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We're looking at 82m in interest next year as per the board forecast.
Keep in mind a lot of the borrowing is short term and it comes and goes.
The main thing to look at is the treasury management page; it's after the free cash flow statement. This shows the breakdown of the financing instruments and their maturity dates where refinancing is likely to take place. Fortunately by 2027-2028 where the majority of refinancing starts to come in, I am hopeful we will see rates nice and relaxed again.
Hybrid is also fixed until 2026 and looks to track UK Gilts when its rate changes - rates permitting, we may actually see a decrease in the payments? If I am reading it correctly.
From memory, the yield on UK coach is actually 20% higher than 2019 according to the CFO as of 2023. They're doing pretty well with that given stiff competition from Flixbus/Megabus.
The actual bus service is the problem. 16% pay rise for drivers (not undeserved). Fare increases of 12.5% for this year are only about half of cumulative inflation since their last increase and we don't yet know how far the new subsidy package will go. Perhaps JG was right and the UK bus business should just be sold. Let somebody else deal with it.
FT has a good feature that shows some institutional buyers/sellers alongside top holders, although data only to the end of June.
How are we feeling about rates after 2025? We got a 250m bond and 400m in private placements due 2028-2032. My personal opinion is US rates might not go back down to ultra low levels like before. But UK rates are likely to hit very low levels again as soon as the inflation is behind us. It's the only way our zombie economy can function. There is also the ECB that has actually dabbled in negative interest rates. Presumably that would make refinancing more favourable but not sure if comparatively higher rates in US would affect refinancing rates in Europe.
Looks like from the HY2023 report the value in use for the NA business actually exceeded the carrying amount by £371.7m in June 2023 which is higher than £225.9m in December 2022. So we are trending away from an NA impairment barring any FY surprises.
JG
Saw the video. We're definitely not gonna be seeing a 15 p/e valuation in current circumstances. But UK rates will inevitably go low again in some years and the organic expansion the business has going for it could take it back up there. In some years. The leverage conversation is an interesting one since Liberum argues the hybrid bond should be considered for the leverage purposes which would make it substantially higher.
Agree with broad sentiment on lack of confidence. In hindsight even looking at 2022 FY there was sizeable cash adjustment for onerous contracts which I don't agree with. Fortunately those are just about gone this HY.
200 EBIT with no bs cash adjustments would be a very pleasing result.
Thinking about topping up if ends up showing sideways movement for a few weeks. It's a shame LISA top up has to wait until next year.
Was looking over cash flow for this. It's a bit cheeky putting cash adjustments from onerous contracts, restructuring etc under free cash flow. Same with hybrid bond payment, albeit it is technically an equity dividend. That's over 40m of cash outflow that isn't really "free".
@Fishb0n3
I agree we can't predict impairments or adjustments. But it's worth brainstorming it.
Looking at the data now, it looks like the more dragging adjustments such as onerous contracts are sharply decreasing which is very good as I question if those should even be there.
One offs/short terms such as restructuring costs, furlough repayment, extra tax charge are contributing a lot this H1.
Amortization is steady.
Hopefully barring any surprises adjustments should overall be lower for H2 and even lower into 2024 as restructuring costs go away.
I wonder if there is anything significant from results we haven't considered.
One thing to look at may be the adjustments for H1 that take the statutory profit to a loss. From memory about half of the adjustments were cash, the others non cash. Some were one offs but they also included onerous contracts in adjustments which was only a small amount, but more operational and maybe a bit crafty to put it there. And the short term restructuring costs and general amortisation.
Is the market pricing in further/significant adjustments for FY?
Agreed regarding the timeframes. While I was thrilled to be buying at the prices I did, it's going to be a set and forget for a couple years at minimum. Worst case scenario, the market will treat this as a zombie company until rates come down and/or debt is outgrown.
As long as the cash flow is there, the stock is "safe" for my own risk tolerance. There is enough operational cash flow to pay interest, capex and everything else. Enough free cash leftover for growth capex and to treat shareholders to a payout. It's not like it's burning through cash, cineworld style.
Moneymule.
It may be helpful to remember the EBIT forecast is adjusted, not statutory. Amortisation is adjusted for and this is consistent with previous results. Nobody knows if there is another impairment, you can only speculate. Regardless, it would not affect cash flow which is likely to continue to be strong.
Also as lerkule notes, you don't subtract amortisation or depreciation from EBIT. The 200m is after D/A is subtracted. You get your EBITDA by simply adding those back in.