Member Info for Sneedway

Https://www.reuters.com/world/africa/burkina-faso-plans-withdraw-some-mining-permits-junta-leader-says-2024-10-05/

Chunky fall today. Looks like EDV mines about 435k ounces in this country. I'm out for now, taking my money and running with it.

I have watched the Q&A. I was very surprised to see UK business predicted to move into profit for FY. A lot of that will still be UK coach pulling up UK bus presumably but they must really be cutting costs aggressively.

This is unexpectedly good so I'll be buying some shares again at about the price where I sold, albeit a smaller amount.

US margins have improved. The ALSA business very strong. They've noted that they haven't won any net routes for a long time until now which means the school bus business would have been relatively static in size. Maybe that explains the slowness of sale progress.

On the other hand, UK is continuing to bleed money money since the bumper profit from rail strikes are not there anymore to offset urban bus. That's likely to continue for the foreseeable future.

There are fewer adjustments. The most marked one is the onerous german rail provision at £12.9m, which is quite significant for such a small revenue segment. I think this the provision unwinding.

It seems in line with expectations but the lack of clarity at this time on Germany contract changes/US school bus sale at this stage might contribute to a negative sentiment.

The date is on already on their website so you should assume the 21st unless there are any updates to the contrary.

Look a bit muted but in line. Looks like they're guiding for a subdued H2 as well so they might dip today. Leverage a bit higher at 2x as well.

Still, looks to be good long term.

Looks like a mixed bag. Some underperformance but they're holding guidance for the FY, strongly relying on H2 to make up the shortfall. And they're hiking up the minimum dividend for the next year.

Might be some short term volatility down but seems good long term.

Looks like EDV is getting put back on the FTSE 100. Tracker fund managers must be pretty annoyed with the yoyo.

New mine 100k oz this year, and 200k 2025. It's looking pretty good with buoyant gold prices on top of that.

This is just the sector rallying on optimism. Everything to do with building is going up, which is a pleasant change.

More central subsidy for bus services I expect should be a good thing. The franchise transition could be good, but it's an unknown factor depending on specifics. When Manchester launched the franchise they had to buy back depots which presumably would happen in burm as well, which could be a windfall for the company.

But this new mayor has basically been lying through his teeth on the current subsidy deal, saying it's unsustainable when a fully publicly controlled approach would cost more since NEXWM would then not be making up the shortfall in funding.

Big uncertainty in foreseeable future. It's several years from being implemented in any case.

RNS showing CEO being given free incentive shares. That's rather funny.

The Fitch UK bus outlook seems to rely on the assumption they'll trim the unprofitable parts of network in 2025. I'm not sure if that's realistic.

The new mayor is already setting out his stall on franchising and making noises on how much the taxpayer is shelling out to subsidize NEXWM despite NEXWM actually subsidizing them to the tune of probably £20m or more since the operations lose money. So more public money is needed in any approach, no operator will take a money losing contract. Except MCG I guess (tongue in cheek). The mayor might change his tune when he actually looks at the numbers. But it looks to be an unfriendly regulatory environment.

One issue with the sale might be needing to clear more than just the hybrid due to loss if EBITDA contribution after disposal which is key for their covenant. School bus has £700m in revenue but not clear how much EBITDA it contributed this year.

Current covenant gearing (NET DEBT/adjusted EBITDA) without hybrid is 3x, their max is 3.5x as per covenant terms with lenders.

So they need to make a sizeable dent in the the non-hybrid debt as well. I wonder what happens if covenants are breached. That's presumably what could force a dilution?

I think you got some of those the wrong way around/some figures off (EBITDA from 2022?). The headline FCF figure is after subtracting the £61mil of non-hybrid interest from the adjusted operating cash flow. Page 22 of the FY has their breakdown of FCF calculations.

I didn't really consider principal lease repayment in FCF. The lease interest is included in the £61m interest, but should the principal payments be? I'm not knowledgeable enough.

Even if you accept all the cash adjustments from loss making operations at face value e.g. not just ones off or restructuring costs, the headline FCF doesn't account for hybrid interest payments, which is a big deal since you're essentially showing FCF without some of the debt related costs. If hybrid payments were twice what they are now, the headline FCF would remain the same. That's why the figures by rating agencies are so different.

JG

The free cash flow can be an accounting trick. Since it's derived from "adjusted" EBITDA, the adjustments can flatter the figure. Furthermore, hybrid payments are not taken out before FCF since it's classified as a dividend but we do know it's basically debt interest. They also take out things like the impact of driver shortages and onerous contracts as per page 20 of the FY report. Some adjustments I think are more legitimate e.g. furlough repayment and restructuring costs. The Fitch/Moody calculations use their own methods that don't make the same allowances, probably.

The company is now doing worse in day to day operations so FCF being the same as 2022 doesn't quite seem intuitive - the figure is manipulated. If you were so inclined you could go through the numbers and calculate what you feel is appropriate FCF. The hybrid payments and cash adjustments for this year are just over £90 million.

It's gone into the 46s on HL. Brutal fall. I honestly didn't think it could go this low even after I sold mine. RSI now below 30 there may be a swing trade opportunity.

I wonder if they can renegotiate the covenant like it was done during COVID. At the end of the day the hybrid is debt just dressed up as equity. Surely it can't be that big of a deal

HL showed it slipped to 49.15p briefly

It has just slid into the 49s on HL

I am rather relieved to have sold mine earlier. Happy to admit I was wrong. The unfortunate problem with buying low is it can just get worse. Easy enough to hold and average down when it was just macro pushing things down but then the complete recovery reversal obliterated the bull case. Even if the operational difficulties are temporary for a few years, they don't have that luxury with the debt pile overhanging everything. And not exactly competent management.

Yeah no good earnings go back it up, it has now slipped below 51p. With questionably adjusted earnings per share at 4.5p it's still at an adjusted P/E ratio of just over 11 which is sort of generous. So it might just keep going I don't know.