Member Info for Sneedway

Https://www.ft.com/content/03ac15ba-76f7-4e31-b835-f9c6e5e9402e

Good news for ALSA and German rail. Both operationally in terms of cost pressure but also that rates will moderate further for any future refinancing. UK is also predicted to dip sharply in the next announcement.

This is the article referenced https://archive.ph/glroy#selection-497.5-509.1 just use google translate.

Pretty sure the 4.1 Net debt to EBIDTA figure includes the 500m hybrid in this context E.g. £1.66 bil vs ? £400m something EBIDTA for this year

And presumably the 2.5x would then be with the loss of US school bus income/ Best to look at the overall leverage rather than a specific figure. If you grow EBIDTA nicely you effectively deleverage yourself but obviously this hasn't quite happened so here we are.

Funny movement. I would have thought the US GDP data would have knocked this right down today.

70 likely to be a ceiling until positive concrete progress on sale/UK recovery?

This is really good if there is funding to subsidize it.

Trains enjoy a huge subsidy, about time bus services do also. It also sets the precedent for future governments to open the taps for more subsidies.

@Genghis

Escalation would affect it from sentiment and the impact of oil prices on inflation/interest rate; not necessarily directly affect operations esp since fuel costs are hedged. If it stays contained then it's just another bloody page in the region's history but Hezbollah and Israel have been exchanging some fire at each other.

Probably stay under 70 tbh until there is concrete good news on sale/operational improvement in UK. Or major macro improvement. More likely to go back to 50s if this war escalates tbh.

RSI shot below 30 over last week so a jump back eventually is inevitable... RSI is pretty consistent like that. Loaded up yesterday and the day before

£250 on a trade here today, just need to do that about 100 times.

My personal opinion is ultra low rates will be back across Europe relatively quickly. By that I mean in the 2026s. Yes they're low historically but they've been trending down for decades anyway; ECB has slammed the brakes on a mere 4%. Aging population with corresponding spending needs and poor growth will necessitate super low rates. It will be the new normal IMO. Like Japan. US spending and interest payments are also up there even if the economy is stronger. They're talking higher for longer but also said inflation was merely transitory...

If that's the case, companies like MCG and others punished by the current situation will thrive if they survive. Obviously I could be talking rubbish but keep in mind ECB was actually in negative rates before COVID...

I don't think anybody who has looked at the numbers has any real concerns about the company going under. Even in the worst case scenario EBIT covers the interest payments well.

Buying at these level is the way to go if you're interested in this company and aren't already hard in. A 10 year buy and hold from these levels is likely to reward you well. The only thing that gives me pause is the disposal risk e.g. if they cave and sell for something really poor below the 1.5bn guided. Either getting lowballed due to the temporary drag in performance or a struggle to get a good buyer due to high costs of raising funds. If they can't get a good sale they need to leave it till 2025-2026 before looking for a buyer again, if at all.

Mobico is not involved with the channel trains, they've already confirmed this.

I've dipped in with 8000 shares today. RSI below 30 for a week now so it's due for a bounce... of some sort. Aim 5% and get out. If it hits some ridiculous low in the coming months I'll commit another lump to it although quite overweight here to say the least.

97% passenger numbers vs 2019 - a bit less

The 7% growth is YoY vs Q3 2022 e.g. up 7% from last year but still below pre-covid.

95% service levels means some routes were cancelled presumably. I thought it may be referencing the strikes but it's highlighting Q3 specifically.

What else can they do to get more passengers? ALSA bus services are up 24% passenger volume wise year on year. Birmingham is our second largest city constantly growing in population. It's not like they're running a service in Aberdeen.

UK bus is gonna be losing money in FY I think

At 175m EBIT divisional might look like this

ALSA-120 to 125 given H2 is always a bit stronger

US 50-70

UK - 0 to -15

UK bus passenger numbers still slightly below covid and fare increases far below inflation. The subsidy package is presumably not enough. And that's with UK coach enjoying bumper profits from the strikes... Honestly it might be a good idea to let the local authority nationalise it at good value and let them deal with the unions and cough up the money for loss making routes. That's what Manchester is doing with their new model, buying back depots from private operators.

Actually to correct myself

The cheeky 500m hybrid bond counted as equity not liability knocks that down to 700m vs 614m shares. Point stands regardless

FGP had their 4.6 bil sale when their marketcap was under a billion, right? So conceptually it's doable. Marketcap is not the most reliable measure of innate value, just of sentiment/risk.

You also can't actually buy this company for 380 million. If a fund started to aggressively buy shares the SP would go through the roof. Or for a formal offer, the board/shareholders would reject any offer below fair valuation. Which at 1.2 bil net assets and 614 shares in issue would be.... just about £2 per share without any premium. But then you'd also be taking on the company debt bonds etc instead of just the business part and some relatively small associated subsidiary specific debts.

Https://archive.ph/glroy#selection-355.0-569.119

Non paywall link, use google translate for the text

jg

same on this front. was relatively unbothered until the 12th. management appeared competent and guiding the business through a tough macro period. now they look very unreliable.

never a fan of selling part of a business like this but can understand the rationale. if they sell it for some paltry 300-400m it would be absolutely disastrous. it needs to be sold based on 2024+ potential/pre-covid track record rather than the current relatively short underperformance period. if the fgp sale is any guidance. £1bn minimum or no sale imo. that's less than x10 ebit based on 2019 performance and probably future performance. if they can't get that it's pointless to sell. then focus on growing alsa.

they should also sell the uk west midlands business but who would want to buy that piece of ****? maybe the local authority will pay up to take it into public ownership.

alsa should get around 120m ebit if you apply the 2022 h1 vs h2 weighing to 2023.

that leaves 55m-65m ebit to split between uk/germany on current guidance.

i reckon all of that will be the us business as uk/germany will probably create an overall loss/breakeven. so for us bus, 13m ebit in h1, 42-62m ebit in h2. if the business continues to improve it should then be seeing solidly over 100m ebit annualized in 2024.

according to 2023 hy presentation; school bus is 70% of na revenue, 30% is transit/shuttle but not clear what the margins are on those vs buses; likely higher. if you divided ebit cleanly by revenue you'd get 70m or more ebit in the school buses for 2024; this is before any further new pricing and more contracts. as us conditions normalize the operating profits should strengthen further. it's already trending upwards from h1 based on my *** packet math.

i don't know much of anything about valuing a business for sale, but 300m is criminally low given its potential.

The more I look at it, the more I wish they kept the school business. 2019 USA only EBIT was a whole 120m. No reason it can't get up there and grow more. It looks like it's only underperforming marginally by 5-10m EBIT this year with training costs and now adding more contracts; it's actually very close to being on track. Where as UK bus (not coach) division is really dragging the company down underperforming 15-20m EBIT and that is on much smaller revenue. Absolutely shocking performance. Without UK underperformance you'd be looking at 190m-205m guidance which is barely off the mark.

Once you sell the US bus business, what have you got? UK is in terminal decline and it's hard to make money off public transport unless you're FGP and getting direct fat government subsidy for trains that aren't even running. Labour govt may inject some cash into bus services but it's all completely speculative.

ALSA is a powerhouse to be fair and clearly ran very well operationally and expanding; over the long term could get big enough to make up for the US disposal.

German business is still very small and now in recession.

US shuttle services seem promising but again relatively small and far less certain business model than school buses.

Potential buyers will want to get the business for the cheap. If they can't get a good price for the school bus business with enough resulting deleveraging to justify the sale they should just suck it up, hold off the divi and just use all profits to lower the debts until 2026 IMO. Cheaply selling off the school bus business which is clearly improving would be a nail in the coffin here.

JG

Goodwill impairment isn't the same as a cash loss. On the day of those impaired FY 2022 results the shares surged up around 17% in one day and then 6% or so the next day before the Liberum leverage downgrade. The impairment was/is irrelevant IMO.

Macro took the share under £1 initially but the HY/Q3 is what took us here. As Poker says, the BOD has lost credibility. The results are nowhere near financial distress level however. Fundamentally it's still a profitable and in demand business, particularly in ALSA where they're now spreading into Portugal.