Ruhr_Express (the bits not started seem to be being worked on in 2025). That gives an example of the impact : (29th Feb to 25th April 2025)

"Trains on line RE 1 (RRX, NationalExpress) will be diverted between Dortmund Hbf and Essen Hbf with an additional stop in Herne. There will be stop cancellations in Bochum Hbf and Wattenscheid. Between Bochum Hbf and Herne, passengers can use the U 35 underground line. In addition, there will be stop cancellations between Dortmund Hbf and Hamm (Westf) Hbf: Here, only the stop in Kamen will be served on the way. Passengers can use the RE 3 line for the other stops during the day; in the evening hours, replacement buses will run between Hamm (Westf) Hbf and Dortmund Hbf.

The trains of line RE 6 (RRX, NationalExpress) are cancelled between Essen Hbf and Dortmund Hbf: The trains from Düsseldorf end in Essen Hbf (without stopping at Mülheim (Ruhr) Hbf); the trains from Minden end in Dortmund Hbf.

On line RE 11 (RRX, NationalExpress), the stops between Duisburg Hbf and Dortmund Hbf will be cancelled. The trains from Düsseldorf end in Oberhausen Hbf; the trains from Kassel-Wilhelmshöhe end in Dortmund Hbf."

Going through the detail of the annual report now and the cash levels will adjust for a £41m hit on Restructing and Other Costs (although it never seems to full come back in future years) and a £9m cost in 2024 for repayment of a covid scheme. But on the negative side the cash impact of adjusting items for German rail is £46m which is an absolute killer. Feels to me like we should run in future years at around £100m cash generation - really for that Germany needs to not get worse but probably doesn't need to get much better.

It desperately needs a full clean year but the underlying numbers aren't terrible.

I think I'm an outlier these days, but I'm still happy and have added at these levels. Pre-acquisitions, debt, foreign exchange, share buys/sells, change in borrowings I get +£57.6m for 2023, +£32.1m for 2024. Biggest changes 2023 to 2024 were +£40m cash from operations, -£54m purchase of plant, property, equipment, - £23m interest costs. For me at x10 and conversion into per share that suggests 94p value on 2023 results, 52p value on 2024 results.

But where I'm the big outlier is on being pretty happy with the sale in the US. Ideally we get £50-100m cash on the same basis and hopefully cutting back a bit on US capex, getting some debt paid off and a drop away on restructuring and disposal costs will just buy that extra headroom. I still buy that you get that cash up and at £75m that is £1.20 and at £100m you get up to £1.60 valuation.

Key is still debt down at all costs imo (whatever the statuary impact and however that looks) because actually with zero debt costs 2024 was a good year even with Germany & UK being basically pointless.

Ballantyne - key will be the cash position and movements. The statuary profit will be a bomb zone but if the cash is rising nicely that is okay for long-term holders, particularly if cash growth to market cap is a low multiple. Not sure it will help the share price though as that will focus on statuary I expect. Share price I suspect might have to wait for the 2025 results on April 30th 2026.