Member Info for wealthtrasfer

Major world event aside, which would kill off a lot of businesses, they are not going bankrupt unless they continue to make bigger losses and lose even more margin this year, which is highly unlikely given cost recovery is now nearly complete and overheads being heavily trimmed.

The parts are worth much more than the whole. Fitch ratings and refinance of bonds would support that also.

Cosmens blocking for now to make sure nothing un-towards happens. But I assume will restart to move to 30% if things stagnate further and NA Bus sale doesn't move forward. They want ALSA and ALSA only in my view and want School Bus to sell as much as anyone. I believe they will then make a move and sell off the UK.

Talk of going bust at this stage is nonsense, whether the share price goes to 50p or not. Value will be realised - in time - whether breaking up the business, a takeover or trading out. The trading out is going to take a year longer than they expected.

2025 will be the first full year to really judge the changes by and will be the final refinancing with revolving credit due end of next year. Debt is 80% fixed and 20% reverting to fixed next year I believe. Just depends what your timescales are.

The company is structured and ripe to split up and sell off. Discrete valuable entities that can easily stand on their own. The board needs to do it before someone else takes us out and does it and reaps the rewards. I stated this scenario a year ago and think we have now got to that point when splitting up is a better option that trying to regroup and trade through the problems.

As you say, although frustrating at times, we will wait and see but my money is now literally on that happening at some point!

Poker - Agreed, but as the board have stated the aim to move to higher margin businesses and this is as one of the main justifications why they are preparing US School bus for sale (to reinvest in higher growth margin opportunities) surely that puts UK Bus and German rail square in that same category and should be sold off - perhaps even more so?

Genghis - UK Bus and German Rail are the most concerning in terms of "can they ever achieve high ROCE" as their hands are tied with government, which is why I would advocate a sale of them, raise a couple of hundred million (must be worth that?) and UK Coach must be also worth a decent return now. Pay down some debt, re-invest some in US School Bus and Transit and float US in a couple of years and list Alsa in Europe or take private. Thats how I think it could turn the current £400m value to £2b+ in 2-3 years time of £3+ p.share

Pipeline at £1.5bn and the 28% win rate at 28% ROCE is coming mainly from US Transit

"Year to date over two thirds of the Group's pipeline conversion has come from the Transit & Shuttle

division. The division has nearly £500m of opportunities (representing approximately one third of the

Group's pipeline) and we continue to have confidence in the attractive capital-light growth potential

of this business into the medium term."

" 28% ROCE. I doubt that is sustainable "

28% WIn Rate at 28% ROCE is what I mean by unlikely to be sustainable. That would be a game changer if that continued across the pipeline.

Poker - Dubai wasn't lost as far as I can tell either. It seems as though the contract was withdrawn. Transdev hasnt won it. It just disappeared.

I also think its reasonable and proportionate to have been updated when spending relatively large sums of precious cash particularly on acquisitions and to explain how it fits the desired ROCE targets or if it doesn't then why it is deemed as worthy of diverging from those goals. That particular acquisition feels more like a vanity purchase, without any clarity as to why they did it. Just 'saying nothing' in my view is not acceptable at a time when cutting costs, removing dividends and re-financing with higher interest burden. That purchase and others should provide an exceptional return, at least 25% ROCE (which from the stated margins in the press, it doesnt) or I have to question why they feel they dont need to stick to the plan, why they are spending important cash in that way and why thy expect continued support in doing so.

Genghis - the last report was a 28% conversion at 28% ROCE. I doubt that is sustainable but would underline why I am still holding if it does continue. We await the update to find out.

Poker - I’m talking about the stated EVOLVE plan and ROCE which Tenerife doesn’t appear to provide unless I’m missing a huge undisclosed synergy. We have no idea if there is another indirect reason for this or travel agents in Portugal.

The board quoted £2b pipeline but also that US transit pipeline at £500m was the most successful area of wins without any further updates. Plus hints at large new school bus contracts, historical Dubai contracts hinted at, £1bn etc… with that one stated as down to last two but no update on the subsequent pulling of that contract or if possible, why!).

What I’m getting at is that although I appreciate the board are not going to continuously update on operational wins (or losses) they should update on material contracts especially when cited in prior updates. There is often a feeling of radio silence and no clear update on what they are doing and why it fits with their strategy. We are mostly left to figure things out ourselves or hear through 3rd parties. I think they could be clearer and more transparent with the owners of the company.

Do you also get the feeling that private shareholders are not considered particularly important?

My thoughts are that the CEO, due to location and background, has been on top of the ALSA business (or the regional CEO there is exceptional and should perhaps step up and run the company) and Garrat his eye off the ball in the US and UK. Which holds up as the two regional CEO's were thrown under their own respective buses and replaced.

Was it a lack of understanding of what was happening in the US and UK vs their local Spanish/Southern Europe markets?

FB for example acted faster and harder. Cutting debts early. Cutting UK route mileage has been cited by Analysts for example for some time. This was done successfully by others but not by MCG.

Overall Im confused on what they are doing now: I cant decide if its a lack of focus and market awareness outside of ALSA or they rolled a dice and thought they'd come through it and it didnt work or simply they had tied themselves up with contracts that couldn't adapt to a new higher cost environment. But the last option doesnt line up with their EVOLVE strategy or management statements in the annual reports.

Buying up Tenerife bus company's and Cruise Ship travel company's doesnt fit the brief either.

There needs to be clarity on what current operations fit with the strategy and which dont and how they are going to address that. Some real targets and clarity are needed as after investing for what I felt was a good direction and strategy I dont understand what they are doing now and where they are going.

JG - could well be that NA attracts lower bids than than the amount sought and therefore present a dilemma for the Board.

The real problem with MCG was the speed of response to the cost increases and the lack of hard nose decision making in cutting overhead costs/routes/passenger mileage to counter that, as has been done by others a year or two earlier. I think the board thought the would ride it out on the back of revenue growth and be bigger and stronger than the competitors as the world got back to normal. Unfortunately it is taking much longer than they anticipated and the rolled the dice and got it very wrong (could have gone either way but as proven was a risky strategy which other analysts were warning about).

That aside and now faced with having to realise the situation that was upon them they have finally responded. It will take another year, this year, to prove that they are now actually trying to actively manage the macro financials they are faced with and turn this year into a profit.

Given that this is being done, hopefully aggressively enough, we should play catch up as the business income and growth hasnt changed. People still need transport regardless of the wider economic climate. So as long as they cut hard and in the right places whilst maintaining what they are good at which is customer satisfaction then this will return but they could do with someone more ruthless at the helm to keep it going as they are now 12 months behind and need to catch up fast.

If NA doesn't happen then I don't think its the worst outcome as long as they get ruthless with the costs everywhere.

My view a year or so ago was get rid of UK and Germany and split US and ALSA, listing on their respective exchanges. That would still be my preferred option for ultimate value and is what the Cosmens will do in my view.

Yes lets hope so... its been more like a hurdles race on a roller coaster. The board could definitely do with a dollop of good luck and news for a change.

.....

For this year and beyond, with price recovery, the German Rail hit of c. £11m p.a. (assuming things stay as they are) will not be so material on £3+b of revenues with recovering margins. With this and the increased interest costs its a hit of c. £30m more p.a. than last year but we have £30m to £50m of annualised cost savings to factor in (£30m already achieved with £20m to be found). With increasing revenues and increasing operating margins the company is going to produce good cashflow and back in profit for 2024.

Annoying and delaying an SP recovery but not particularly material IMO in the grand scheme of things.

Now the dust has settled, this is just a big annoyance for the board and something Im sure they could have well done without as much as we could !!

At least we know that £160m should underpin the results, which after a poor start to 23 due to costs ahead of price rises, this is still just about okay. With no impairment we are going to be about break even (give or take £20m or

Smokey - Fitch (ratings) stated that there was no imminent need for additional finance. I quote ..."Near-term refinancing requirements are limited ". This was stated after the Q3 update and revised forcast.

Fitch Ratings-London-16 October 2023: Mobico Group Plc’s (Mobico; BBB/Stable) plan to dispose of its North American school bus business would likely help in mitigating the impact from weaker trading in UK businesses, assuming a timely disposal with the majority of sale proceeds used to repay debt, Fitch Ratings says.

The announced sale of the North American school bus business is part of the company’s strategic review focused on de-leveraging and accelerating capacity for growth investments. We expect Mobico to use the majority of the proceeds to repay its debt and to move leverage towards a net debt/EBITDA ratio of 1.5x-2.0x (from 2.8x at end-June 2023), in accordance with the company’s financial policy. We expect EBITDAR net leverage to decline (pro forma for the disposal) to less than the existing negative rating sensitivity of 3.5x, even though the timing, asset valuation and use of proceeds are not yet certain. However, the sensitivities for the current rating might be revised due to changes in the business profile as explained below.

In our view, the potential disposal of the North American school bus business would result in a significant reduction in Mobico’s exposure to the US, in addition to the loss of contracted revenue. This will result in ALSA (mostly in Spain) becoming its largest business, contributing almost 50% of group EBIT. However, Mobico will still be a more well-diversified business than other Fitch-rated passenger land transport peers with operations in several countries, including the UK, the US, Spain, Germany, Morocco, Portugal and Switzerland. The company is also well-diversified by sector with operations in local buses, regional and inter-city coach in the UK, Spain and Morocco; transit and shuttle services in the US and rail in Germany.

Operating performance in 2023 YTD, particularly in North American school bus and UK bus businesses, has been weaker than previous expectations, due to price increases lagging cost inflation and slower recovery in volumes. The elimination of pandemic-related government aid this year is also adversely affecting North American school bus profits compared with 2022.

We expect the measures taken by Mobico, namely increasing its UK bus pricing and reducing costs (target of GBP15 million in 2H23), along with the ongoing recovery post-pandemic, to support deleveraging. This is despite the fact that the company’s results were lower than expected in 1H23 (EBIT of GBP57.5 million), and that the management further reduced their EBIT guidance by GBP25 million-30 million in 3Q23 trading update (EBIT of GBP175 million-185 million in 2023 vs GBP197 million in 2022).

Near-term refinancing requirements are limited as Mobico has recently issued EUR500 million senior unsecu

Because they said they would do it by end of March. Thursday is the last day they could do it.

With no effect on front line services! Does kind of make you wonder why the costs were needed in the first place?

However if achieved thats £50m better in 2024. Less the £30m additional interest on debt

....£30m cost savings

and from Q3 update a further £20m being sought on top.

Then why are we here in this situation at 67p?

Covid - and the fall out following. The world will and is getting back to normal

Although on this occasion its probably not a big issue as we knew the date was coming anyway but they have on other occasions posted on the website before an RNS and then taken it down quickly. They did it last year with the German Rail contract win for example. So I don't think its blatant deception, although it is slack and unprofessional at best !