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The remarks on positive lead indicators probably made the market take the update well. If HY falls short then it could struggle still. Obviously this sector will recover and do well, it just could still get worse before it gets better.
UK bus and german rail are basically in limbo for the next year. The provision isn't just a write off; it will have significant cash outflows associated. US bus is recovering rather slowly and a quick/good sale is now less likely given margins haven't yet improved at FY. Only ALSA is thriving. So there isn't really anything on the horizon to boost the sharp price.
Paired with interest rates keeping higher for now, I expect that is the reasoning for increasing shorts.
I don't think 40s are unlikely, actually. There is no quick turn around for any of the struggling business segments, with US bus recovering slower than expected, UK bus in limbo and german rail locked into onerous provision. And meaningful rate cuts now less certain.
The whole company will be in limbo for a while. Cash flow is there to keep them treading water, at least. The hybrid bond is still trading fine at £1.04-5 which suggests no cash flow concerns for those obligations.
Finished the webcast.
It looks like UK bus will continue to bleed money for 2024 - their plan is to cut network from 2025 if TFWM doesn't pay up with subsidies. They're talking about having an automatic mechanism to pass through cost increases onto fares in UK bus. Can't imagine TFWM would like that kind of approach. Moving onto franchising seems rather likely.
German rail provision is 30m from a bid error from the initial 2015 bid which is non-reversible and 10m from discount rate changes. So something like half of the provision should be reversible if they successfully negotiate it with the relevant authorities.
For US school bus, Stamp suggested that FY2024 should produce about £20m more in 2024 based on the last quarter of Q3 2023 doing well.
Mixed bag, really. The FY report uses a lot of "ifs" regarding the school bus sale and it certainly seems like it won't be a quick cash injection. However, if H1 actually shows those margins in school bus it would be optimistic.
Some encouraging growth figures in some areas.
ALSA outside of Spain 61% revenue growth
Irish business 48% passenger growth
US shuttle/transit 13%
Will look at more details later, some good in here. The US bus lagging is probably the reason for today. I don't think anybody expected UK bus to turn a page but the fact US bus margins haven't moved is large uncertainty moving forwards
Looking over interest.
Looks like they paid 75m this year so slightly above forecast. 85-90m guided for 2024 which is rather punishing . US inflation dragging with consequent fed rates likely to be kept at peak for longerm. Nobody really knows. It would be a lot less than 85m if they begin to cut at some point.
Not a surprising fall. With lack of real margin improvement in US at this time it really creates uncertainty for the foreseeable future.
UK bus can be overlooked, I suppose. But US bus was once more profitable than ALSA and a stall in recovery is a worry. Both for sale purposes and as a profit generator in meantime.
Looks like UK bus is still losing money and I think that might not change for a while, with UK coach making up the shortfall for UK overall. Some comments on them looking to cut unprofitable routes in 2025 if they can't get a good enough subsidy package.
US School Bus adjusted margins at 2.4% so same as at half year.
ALSA keeping company alive.
Pretty lukewarm. Bit of a concern that NA adjusted margins are the same as at HY, those were supposed to improve with contract increases.
How bad could it be? The German provision guarantees a statutory net loss, I think. Which is reflected in the SP. Free cash flow should be positive but if it's negative that could be a real shocker.
US inflation is really awkward now since the rise yesterday was broadly fueled by housing costs which is majority rent and interest rates don't really help that. Can arguably make it worse.
It makes it awkward for UK even if inflation is good next week cause cutting rates if US doesn't has potential to majorly fuel inflation because of £ devaluation and oil being quoted in $
It will be interesting to see if the Fed acknowledges shelter costs as the sticking issue and their inability to do anything about that
Https://www.pmi.spglobal.com/Public/Home/PressRelease/12901bc3ebe74e888a7e6fa91e15ad9c
PMI at 50.2 meaning a very humble expansion. Encouragingly the trend of housebuilding activity is trending to a rise above 50 as well. Early days for sector recovery still.
What a wonderful V shape recovery. Gold pushing over $2300 helping for sure.
My thought is that barring quite notable operational improvement the stock is possibly to drift lower in the next few months. 40s less likely but mid 50s fair chance.
US seems to improving to an ok status, ALSA good. But UK bus faces fundamental viability questions with the company essentially subsidizing the stingy local authority. Same with viability of German rail if last minute energy cost recovery changes can immediately cause a profit warning. The need for public transport is there but the governments won't cough up the money and the company makes up the shortfall. This is obviously very bad.
This goes a bit beyond the balance sheet/temporary cost pressure concerns that initially drove this stock lower. It's more of an existential concern for the business as a profitable entity, so I'd be cautious on buying low again. Inflation chilling out and rates being cut in and of itself won't be enough now.
I'm gonna keep an eye on the company still. Buying low in the £1.30-0.80p range didn't quite work out but maybe second time's the charm if it slips to all time lows again.
My investment reason was - ride out the short term inflationary bumps, grow revenue to outscale debt. If they can't do that then it's only gonna chug along barring a buyout. But IMO you should never invest based on buyout speculation. A depressed operational performance with some questionable adjustments to operating profit alongside a chunky debt pile is a recipe for poor returns. And then back to back profit warnings and a double results delay really raise concerns on management competence which is a BIG red flag for any company.
If they shown signs of operational improvement in next 12 months, it's definitively heading back up. They'd do well to delay the US bus sale until interest rates come down so they can get a better valuation.