Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Each will take their own view here in terms of whether they have their pricing strategy right. importance of relationships with local funding bodies, their effectiveness at implementing marginal pricing strategies etc. But however we look at it they have turned over 1.5bn across myriad contracts and operating arrangements, with no traction on the bottom line whatsoever. There is no way that they can correct that through expense management, let alone in the current inflationary environment. So they need to either address contract pricing, fare pricing directly or withdraw from those arrangements that are unable/unwilling to support price increases/subsidies. I’ve no doubt the Exec know the same themselves. You can’t run a business on a jam tomorrow basis indefinitely however much you might value the relationships.
Would also say writing revenue at these levels at a loss is a pointless exercise in any event irrespective. They have to raise prices however you cut it. Even if it does have a top-line impact. This is vanity over sanity right now chasing revenue at the expense of profit. When a local greasy spoon banks more profit than a 3bn turnover business difficult not to conclude you have a serious pricing issue.
Can debate this back and forth but I’ve always found NEX fares substantially cheaper particularly on longer journeys. 4th sept train Bristol to London 80-100 quid, NEX £3.50. Can debate magnitude but there is leeway on pricing here in many examples. Certainly not intended as fake news. They have to be significantly cheaper given the journey times but I think if you have flexibility on time of travel hard to find cheaper than NEX..
Anyone would be rattled, I know I am. However cool head needed as it’s a pretty essential service, improving revenues and I do believe they have some leeway on price point in many areas. Many businesses have been caught out by cost inflation (look at personal lines insurers). It takes a bit of time to take the pricing actions necessary to close that issue out. Ultimately Mobico and many other businesses will need to reset their pricing to accommodate. Little choice.
As an example; Bristol to London -£103 by train. £37 by coach or as low as £6 if early morning. That’s quite the difference and corresponding opportunity.
Certainly on the longer distance routes you see significant cost differentials. May be there is less leeway on shorter routes like the one you highlight.
Been in this share since the covid drop and one thing that strikes me is that as a business they are unusual in having a significant opportunity in terms of their fare pricing in many areas of their business. Take the majority of U.K. routes; they tend to price at 25-30% of comparable rail pricing. That’s enormous leeway to increase pricing with probably minimal impact on demand, given the price of alternative travel. There is little point turning this kind of revenue over with this bottom line so they will have little choice but to increased fares to rebalance the business. Show that can be done with only minimal impact to the top line and I’m hopeful for improvement.
At the height of the pandemic, during repeat lockdowns and with no vaccine available NEX traded around 10% higher than today; where yes we have some inflation headwinds but fuel is hedged, and revenue back to pre-pandemic 2019 levels....go figure.
Superlative? ;-)
Was just reviewing the same. NEX SP has throughout the pandemic reacted disproportionately to the U.K. situation. Makes little sense but is what it is.
Keep upbeat Jtan :-) Just remember that a lot of NEX holders were in prior to the pandemic. However tricky it’s feeling right now, they are probably envious of your holding, even if it is redder than a vicars face at a strip club.
I agree. But also I think it’s a terrible market to try to apply intelligent timing on trades within. Technical analysis, macro economics etc is being completely overshadowed right now by covid, especially on stocks with particular exposure (travel, leisure, certain retail etc). It’s just my view that if you believe that the pandemic will fizzle out, worrying about volatile share prices, within the life of the pandemic, is actually pretty pointless. Just ignore the paper losses for now. The biggest winners will be those that don’t try to trade in and out (unless exceptionally fortunate), but those that just recognise the buying opportunity, buy, and hold. In a few years I suspect many put off by the volatility and sat in broad index funds, and those that attempted to trade regularly, will be in a similar boat; with returns some way below simple targeted buying of shares in obviously depressed (covid impacted) sectors.
This debate was in July 2020 after the initial crash. All I’m saying is he was wrong and missed the boat. It can happen to anyone. The other thing I would say (a personal view) is that all this debate about a 20% loss here or a drop there is actually irrelevant, within such a volatile market. The pandemic is almost certainly presenting a once in a lifetime buying opportunity whether you time the exact bottom or otherwise. You can try to time the buys to perfection and you may miss out completely. If you don’t need the money in the next couple of years I think you are likely to win here either way, whether you buy at 150, 200 or 250. That’s my view and like anyone’s it could be wrong. But I suspect not.
Just to say I was around when this same debate was happening as the share headed towards 116. At that point Falkland was calling for sub-100. It never came. As it bounced Falkland bought in, from memory rather late (150ish) and then bailed before the big bucks were secured (convinced another buying opportunity was coming). In doing so, missing out on profits over 100% for many. That can happen to anyone, but the more important thing is that we cannot “know” we are right. I bought at 116 and still hold many of those today. I am not concerned about what I consider a short term drop. I believe that travel will get broadly back up to speed within 12 months. Some believe otherwise. If Chris’s/Falkland et al want to wait for a much lower buying opportunity that’s a call they can take. I suspect it will prove fruitless but no-one knows. I can say though it wouldn’t bother me one way or the other as I believe the share will recover in the timeframes I hope for.
Unrelated in my view. All travel is down. EasyJet, IAG, GOG, Ryanair etc. Nervousness around covid persists, inflation, speed of recovery, consumer spending, energy costs etc.
Have worked on multiple mergers and acquisitions. The delay is probably more of a positive sign in my view than not. Often to progress to the more detailed elements of due diligence the parties what clarity on the merger approach, operational alignment, IT and system alignment, evidence of contracts in-force, supplier reviews, financial exposure, general risk exposure etc They also tend to want to agree realistic timeframes for the merger to press ahead such that expectations are correctly set with customers, regulators, markets etc and associated comms strategy. That often involves detailed assessment of all the necessary activities from point of agreement to change in ownership. Personally think this is more likely now to happen than simply the previous expression of interest.
No doubt the trading statement is broadly positive. Long since realised though that market reactions can be completely nonsensical. Good luck today all! We could certainly use a little ;-)
Nearly 10% lower than in June 2020 with the pandemic fully rampant, no exit strategy whatsoever and no knowledge of whether a vaccine would even emerge. Makes sense...
Should be apologising to their shareholders as well tbh. Shambolic.
Topped up just over 228. Gut feel that’s the bottom now....and it is just that, a total guess! :-)