Member Info for Sneedway

@JG

As it turns out the consolidated accounts statement breaks down assets segmentally

FY 2022 UK business had 318m in non-current assets; no mention of current assets however. 2023 UK revenue will be around 580 million or more.

How you'd value that in a sale is any man's guess. In 2005 ALSA was bought by MCG for £262m. ALSA had 219m in revenue at the time. These sales will always have a premium over fair value. I suppose it wouldn't be such a bad idea given how bad UK business is right now. It would be very symbolic of our national decline for MCG to fully operationally leave the UK. Although pre-covid the UK operating margin was 14%. Perhaps it can get back up there with (one day) more sane people in government who value the benefits of well funded transport.

@JG

Zero idea; the releases do not show their assets geographically.

In any case I'm more interested in revenue growth, expansion and new contracts, which will lead us to more profit in due time. The bankruptcy/dilution talk is silly. Cash is king and this company has plenty of cash flow.

One would think so but it won't. The UK part of the business is actually small. I would prefer if we had massive train strikes in Spain instead.

82.60 on Tuesday

Has been bouncing off low 84s rest of week. Buying today will give you a 5.9% yield from the final divi (5p again assuming)

It may go sideways for some time here barring any news but apologies if I just cursed it to go to 80

Would also like to note the debt is handleable; well covered by operating cash flow. The situation is not that great but hardly in distress. Rate cuts by late 2024 and by 2025-2026 2022 buyers will be in good spirits.

Spread is Huge 0.70p on HL. Volume at absolute rock bottom today.

Depreciation is subtracted from EBIDTA, not operating/net/before tax profit.

Bought a bit this morning to help it along.

Sort of wish I phased in my buys a lot slower; front loaded a lot of it at 130. Benefit of hindsight.

I don't think it's possible to approximate this. Their financial statements do not discriminate between regional segments.

Even if you could count up the tangibles e.g. buses, owned depots, buildings, whatever else, the intangible component is huge. This is why it's also silly to say the business is in negative equity; if everything was to be sold off it wouldn't just be a case of selling the buses to someone to scrap them. Staff expertise, branding, connections etc that's what creates goodwill.

With that in mind it may be useful to compare assets and debt pre-and post pandemic. Since there is so much hassle about debt being (supposedly) huge.

2019 FY

Total Assets: 4408 (1901 Intangible)

Total Liabilities: 3295 (1241 net debt)

Net assets: 1,125

2023 HY

Total Assets: 4,074.8 (1545 intangible)

Total Liabilities: 2848.7 (1168.9 net debt) + 500m Hybrid Bond

Net assets: 1,226

Intangible vs Tangible asset ratio is lower now than 2019.

It's also worth noting the company has an explicit goal of running more asset light contracts moving forwards; revenue to asset ratio will increase.

Debt overall is not really higher except the 500m hybrid bond, which is a funny piece of accounting. I do not fully understand it and it has quite a long document on its terms. Its essentially counted as shareholder equity rather than debt. It runs at a 4.25% coupon (from memory) and the payments can be suspended if the dividend is suspended. Its issued in perpetuity and can be paid off at the group's discretion after some years. With the benefit of hindsight, the fixed rate is pretty good now.

Overall the difference is not so stark. My only real concern is that there is a chance we may be relegated to zombie company status until rates come down.

That revenue forecast is way too conservative; they're predicting revenue of under 3400 mil by 2025.

Even if you use 2022 to forecast 2023 because historically H2 is always stronger you'd end up with over 3340 revenue.

E.g. 2022 H1 was 1.32 bil. 1.32x2.129 makes 2.81 bill

The 2.129 is essentially the strength of H2.

For HY 2023 you got 1.57x2.129 makes 3.34bil, but allow for a stronger H2 as stated in HY results.

By 2025 this company will have over 4 billion in revenue.

When the Liberum guy asked about this last week they clearly stated they're doing a simple bond refinance, nothing else. Trolling about this is uncalled for.

Opportunity cost is a fair argument. I've sold my GSK on the same reasoning and did well elsewhere. Did you sell above £1?

Good morning,

You often notice many stocks have strong support levels even in their downtimes; British American Tobacco refusing to go below 2400-2500. Even speculative stocks like CTL can hold strong support; it has held support firmly at 37-38p, or SPCE in the low $3s range. MCG is yet to establish this, although I believe we are quite close.

Volume is seriously low since November 2022; the buying demand is obviously weak, but I wonder the rationale for selling at 2009 levels. The potential upside vs downside appears quite positively skewed; it's not like a share offering or bankruptcy is even remotely realistic. I would be expecting more sideways movement. Is it simply small time PIs giving up/panic selling? A very large % of float is held by institutions who are apparently not selling given the volume is so low. Crowd mentality can easily overpower reality given I have been making satisfying returns on meme stocks that are likely heading for bankruptcy. I feel a similar thing is happening here but in the negative sense.

I would not be able to sleep if I held any significant holding in CINE.

Have added another 1000 shares just now.

I agree 5%+ rates will stay around for at least a year. Not that it will help inflation; what are we gonna do, eat less food?

Celebrating sub 90 with a £700 top up on my T212 holdings. Reinvesting the Tupperware meme gains.

Cash call is out of question. There is no need as economy of scale will outpace the debt over the next 5 years. Gearing will fall in line.

And it would just be nonsensical to do it after issuing a dividend. Those two moves don't match up.

Maybe there would be a dilution if this was called Virgin Buses.

It's not a bad day at all.

Someone posted about shorts reducing. I'm no expert on shorting but is it fair to say they were expecting worse results/forecasts and are taking profits expecting no further falls? If things were going downhill they would instead increase their positions.

They don't matter too much in any case for long term holders but it's interesting to see shorts reducing while there is speculation on here about going to 60p.

A comparison to ASOS Or Cineworld is a really not right. Cineworld literally filed for bankruptcy this year, meanwhile MCG is on track to increase their overall dividend this year, financed by free cash flow. They are planning to set up a Eurostar competitor.

The talk of financial distress is also really inaccurate. Months ago some guy was posting about how they won't be able to refinance the 2024 bond and have to issue shares instead because their ROCE is too low... this is just untrue and was never even a remote possibility. It's easy and tempting to talk of financial doom when the share price is down but stick to the facts and reasonable forecasts. Worth mentioning they did forecast margin reduction a whole year ahead; June 2022 press release stated this would happen with the US bus business and they would then recover in H2; it's not like this was unexpected and the price recovery plan is just a cheap excuse.

Debt should definitively not be ignored here though. Best case scenario we will still have a lower net profit this FY but 2024 the sheer revenue growth with improving margins should simply begin to simply outscale the interest. I do get the frustration here; rest of my portfolio is making good money on pumping US stocks with questionable paths to profit, 70% in a day on memes like Nikola who used to roll their down trucks down a hill in promos. Meanwhile this is just dragging.

I predict a 85p bottom but it has shocked me that even went below £1. If there wasn't a clear path to a major recovery I would have sold my holdings months ago. They will literally outgrow the debt. The only fair argument to sell at this price is the opportunity cost of not piling onto the US rally; but you're just swapping one risk for another.

I think the market is pricing in not meeting 200-215 EBIT forecast. I'm a bit sceptical myself; it does seem very ambitious.

2022 H2 was at 7.1% margins.

H2 2023 will need to be at 7.5% operating margin which seems hard to meet with how H1 went. We're looking at a 4%+ margin increase from HY1. To be fair ALSA is still running at a 10%+ margin, it's the US school bus business that needs the pick up to make up the numbers.

Just to add some further numbers on future revenues and margins (speculative)

6% Margins on revenue

3.6 bil = 216 mil EBIT

3.8 bil = 228 mil EBIT

4 bil = 240 ebit

7% margins

3.6 bil = 252 EBIT

3.8 bil = 266 EBIT

4 bil = 280 EBIT

8% margins

3.6bil= 288 mil

3.8 bil= 304 mil

4 bil - 320 mil

Barring any surprises and if the price increases work, 2024 could be a 250 mil+ EBIT year.

If we get 3.8 billion revenue at 7% in 2024 it would give 184 post-interest profit (266-82)

As a side note; Eurostar revenue was 1.53 billion 2022 with 322 million operating profit which is a 22% margin. A piece of that would be good if they can break into it.