21st Aug 2024 10:56
(Alliance News) - Analysts said reiterated guidance at Mobico Group PLC should be well received after downgrades characterised 2023.
In the six months to June 30, the Birmingham-based transport operator, formerly known as National Express, said pretax loss narrowed to GBP1.5 million from GBP41.9 million a year prior. Revenue climbed 7.6% to GBP1.65 billion from GBP1.57 billion.
Adjusted operating profit rose 24% to GBP71.2 million from GBP57.5 million. Mobico said it "remains on track" for adjusted operating profit to reach between GBP185 to GBP205 million for 2024.
Mobico highlighted record first-half results in Alsa, the firm's Spanish subsidiary, an improvement in North America, alongside ongoing recovery in the UK and Germany.
In response, shares jumped 14% to 66.20 pence each in London on Wednesday. They remain down 13% in the last 12 months.
Analysts at Jefferies said: "After a series of downgrades characterised [financial 2023], a robust interim performance and reiteration of full-year guidance should be well-received."
The broker said the results are in line with consensus, with guidance reiterated. As a result, it does not expect material changes to consensus estimates.
Peel Hunt said results were marginally below its expectations. Divisionally, Alsa and North America outperformed expectations, but the UK and Germany underperformed, it explained.
In addition, the firm pledged to take further steps to cut debt as it attempts to improve its financial position, which saw the firm pass on paying a dividend for the first half.
These include starting the formal process to sell its North American bus business plus company-wide initiatives to cut debt.
Chief Executive Ignacio Garat said: "Addressing our leverage remains a priority and in addition to commencing the formal sale process for North American School Bus, we have identified new organic debt reduction initiatives that will deliver in the second half."
But the company passed on a half-year dividend compared with 1.7 pence per share last year. This reflects a commitment for debt and leverage reduction.
At June 30, the group had GBP0.8 billion of cash and undrawn, committed facilities and a covenant gearing ratio of 2.8x, down from 3.0x a year before.
Covenant net debt rose to GBP987.9 million from GBP908.5 million.
Interest charges for 2024 are expected to increase to GBP90 million from GBP75 million in 2023 as a consequence of higher bond coupons and interest on the revolving credit facility when drawn.
Mobico said the 'accelerate' cost saving programme remains on track, with savings of GBP30 million expected in 2024 under Accelerate 1.0 and GBP10 million under Accelerate 2.0.
In addition, Mobico has launched a company-wide initiative targeted specifically at cash improvement and debt reduction, with projected 2024 benefits of GBP25 million and annualised benefits from 2025 of at least GBP50 million.
Mobico also said the formal sale process for its North American School Bus business is underway following a strong bidding season where routes won exceeded routes lost for the first time in over a decade.
Away from the results, Jefferies thinks investor attention is likely to remain focused on the bus disposal.
"We continue to expect the disposal to prove a material positive catalyst, with our recent analysis demonstrating that even a trough multiple would still drive material deleverage and equity upside."
Jefferies believes strong pricing on NASB contracts is likely supportive for both disposal interest and valuation potential.
Peel Hunt acknowledged progress at the US bus unit. It pointed out the operation is now more adept at identifying under-utilised fleet and reallocating vehicles to more suitable contracts to improve efficiency.
Driver recruitment has also been successful, with 21% more drivers hired, the broker pointed out.
"However, we remain concerned that the value realised from a disposal of North American School Bus, after fees and provisions, would allow the group to delever sufficiently," it cautioned.
Bank of America estimated an enterprise value of GBP200 to GBP700 million with a base case at around GBP400 million.
Peel Hunt has a 'hold' rating on Mobico. Jefferies and Bank of America rate Mobico 'buy'.
By Jeremy Cutler, Alliance News reporter
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