ii view: Mobico Group shares skid to all-time low

Third-quarter trading update to 30 September

• UK revenues down 3.2%
• ALSA revenues up 4.1%
• Total group revenues for the nine-month period up 5.4%

Guidance:

• Now expects full-year adjusted operating profit from continuing operations (excluding NA School Bus) towards the lower end of a previous £180 million to £195 million range

Executive chairmen Phil White said:

"We continue to focus on simplifying and strengthening the Group, taking decisive actions to improve operational and financial performance. 

“The key priorities for our new leadership team remain strengthening the Group's balance sheet and improving profitability through our strategic initiatives."

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ii round-up:

Mobico Group (LSE:MCG) operates bus, coach and rail services in the UK, North America, Continental Europe, North Africa and the Middle East. 

Group brands include National Express in the UK, ALSA coaches in Spain, and WeDriveU corporate and paratransit services in North America. 

For a round-up of this latest trading update announced on 26 November, please click here. 

ii view:

Joining the UK stock market in 1992, Mobico today operates over 13,500 buses and coaches as well as some German train services. The company’s ALSA European coach business generated most sales during the first half to late June at 52%. That was followed by the UK bus and coach business at 22%, its remaining North American coach business, WeDriveU, at 16%, and finally German rail services the balance of 10%.  

For investors, group net debt of £1.29 billion as of late June compares to a stock market value of under £155 million. Adjusted operating profit for the current financial year to late December is now expected to be at the lower end of a £180-195 million range due to the competitive UK coach environment, reduced UK bus passenger numbers and a loss-making WeDriveU contract. The previous sale of its North American school bus business has reduced diversity, while volatile fuel costs and often difficult industry-wide staff relations should not be overlooked. 

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On the upside, a focus on reducing debt is ongoing, with the group’s leverage ratio expected to improve come year-end. A new management team is evaluating each of its business divisions, with a large-scale cost reduction programme underway. A total of 36 new contracts were won in 2024, representing total revenue of £766 million, while a move to zero emissions vehicles across its fleets is ongoing.

In all, the perceived environmental benefits of shared transport and a consensus analyst fair value estimate above 35p per share may offer some hope for speculative investors. That said, more cautious investors might demand signs of profit recovery and further debt reduction before taking an interest. 

Positives: 

• Positive environmental benefits
• Focus on costs

Negatives:

• High net debt
• Competitive UK market

The average rating of stock market analysts:

Hold