Member Info for tommy15

You guys just had to jinx it…!

Doesn't look good :-(

Getting sick of saying this, but... any ideas why the large drop today?

FT has an article today with the headline "Delta surge is test for US schools as classrooms reopen". Anything leading to doubts about the US school reopening going swimmingly would be bad news.

Constant news headlines about worker shortages affecting everything; we know NEX is being affected by this as they are struggling to find drivers.

NEX is still getting a significant chunk of its revenues from state subsidies, which isn't sustainable. If those subsidies are removed before business picks up the results will look bad.

So there is still a lot of medium-term uncertainty. Long term we'll be fine.

On a similar positive note - but still extremely anecdotal - I was in Chelsea a few days ago and was very cheered by the number of National Express coaches thundering past on their way to Victoria Coach Station.

Overall this is a tough call. (FWIW it's worth I have a stupidly high proportion of my personal assets invested in NEX, so I need to make an extra effort to be impartial).

I suspect we may be in for a long slog here, as my gut feel is that the subsidies will start decreasing before passenger numbers fully recover. Nothing has better margins than free money, so that will affect margins as well as the top and bottom lines.

Over the longer term I feel this is a sound investment, but how long? Who knows.

There's still a lot of uncertainty here - how long will it take passenger numbers to recover, to what degree; how long will the subsidies last; will there be more waves of variants and lockdowns (in any parts of the world where NEX operates). Those unknowns are still very much in play, and while they are I think the price may languish.

But then again, I'm consistently wrong about these things, so...

Having looked at the results more closely I think I have a better appreciation of the market reaction, especially now that the price has recovered a little.

To NEX's credit they do a great job of breaking down revenues and costs by market segment. By comaring H1 2021 (today's results) to H1 2019 (pre-COVID) we can see that:

- contract revenues are at ~76% of pre-covid levels. Most of the drop is in the USA, this is presumably the shuttle and transit businesses, since the schoo bus business seems to be recovering well. For context, USA contract revenues are the monster, accounting for ~43% of all NEX revenue.
- passenger revenues are at 42% of pre-covid levels. In the UK it's down to 27%; in ASLA it's at 52%. These are big chunks of missing revenue - in total there is £175MM less revenue coming from this area, representing ~18% of H1 2021's revenues
- private hire is at ~43%, but it's a minnow
- grants and subsidies are up a whopping 470%. To me this is pretty huge - it turns out that £208M of NEX's revenue for H1 2021 - is free money given away by the governments local to where they operate. Some degree of subsidy for e.g. local bus services is normal, but this is much more. That's 21% of this half's revenue, vs 3.3% in H1 2019. In absolute terms it's an extra £163M of free money.

Also interesting is that this half had another ~£20M of "separately disclosed" covid-related expenses. A lot of these seem to be to do with cancellation charges / unable to meet contract obligations due to covid. It would probably be prudent to assume there would be some degree of this continuing for at least a couple of years as new variants emerge (although obviously I hope not!)

So the bear case:
- without the massive, unsustainable subsidies, revenues would be much lower. If the market wasn't happy about flat revenues, they would be really unhappy about this.
- passenger revenues are still extremely low, with the UK coach and German rail operations running at a significant loss for this reason
- ~£10M of extra costs a year can be expected from ongoing covid-related expenses

The bull case:
- There do seem to be some efficiency gains. The USA segment (which is where most of the efficiency work seems to have been focused) operating margin went from 10.3% in H1 2019 to 9.2% in H1 2021 - yes that's a downward movement, but it's a heck of a lot better than H1 2020's 1.5%. Having a bunch of your fleet sat around unused is inefficient, there's no way around it, so the margins should improve further as fleet usage increases.
- the passenger numbers in the UK have basically no impact from "freedom day". Passenger numbers should start increasing.
- all the positive stuff around picking up new contracts around the world etc etc.

Jwd NEX is a big operator in hydrogen mass transit. If you truly believe what you’re saying then NEX is a good buy

I suspect what the market was looking for was a recovery in demand - ie revenues increasing - and that didn’t happen.

Cutting costs is great, but is it because they fired a bunch of drivers they didn’t need because no one is using their busses??

How concerned should we be that revenue is actually down slightly cf H1 2020? That’s the big question. My gut reaction is “not very” because over 1/3 of H1 2020 had no Covid impact. H2 2020 had revenues of 0.93Bn so we’re up from there, although not sure how valid it is to compare across H1 vs H2

Early trading not looking great. How frustrating.

I would also be interested

Wow I get so tired of the "only people who think this is a great investment should post here" argument. If someone provides a counter-opinion that makes you critically think about how wisely you are investing your money you should be GRATEFUL, even if you disagree, or even if it's painful to read because deep down you know it's true.

ah gotcha, the FT number was % vs avg daily volume, not % of float.

...do you mean 700%? FT has it closer to 900%

Here's hoping

So he's not allowed to change his opinion?

*not "lost", since I haven't exited. Currently I'm down that much. But will be looking for an exit as soon as this bounces - fingers crossed it does.

BigBoo: I'm not quoting a specific fact on wikipedia, I'm linking to a page about a recognised branch of cognitive science. If I linked you the page about Berlin would you imply Berlin doesn't exist?

smoke: fair, I'm just feeling snarky. I have lost mid five figures in LOOP. I certainly hope for everyone's sake that what I said is true.

https://en.wikipedia.org/wiki/Cognitive_dissonance#Belief_disconfirmation

This board is fascinating to watch. The more the negative evidence piles up, the more you retrench.

Please believe me that I have lost more money in LOOP than you have. I am not a shorter, I am not a deramper. I have finally come to appreciate that this company is simply exactly what it looks like - the classic value trap.

Look at the TCVs at previous updates
Nov 2020: £84M
Mar 2021: £106M
Jun 2021: £117M

From Nov - Mar the TCV grew at £5.5M/month, while from Mar - Jun it grew £3.7M/month. This is not "gaining momentum"! And the increased % of discussions at an "advanced" stage could just reflect the fact that nothing new has come into the pipeline to bring that % down! I think that even using "% of discussions at an advanced stage" as a metric is misleading/worrisome since any movement could be twisted to be positive (if it goes up you say "look, we're likely to convert more of our pipeline!" and if it goes down you say "look, we have a ton of new customers in the pipeline!")

The acceleration in contract wins is more exciting, but the actual numbers are very small - both in terms of revenue and actual numbers of customers. At this rate of growth (with a slowing pipeline) it will be a long time before increases in revenue here offset the losses coming from the remote meetings business.

I think the market has this spot on.